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Mergers and Acquisitions like never before
Monday 8 June 2015
For years value fund "ME Fonds - Special Values" has not ceased to point out that first class listed companies will become a rare commodity. In Switzerland and the USA we have currently an astonishing wave of mergers and acquisitions going on. A trend that is not going to stop so soon.
The successful international companies are as profitable as never before. Many do not know what to do with all the cash they earn each year. Share prices appear to be on high levels. But one can only say that the prices for first class operations in reality are often too cheap. Wait until there is a chance for a competitor to bid for the company. This is what is happening right now. Here are a few examples from Switzerland and the USA:
Swiss listed KABA is merging with private German DORMA Group (doors, keys, access segment). US-Holding DANAHER is offering USD 13 bn to acquire filter specialist PALL Corp. A take-over battle is happening in Basel where US giant MONSANTO is trying to buy competitor SYNGENTA for CHF 49 bn. The tobacco world is on the move: Reynolds wants to merge with competitor Lorillard for USD 27 bn. US-semiconductor manufacturer AVAGO Technologies is offering USD 37 bn for heavy weight BROADCOM, a specialist for chips in smartphones and tablets. Cable network company CHARTER COMMUNICATIONS is trying to buy two companies at the same time:
TIME WARNER CABLE for USD 79 bn as well as BRIGHT HOUSE NETWORKS for USD 10 bn.
All of these transactions are less than eight weeks old. Not so long ago beer brewer HEINEKEN defended its independence only due to the resistance of the founding family. Whereas US-food company HEINZ was successfully acquired with involvement of Warren Buffett. Now HEINZ will merge with food group KRAFT.
The conclusion ? What prices ! We have to realize, we are living in an era of enormous asset inflation. Ignore the consumer inflation. It is meaningless at the moment. Shareholders should hold on to first class quality stocks and ignore short-term setbacks. In July this year, value fund "ME Fonds - Special Values" will celebrate its 13th anniversary. A nice confirmation of its long-term strategy.