Icahn's Clorox bid a prelude to more deals
Like the trusted brands of Clorox or the natural resources of Petrohawk, there are assets in this country worth far more to bigger companies than they are in the stock market.
While Washington burns, the corporate world isn't fiddling -- it's taking action, with companies taking advantage of depressed pricing, unusual valuations and unique properties to do some buying.
This morning's ridiculously lowball bid for Clorox (CLX) by Carl Icahn is an example of what's about to happen in this country. I have little doubt that now that Clorox is in play, a company like Unilever (UN) will easily spend $12 billion or $13 billion to snap it up. You could see this one go to $100 a share once it is in play -- wildly overvalued on depressed earnings, but incredibly cheap as an asset play with great brands.
The stock's been lower than it should be because management overpaid for Burt's Bees and has undermanaged its core brands. It lacks scale. But it will be perfect for a Unilever counter to Procter & Gamble (PG), which once owned Clorox but was forced to divest it by an aggressive FTC in the 1960s.
Or Petrohawk (HK). Here's a company I have been pounding the table on because of its amazing Eagle Ford assets, which make it worth far more than the company was selling for . . . at least until today when BHP Billiton (BHP) bought it. You could have made a ton of money -- trading at $38.75, wow!! -- simply because this stock, too, had been depressed, notably by a series of powerful articles in The New York Times basically saying that the industry's a fraud and there's not much gas there.
Given that BHP has already had tremendous success with its Fayetteville assets for $4.75 billion back in February -- an area, by the way, that the Times highlights as being especially overvalued if not downright uneconomic -- this is a sign that a smart acquirer knows these assets are long-lived and solid.
Given the high concentration of oil and gas in Eagle Ford -- Chip Johnson, the CEO of Carrizo (CRZO), a big Eagle Ford asset holder, told me on "Mad Money" the other day that it’s as easy as "shooting fish in a barrel" -- it would not shock me if more foreign companies did more buying before long. If you wanted more assets on the cheap, the cheapest are EOG Resources (EOG) and Pioneer Natural Resources (PXD).
There's a remarkable plethora of assets in this country, branded, and natural, worth a great deal more to bigger companies -- particularly foreign companies -- than they are in the stock market. BHP's prospecting in Eagle Ford, Icahn's prelude of a bid for Clorox by a foreigner -- so natural you can smell it like bleach -- make the real pattern here, obscured, as usual, by our obsession with bonds and politics.
Don't lose sight of the power of individual companies' worth. Don't lose sight of how everything trades in lock step now because the market, with so little money coming in, is dominated by high-frequency traders who simply whip around the futures and the ETFs as if individual companies don't matter.
They mattered to shareholders of Clorox and Petrohawk. They will keep mattering, right up and through the deficit deadline, as corporate chiefs globally recognize that the absurdities of politics are depressing prices, along with the managements (Clorox) and the press (Petrohawk), and that the prizes are available to those willing to see through the manmade obfuscation.
At the time of publication, Cramer had no positions in the stocks mentioned.
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