This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Companies Bolting Joint Ventures

NEW YORK ( TheStreet) - A wave of joint venture deals that came to a head last week reveals that companies taking control of partnerships are getting in at the bottom, which could translate to a big upside for their shareholders.

Last week, the Dow Jones Industrial Average rose above 12,000 for the first time since early August as government debt fears and bank solvency gripped markets. This week, fears re-emerged when MF Global's (MF) bankruptcy and a Greek bailout referendum jilted markets.

Emblematic of seesawing fear and greed in markets, joint venture partnership buyouts are being negotiated between sellers and interested buyers.

In October, Sony (SNE - Get Report) bought its mobile handset venture with Sweden's Ericsson (ERIC - Get Report), United Technologies (UTX - Get Report) took control of a jet engine making duo with Rolls Royce, Peabody Energy (BTU - Get Report) got control of its coal to steel partnership with Indian steel giant Arcelor Mittal (MT - Get Report) to buy Australian Macarthur Coal, Teva Pharmaceuticals (TEVA - Get Report) took on a Japanese J.V. and a Johnson Controls (JCI - Get Report) acquired its French battery-making venture.

For those like Peabody, Sony and Teva taking control of partnerships, the timing may be impeccable if last week's rally is a better economic signal than this week's fear. It's also a sign that quick-strike deals may be more opportunistic than company takeovers.

In October, United Technologies' (UTX - Get Report) jet engine division Pratt & Whitney bought out a $1.5 billion joint venture with Rolls-Royce, ending a partnership to build V2500 jet engines. The deal may be a signal of opportunistic partnership buyouts.

"I think the larger companies can potentially take advantage of these situations and opportunistically buyout their partnership. Clearly it was part of the mandate of United Technologies in buying out the partnership of Rolls Royce," said Russell Solomon an analyst with Moody's (MCO - Get Report).

Solomon says that both firms entered the partnership to pool funds and expertise to develop engine designs without taking on too much financial risk. He added, "At a certain point invariably someone wants to take a controlling stake" once designs are successfully developed. Signaling confidence in future orders, the aircraft engine giants also announced a multi-decade joint venture to make mid-sized 120-230 passenger plane engines.

"In this market, if you are sitting on a lot of cash, there are a lot of opportunities out there. What makes joint ventures interesting is that the degree of due diligence you need to do is substantially less than a merger and acquisition," said Peter Bible a partner at advisory firm EisnerAmper in a phone interview. For companies like Sony, Teva or Johnson Controls taking control of a previous venture, buyouts might be a quickly executable bet on growth or a market opportunity.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $110.78 0.36%
BMO $56.37 2.32%
BTU $19.72 8.71%
DISCA $26.88 3.03%
ERIC $10.18 2.57%


Chart of I:DJI
DOW 16,776.43 +304.06 1.85%
S&P 500 1,987.05 +35.69 1.83%
NASDAQ 4,781.2640 +73.4890 1.56%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs