Filed under: Deals

I’ve written about Sherwood Investments’ offer of $7 per share for Trans World Entertainment (NASDAQ: TWMC) and I’ve expressed more than a tiny skepticism.

Now, at least some of the skepticism has been assuaged — Sherwood has filed a 13-D indicating a 5.48% stake in the company. Should we take the offer more seriously now? Yes. We now have confirmation of Sherwood’s ownership of the stock it reported in press releases and an assurance that the company wasn’t trading on the hype its press releases generated. So the ethical worst case scenario has been eliminated.

But questions remain.

Right now, Trans World is a stock trading up about 40% in less than a month on two offers, both of which are contingent on financing.

There are other questions too: How easy will it be to get financing in this market for an unprofitable company in a declining industry?

And if Sherwood is serious about buying at $7, why is it so cautious about buying at under $6 — having accumulated a stake of just 5.48%? If Trans World has the cash to acquire Trans World, why the temerity? And if it is planning to purchase the company with mostly debt, the questions about financing are even more important.

Sherwood might be playing a game of chicken, tossing in an air ball offer to try to get Higgins to go higher. In my last post, I wrote that:

I’ll believe that Sherwood’s $7 per share offer is serious when a deal is consummated. Goldman Sachs Group, Inc. (NYSE: GS) has been shopping the company for months, it’s hard to envision another bidder emerging with a higher offer.

But until then, I think investors should take Sherwood’s offer with a bucket of salt.

I still think that applies, but the 13-D is a sign that Sherwood is more serious than I had previously thought. In the meantime, the company is trading at a premium of nearly 10% to the CEO’s offer, which still lacks financing, and it’s still hard to know what to make of the Sherwood offer. The Business Review takes a more detailed look at Julian Benscher, the man behind Sherwood’s offer. Given that Benscher’s major business interest right now appears to be an orchid farm with $5 million per year in sales and life insurance policies on former music mogul Lou Pearlman, there doesn’t seem to be anything in his background to predict that acquisition of the largest mall-based music chain in America.

Who knows? But, like I stated, I’ll believe the offer is real when I see the deal close — if Benscher wants TWMC at $7 and can get the financing, I doubt anyone will jump in with a higher offer. The company has been trying to find a buyer since May, after all.

Share This

Share This

Filed under: Earnings reports, Deals, XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Short stories, Stock screen

The short interest in Sirius (NASDAQ: SIRI) spiked up between November 15 and November 30 by 14.4 million to 113.4 million.

Sirius shares have been down over the last few days, and perhaps the market thinks they’ll go lower.

Many analysts expected that the Sirius merger with XM Satellite Radio (NASDAQ: XMSR) would be approved by now. No such luck. The longer the approval drags on, the better the chance that it will get derailed by ranting congressmen of the Justice Department.

Then, there’s the issue of the Sirius balance sheet. The company has long-term debt of about $1.3 billion and no way to repay it. With bad credit markets, it may not even be able to be refinanced. The company had an operating loss of $106 million last quarter on $242 million in revenue. And subscriber counts are not doubling year-over-year like they used to.

Sirius is in trouble. The market knows it. And it needs that merger and the savings it should bring to stay afloat.

Douglas A. McIntyre is an editor at 247wallst.com.

Share This

Share This

Filed under: Deals, Competitive strategy, Yahoo! (YHOO), General Electric (GE)

Yahoo! (NASDAQ: YHOO) Finance announced that it will start to show about 20 video segments everyday covering the current action in the market. It has picked three hosts and the project will start next month. It will allow the massive financial web site the chance to give users breaking news from experts via web video, which has become a major part of the web multimedia experience.

The Yahoo! move makes sense because advertising sold in on the internet video brings a premium to display advertising. If consumers watch the new programming, Yahoo! Finance can increase its revenue.

Now, Yahoo! has decided to double down on its plan. It has formed a partnership with GE (NYSE: GE) cable channel CNBC to offer video clips from the network’s shows on Yahoo! Finance.

“We’re bringing together the leader on television with the leader on the internet for financial content,” Scott Moore, Yahoo!’s head of media, told the New York Times.

Yahoo! Finance has almost 30 times the very special visitors that CNBC.com does, so the joint venture will give the cable channel’s programming a much wider audience.

Yahoo! Finance is on to something here. The advent of YouTube and other video sites has gotten internet consumers used to seeing video. CNBC will produce the content that Yahoo! uses for its Television audience anyway, so there is no additional production cost. Whatever money each party makes from the deal is gravy.

Douglas A. McIntyre is an editor at 247wallst.com.

Share This

Share This

Filed under: Deals, Hewlett-Packard (HPQ), Technology, Israel

As if investors needed a reminder that Israel is an attractive investment destination for multinationals, the news today that Hewlett-Packard (NYSE: HPQ) is spending $117.5 million to purchase Israeli NUR Macroprinters (OTC: NURMF) is just that reminder. While M&A of publicly traded Israeli companies has sagged this year, this move by HP should remind investors of the tremendous bargains that these Israeli stocks which trade in the U.S. provide.

Leave it to HP to serve up that reminder. The company has been extremely active when it comes to investing in Israel. Today’s move expands HP’s portfolio of digital presses and wide-format printers and furthers its strategy to digitize analog prints.

A massive congratulations to the team at Fortissimo Capital on an astonishing investment. They invested $12 million in December ‘05 for 55% of NUR Macroprinters, as the company was on the verge of collapse. This day, that investment is worth more than $60 million!

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/10/07.

Share This

Share This

Filed under: Deals, Hewlett-Packard (HPQ)

Hewlett Packard (NYSE: HPQ) announced this morning that it would be purchasing NUR Macroprinters, an Israeli-based maker of inkjet printers, for $117.5 million. As HP marches straightforward into bolstering its hardware assets, this one should make a very good acquisition for the world’s largest Personal computer manufacturer.

The terms of the deal specify that $14.5 million of the purchase price would be held in an indemnity escrow account as well — that’s standard practice in some mergers. No surprise there. HP wants NUR to be folded into its large-format hardware printing business, for which it has a strong slice of market share.

While other companies seem to be making less in hardware, save for Apple (NASDAQ: AAPL), HP is doing the opposite. It’s making money in the Personal computer business (a feat in itself) and in the other hardware businesses it operates in. Not be left behind, HP is making major headway in the software intelligence business as well thanks to Mercury Interactive.

Share This

Share This

Filed under: Deals, BHP Billiton Ltd ADR (BHP), Rio Tinto plc ADS (RTP), Blackstone Group L.P (BX)

Private equity might be dead, but it isn’t buried. The Blackstone Group (NYSE: BSX) is working on a bid to purchase and split up mining company Rio Tinto (NYSE: RTP). Metals company BHP Billiton (NYSE: BHP) has already made an offer of its own.

According to The Telegraph, “the U.S. private equity giant is in the middle of putting together a consortium — believed to include a Chinese sovereign wealth fund — to mount the bid for Rio.” Blacktone’s plan would be to break Rio Tinto into pieces and auction them off.

Rio Tinto has a current market cap of over $150 billion, so the U.S. firm must believe that it can garner much more than that for the pieces. Rio’s largest business is its iron ore operation.

The move is a sign that private equity might be making a comeback, but with a twist. So far there is no mention that bank loans will be part of the Rio bid. It would appear that most of the support will come from a fund run by an affiliate of the Chinese government.

Private equity may have found a new financial partner in overseas government funds.

Douglas A. McIntyre is an editor at 247wallst.com.

Share This

Share This

Filed under: Earnings reports, Deals, Bad news, Industry

UBS (NYSE: UBS) is the latest big bank claimed by the subprime mortgage fiasco. It will write-down $10 billion in assets. It is also bringing in an investment of $11.5 billion, lead by the government of Singapore.

According to Bloomberg , “UBS scrapped a forecast for a fourth-quarter profit and may post a full-year loss.”

“The industry has been moving to more aggressive markdown rates” on subprime-related assets, Kinner Lakhani, a London- based analyst at ABN Amro told the news service.

The news raises two questions. The first is whether the action by UBS will precede more write-downs at big US banks, probably in the fourth quarter. It is certainly a sign that the values of subprime assets are not superior than they were at the end of the last quarter. And they might be getting worse.

The other, more vexing question is at what point will investments from Asia and Middle Eastern interests, flush with cash, become at cross purposes with banking interests? Obviously, US financial authorities wouldn’t allow a fund controlled by the Singapore government to own a huge US bank outright. But in a crisis, that might mean that the US government would have to step up with capital of its own.

Douglas A. McIntyre is an editor at 247wallst.com.

Share This

Share This

Filed under: Deals, Citigroup Inc. (C), JPMorgan Chase (JPM), Bank of America (BAC), Countrywide Financial (CFC)

Jamie Dimon, the head of JPMorgan Chase (NYSE: JPM), sees massive bank mergers coming, especially in the US and Germany. Speaking about the fallout from the current debt crisis he said, “Companies recognize after such a collapse that they need more weight, more capital and access to good, long-term financing.”

Dimon is right, of course, but his comments neglect to address how huge financial institutions can evaluate risk at other companies that they might take over when those risks are not fully known to anyone. Citigroup (NYSE: C) is probably as good a target for a takeover by another huge bank as any. Some of its units could be sold off for cash. Others could be integrated into a firm like JPMorgan Chase with savings due to overlapping functions. But Citi does not yet have a handle on its own liabilities, so why would another bank take the danger of finding out that things were worse than the markets expected?

The same holds true of Countrywide Financial (NYSE: CFC). There has been speculation that Bank of America (NYSE: BAC) might take over the mortgage lender as BAC has already invested in the smaller company. But the massive fluctuations in CFC shares indicate that the market has no idea what the eventual fate of the firm’s prospects are.

Mergers are a good idea in theory, but the danger profile of many candidates probably takes them out of the picture.

Share This

Share This

Filed under: Before the bell, Major movement, Forecasts, Deals, Bad news, Market matters, News Corp’B’ (NWS), Palm Inc (PALM), Economic data, Federal Reserve

U.S. stock futures were slightly lower this morning, indicating a flat to mildly down open on Wall Street. However, all this could change when non-farm payroll is reported an hour before the opening bell. While investors generally expect a rate cut the next Federal Reserve meeting on Tuesday, December 11, it is the size of the cut that may be decided following the labor report due in an hour.

Yesterday, U.S. stocks continued their rally as the White House offered a plan to aid the ailing subprime mortgage market and curb home foreclosures. The Dow industrials rose 174 points, or 1.3%, the S&P 500 added 22 points, or 1.5%, and the Nasdaq Composite rose 42 points, or 1.6%.

Economic data will be the focus this morning and into the trading session:
At 8:30 a.m. EST, November non-farm payroll will be reported. Economists expect the labor market to show signs of softness in November. Still, on Wednesday, Associated Data Processing Inc. showed a more massive surge in private-sector hiring and projected that 189,000 jobs were created in November, much higher than what economists have been anticipating. This report be a superior indication of what’s to come this morning. According to Briefing.com, economists are expecting an addition of 70,000 jobs last month, a much lower figure than that 166,000 added jobs shown in October. [Economists surveyed by Thomson predict a 100,000 addition.]
Along with the report, unemployment rate will be released and is expected to inch up to 4.8% in November, from 4.7% the month before. Hourly earnings is also expected to be higher that the 0.2% rate reported in October and come in at 0.3% increase.
At 10:00 a.m., Michigan Consumer Sentiment is due and is expected to edge lower. Another indicator of consumer confidence was released, the RBC Cash Index. It showed confidence at 65.9 in early December after hovering close to a reading of 64 in November, which marked the worst showing in two years. Housing troubles, a credit crunch, high energy prices and turbulence on Wall Street continue to make people uneasy about the economy and their own financial situations as indicated by the small increase in the index. Yet, the direction, at least, seems healthy.

Strong readings will likely boost stocks as recently investors feel that despite readings that ease concerns of a U.S. recession, the Fed may still cut rates this coming Tuesday.

Overseas, Asian stocks were mixed and European shares advanced.

In corporate news:
Palm Inc. (NASDAQ: PALM) are taking a beating in premarket trading, down over 17% after the company said it expects to post a loss in its fiscal second quarter.

Macrovision Corp. (NASDAQ: MVSN) concurred to purchase Gemstar-TV Guide International Inc. for $2.8 billion in cash and stock.

News Corp. (NYSE: NWS) promoted James Murdoch to run the operations in Europe and Asia, putting him in line to succeed his father, Rupert Murdoch.

Share This

Share This

Filed under: Deals, Rumors, Morgan Stanley (MS), Israel

Shares in chip-maker Micron Technology, Inc. (NYSE: MU) are trading higher on rumors that Samsung Electronics may purchase part of their business. The South Korean Electronics giant is denying the report. Micron Technology of the U.S. is the world’s leading producer of CMOS image-sensing chips. Micron three years ago invested heavily in image-sensor chips as a hedge against fluctuations in demand and prices of memory chips. Business has been very week as prices for these chips have plummeted. That being said, chip-makers have started slicing production to create superior pricing.

Morgan Stanley (NYSE: MS) analyst Atif Malik stated he understood why investors are getting excited about a potential price rebound for Micron shares as chip makers are starting to cut production in some less-profitable types of chips.

While Samsung denies the rumors, I wouldn’t be surprised if a deal gets done. Why? Because in October Samsung bought Israeli non-memory chip developer TransChip Inc. to help strengthen its research and development capability in the CMOS chip business.

With Micron shares down more than 35% from their 52 week high, Samsung would be able to establish a real foothold in this business for cheap.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/6/07.

Share This

Share This