We could be in for a year of M&A

With VF Corp.'s huge gain on buyout chatter, this theme has been underscored yet again.

By Jim Cramer Jan 17, 2013 10:13AM

thestreet logoHandshake CorbisWhen will companies take their cue from these bold acquirers? On Monday we again saw how positively this market reacts to these bold moves: Shares of VF Corp. (VFC), an apparel maker, reaped a huge gain just on the strength of reports that VF might buy Billabong. The latter is an Australia-based surfing-attire company that's been down on its luck, but has great brands for the fast-growing surfer set. VF Corp. stock started higher as word leaked about the possibility of the bid, and then gained strength throughout the day, ultimately closing up almost 5 points. Remember, VF would be bidding -- not getting a bid!

 

Billabong is a company that has tremendous credibility among die-hard board fanatics, even as its stock has lost 34% in the last year after sliding 78% the year before, all of which transpired after the company missed a multiple quarters. This darned thing has been crushed, and it now trades at 14% of what it was worth just a couple of years ago -- yet the company is still worth about $500 million.

 

Yet, when VF Corp. expressed an interest in this loser, its shares went up. It's a testament, again, to my thesis that this market has a view of things (read on RealMoney) that says, "Don't just stand there, do something." Any sign of a company willing to grow through acquisition is electric in this market.


Now, there are other bidders, so it is not a done deal.

But if VF doesn't get Billabong, who is to say it might not go after Quiksilver (ZQK), another company in the segment, or perhaps Zumiez (ZUMZ), which also sells apparel to this sector? Quicksilver might be too much to swallow, as it has $1 billion in market capitalization. Zumiez sports a $630 million market cap, but it has also been real down on its luck, much like Billabong. Both are at least historically cheap -- and I now feel, after Monday's Billabong foray, that they have a VFC backstop underneath them. Zumiez has been cut in half since last July on a missed quarter, not unlike Billabong, and that sure hasn't scared off VF.

This Billabong tussle is worth watching for two reasons. One is that VF's move has to be noticed by all of those bankers who are looking to work a deal for Deckers Outdoor (DECK), which is thought to be another VF target, and has recently expanded to surfer apparel. Second is that even a whiff of a deal sends the acquirer up in this market, and a great deal of acquirers have enjoyed success in the last year. So, if you have a decent balance sheet and a good stock price, how can you not put a call into a banker and ask them to tee up some company that would fit into your portfolio of brands?


This Billabong news comes on top of the possible private-equity bidding for Dell (DELL) and the takeover of Harry Winston, the jeweler that's being bought by Swatch, and all in one 24-hour period. I reiterate, then, that we could see a truly bountiful year for mergers and acquisitions.

 

It will stay that way as long as companies like VF go up huge, not only when they make acquisitions, but when they even say they are interested in bidding. This is a truly astonishing development, and one that I think could portend very good things in 2013 for both the acquirers, and of course, for the targets.

 

cramer's face

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 

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28Comments
Jan 17, 2013 1:06PM
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I had to laugh when I saw this in the comments....no offense Mr Moore but if you think cramer is a man of good moral character with an impeccable reputation you are sadly mistaken.

"And, as a man of good moral character with an impeccable reputation in the financial world, it is your duty and obligation speak out about such egregious behavior! "

I will offer just one example and there are hundred more:

When Countrywide financial was going broke and it's CEO Angelo Mozila was taking out hundreds of millions of dollars in option payments --- cramer REPEATEDLY had him on his show and talked about what a great investment Countrywide was in the $40 s .....cramer never mentioned that his street dot com website was receiveing hundreds of  thousands of dollars in advertising from countrywide ....

When countrywide was below $10 cramer kept calling for BofA to BUY them out ....ff a couple of years and cramer was screaming about how bad a decision it was by BofA ....

The country will never recover until him and his ilk are jailed or deported ....they produce nothing but hot air and their only goal in life is to enrich themselves at the expense of others.

his newsletter is $700 a year and its record is - 5% - +5% over 11 years !!
Jan 17, 2013 12:55PM
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The heart monitor is a straight line on VF. Outlet stores burgeon with surplus and big boxes drown in untouched shelves of their current product line. Flash brands like Billabong and Quicksilver lack what gave them brand status... customers who want to buy their designs at MSRP. You might want to look for yourself (I know you don't do your own shopping, Jim)... but malls are empty and m****duced clothing isn't form-factored for the American body shape. When we return to making clothing here in America for Americans, we'll have something to invest in again. I'd prefer to-- look for the union label and the consistent quality we once knew, then to guess the import platform every day.
Jan 17, 2013 12:15PM
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What's the bottom line, Jim.  Are you predicting an up year (Bull Market) for the stock market in 2013? If so, then quit "beating around the bush" and clearly state your position!  I, personally,  don't believe a few company acquisitions this early in the game necessarily says we're either in a bull market or beginning a bull market, but what do I know?  At one time, in the past, I had a great deal of faith in your market "wisdom" and investment savvy; however, since you endorsed KEN FISHER of FISHER INVESTMENTS in 2008, I've lost almost all respect for you. 

Jim, please don't misunderstand me, I believe that you are a fair and honest person and a good stock market "technician," but why you would endorse the charlatan, KEN FISHER, is beyond my comprehension.  You know as well as I , based on its undeniable poor performance data, that FISHER INVESTMENTS is a SCAM!  It expressly targets, pursues, and entraps, and I quote from its own ads, "high net worth individuals," primarily seniors and retirees with $500,000 or more to invest; for many, this is their life savings!  Unfortunately, but quite naturally, with their lack of confidence in our government, the economy, and the financial markets, too many elderly folks are now, more than ever, susceptible and responsive to FISHER INVESTMENTS slick "snake oil" ads and salespersons -- questionable and misleading financial ads and/or investments.  As a regular columnist (writer) for MSN Money, you are well aware that FISHER INVESTMENTS' marketing strategy (scheme) is to saturate many financial publications (FORBES, etc.) and most financial websites, especially MSN Money, with sophisticated, multi-colored, and emotionally stirring ads depicting retirees "happily pursuing and enjoying their retirement plans and dreams;" ONLY obtainable and fulfilled as a direct result of becoming financially independent by investing with FISHER INVESTMENTS!  Again, Jim, you know as well as I, that all this is as phony as a three dollar ($3.00) bill.  And, as a man of good moral character with an impeccable reputation in the financial world, it is your duty and obligation speak out about such egregious behavior!  Don Moore
Jan 17, 2013 11:31AM
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Brutus, A LOT of Companies have hoarded a ton of money, doing a lot of buybacks of stock...

Several are grabbing up small competitors, mostly propietory or a niche product.

 

Others are the Founders or Major stock holders, buying their companies back on the cheap..

Down the road, this can spell problems for employees or even for "new hires."

Others are Venture Capital....

And for the most part "all they do is GUT" organizations or businesses.

In the long run, shareholders,employees and the consumers suffer...Seldom do the Capitalist..imo

Jan 17, 2013 1:14PM
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NTU.....Yeah, think I've read something somewhere about those amounts being hoarded, in the tens of trillions...

I was just scratching the surface with what some Americans or American Corporations were doing and I might very well be, low on my estimates ??

Another point is the Foreign investment going on here...And I believe a lot of that is being done by Asians, Indians and Mid-Easterners....?

We are being bought 1 block at a time...And many don't really realize it...

The tables are turning...

Jan 17, 2013 12:23PM
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I think in one sense of the word.....The 1%,5% maybe even 10%'ers are hardening down or "circling the wagons"....They want it all and "all the control" that comes with it....

They are tired of feeding the system and they think they are "entitled" to more, instead of the other way around....

Through out the History of the World....We have refferrences(sp) to these mandates and the consequences of the end game is usually failures of Nations.

We have an extreme amounts of capital and monies, hoarded away from these shores, by individuals and Corporations...In the 10s of Billions or a few Trillion.....That is not being repatriated..

I guess we need some tax re-work and make some reasonable deals...to bring much of it back to a Country that needs it.

Jan 17, 2013 1:16PM
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CRAMER says bright year ahead ?   To the transnational corporations and global elites !

 

There never was a throne which did not represent a crime !   The institution of royalty in any form is a insult to the human race !

 

Mark Twain ! 

Jan 17, 2013 1:11PM
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"The president of the National Rifle Association defended his organization’s use of President Obama’s children in a web ad about armed guards at schools, insisting Thursday “it wasn’t about the president’s daughters.”

 

Perhaps one of you regular jackasskoolaid posters who plague these blogs can refer this to the aged geezer boss of the NRA: Look, fool... Americans are tired of bureaucracy. You suggest armed guards in schools? That's just another bureaucractic layer easily manipulated and exploited until the "armed guard" is a pawn and paper/button pushing administrative FREAKS are making ridiculous wages with enough fool-rules to boggle everyone. You know what it doesn't do? Stop fanatics with guns. What we want are transparent laws that make it perfectly clear to grasp the seriousness of gun possession. A user WILL be mentally certified to possess one. An owner of multiple weapons has hunting expertise, not military or terror training. An assault weapon was designed to assault... not hunt. YOU, geezer... look an awful lot like a political lobbyist, not an avid hunter. I have read your historic materials. I was raised respecting weapons used for hunting with awareness for those used in war. I believe there are members of the NRA with similar respect but THE MAJORITY are politcally motivated. Why not show America that you aren't a creepy loser and fully separate your "association" from government, step away from adverse influence and let elected officials do the job they are meant to and create quality legislation we can ALL live with. Remember... Cheney shot a fellow in his party in the face. Once upon a time, the NRA would have had ZERO TOLERANCE for such irresponsibility. It's why I don't possess a weapon today. I RESPECT them. That means I am fully trained in handling and use but don't hunt, so why would I create the premise for a mishap? If you are a "group of gun respect advocates" and not a terrorist association, you will admit that the ad was absolutely in poor taste and meant to create havoc as we decide nationally what to do with the SEVERE problem of guns in the possession of criminals, nut cases, fanatics and diminished mental state humans... and demonstrate your FULL SUPPORT to bring back the respect. Guns don't kill people... people like you who head the NRA and create offensive media ads lead others to use guns irresponsibly or criminally to kill people. Snap out of it, old guy. The 21st Century is waiting for your mentality to let go and let us make progress, not poverity, destitution and desperation. YOU FIX IT NOW and publically.  

Jan 17, 2013 1:05PM
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To Don Moore...Very interesting insight.....And I agree with many of your observations..

I don't hold Cramer as accountable as you do...?

Because I take Cramers, Fishers and many others for what they are and a grain of salt..

Although there are dozens now that have come out of the woodwork, knowing that baby boomers and other soon to be's wanting to retire and looking at ways to protect their capital and livilyhood with ways that they can "somewhat" guarrantee.?

 

Everyone has a Website, a book or a plan; And anybody over 50 is a target, in some cases a lesser age...?

I tell my kids, friends and family; Research and learn as much as they can, but many don't want to be bothered by what can very possibly change their lives or their futures forever...The here and now seems to be more important; And they are willing to trust what some deem as "experts" to take care of what they consider boring, until the time comes and they wish they had paid more attention.

Jan 17, 2013 11:21AM
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Guess I should have put my rants on here, BUT Cramer was slow out of the blocks this morning..

 

Maybe somebody on his show, did Taser him last night or in the afternoon..

Jan 17, 2013 3:35PM
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My last post on gun control;

I just think the idea of the government disarming it's citizens before taking total control is maybe the craziest idea of them all.  Look at European democracies as well as Canada and Japan.  They all have tighter gun control laws and oddly enough their governments are not dictatorships and all enjoy their freedoms.

Also look Somalia, Iraq, Afghanistan and others like them, everyone in those countries is armed to the teeth, are they safe?

Either way I don't want to debate it any further, lets just hope a debt ceiling limit agreement is reached so this positive economic momentum can be sustained.  Lowest number of new unemployment filings in 5 years, good stuff.

Jan 17, 2013 12:31PM
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For those of you forward thinkers the options market has to be deader than a doornail.  We have to have a move sooner than later don't we?  This is how it was in the 60's and 70's.  Sometimes 1/2 a point a month.  Sleep two weeks trade 2 minutes.  Ho Hum.  I thought about Cramer getting tasered last night.  Come to think of it maybe you wouldn't notice any change at all.  The guy is already hotwired.  On another note we need to look at changing demographics to better understand the new money coming in right now.  With the decline of the dollar there are many new faces in America.  We are still resting on our laurels as the best in the world to raise a family and an available higher education.  With the declining dollar many many are coming here to live or as a second residence.  And many younger emigrants with children who have inherited money and are settling here.  I go for my daily walks and talk and listen. I don't think fear is the best description for younger Americans but resolute might better fit.  They seem much better at understanding they need to be more careful in most everything they do.  And many many young people are learning FRUGALITY and that is what is most impressive as these habits will carry forward for years to come. We all hear about we boomers but in the longer term boomers will fade away rather quickly now and the companies left behind to be supported by these younger consumers will be those that prosper and have good returns.  Boy could I have lost a ton on options in the last few months.  But that will change right? Volitility is just taking a short break right?
Jan 17, 2013 1:22PM
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If you believe you need an assault rifle or rapid fire clip to protect you from the government then you do indeed have a a mental disorder !

FTNRA
Jan 17, 2013 11:16AM
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who cares about clothing companies?  it's a whimsical fad market that could come and go in a flash.  ~ which it actually DID.  Billabong had products the kids bought, and do not buy now since they are on to other fad clothing. 

 

i'm with brutus - smart companies will dump their public status.  after all, they gained their cash when they WENT public and can quietly return to private.  perhaps to go public yet again in 10 years

Jan 17, 2013 11:08AM
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We could also see a bunch of public companies go private.  This will probably be a long-term trend.  There's plenty of extra expenses and red tape associated with being a public company.  This will only get worse.  Plus the class warfare rhetoric is reaching a fever pitch.  No reason to voluntarily stand up in the middle of a firefight if you don't have to - if you're making bank, it's better to keep your head down and maintain a low profile.
Jan 17, 2013 2:13PM
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Not going to enter into the Gun fray except this....I think that can be discussed elsewhere on that other blog....Go fkin argue with them !!

 

I'm not a total conspiratorist, but I believe many Tyrants and/or Dictators throughout history,

disarmed the citizens,commoners and peasants, before they totally brought the hammer down on their "so-called" subjects or the "ruled."  We did it here, at least once in our History...

 

The Actual Mental Disorders were at the Top...IMO

Jan 17, 2013 2:40PM
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Markets are doing Fantastic today....And I'm hoping earnings or earnings surprises will not dampen the spirits over the next 10 days or so.......
Jan 17, 2013 2:38PM
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Vineyard...I would tend to agree Mark Twain,Samuel Clemons..Was a very deep man with a lot of forsight....There were others like him, and we didn't listen enough.
Jan 17, 2013 1:50PM
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And I would be remiss,,,If not to mention what American Corporations are investing overseas or in off-shore operations...

No doubt some is to Capitalize on low labor and other cost'.

Much is to capitalize on the purchasing power of emerging Countries and/or emerging classes of buyers within those countries...

And some of the investments are required by Governments for rights to sell or maybe even import to those Regions..

And I'm not going to argue about this, BUT such as GM's recent announcement of investing over 8 Billion worldwide, with only 1.5 billion going into North America.

THEY ARE NOT ALONE...

It isn't worth discussing the politics or bailouts, because these companies are trying to add to their bottomlines and survive...They are forced into these types of deals.

Jan 19, 2013 11:29PM
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TO:  VoxPopulae and all other readers of my comments to Jim Cramer, Thursday 01/17/2013 @12:15 PM

FROM:  Don Moore

Thank you so very much for this information;  I've Never read or heard of any of  this about Jim Cramer.  Moreover, I have Never followed his MSN Money column, his MSN show, his investment newsletter, or his investment advice.  I have always assumed that he was a fair and honest man. I do know, however, that his investment advice is somewhat questionable and his theatrical antics are "over-the-top."  If what you say is true, AND I CERTAINLY BELIEVE YOU, than I owe you and everyone who read my posting a sincere apology.

VoxPopulae, if more readers would be like you and I, coming forth with their experiences, knowledge, and  comments, to tell the "real story" about these unscrupulous charlatans, scavengers, and narcissists, like JIM CRAMER AND KEN FISHER (FISHER INVESTMENTS), then maybe the TRUTH would finally prevail.  If so, I think many investors, especially the middle-class, would not only welcome it, but more importantly, would be enlightened and could protect themselves from the many pitfalls lurking in the financial world.  I SALUTE YOU SIR, for having the courage to speak-out! 
Don Moore
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