This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Companies Bolting Joint Ventures


Sony bought Ericsson's 50% stake in their Sony Ericsson mobile phone venture for $1.5 billion on Thursday in cash, ends a partnership started in 2001 that created the world's sixth largest mobile phone maker. The deal allows Sony to integrate smartphones into its line-up of network-connected consumer electronics devices and is also a signal of where the company sees opportunity - principally competing against Apple (AAPL) and Samsung in smartphone and tablet sales. Of his strategy in the deal, Sony chief executive Sir Howard Stringer said, "We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment."

About joint venture buyouts, Bible of EisnerAmper added that because deals can get done quickly, they may be a leading indicator for larger mergers and acquisitions, which are recovering with deals like Kinder Morgan's (KMI) $21.3 billion purchase of El Paso (EP). "My personal view, I think were probably a good year away from some level of confidence for both producers and consumers in the economy that will lead us to more normal times," said Bible.

Clued in company watchers found last Monday's announcement that Peabody Energy would assume 100% of a previously shared $4.7 billion partnership to buy coal miner Macarthur with ArcelorMittal as a stunning reversal from days earlier when the venture looked complete. "I was definitely surprised. I didn't see that Arcelor would drop out," said Meredith Bandy an analyst at BMO Capital Markets (BMO). Bandy added about the deal, "at current rates of production it's a very full price that they are paying. Long term at Macarthur you are looking at 9 million tons of annual coal extraction or more, so if you are able to achieve that growth then they are not overpaying." The idea is that the Macarthur coal takeover is sensitive to the amount of coal the company can extract and its selling price. Expected extraction tonnage and selling prices are contingent on global economic demand and a stem in the tide of economic and market deterioration in recent months.

Mittal said in its walk away that the price of the partnership "exceeds what is appropriate to allocate to a business that ArcelorMittal does not fully control." It's a signal that though Mittal absented a 50-50 bet on coal production and prices, putting a partner in all hands on the deck, they too might jump into deals.

For ventures suffering from falling commodity prices, today's still confidence lacking market may be a deterrent. For instance, natural gas prices are still well below levels earlier in the year. "In general I would say that many gassy exploration & production companies have JV's that they might not be interesting in selling a remaining interest in given depressed natural gas prices," said David Deckelbaum and analyst at KeyBanc Capital Markets in an email. Deckelbaum added however, "there might be a chance, particularly in the Bakken Shale to consolidate minority interests." Earlier this year, in the Eagle Ford shale, KKR (KKR) sold its shale joint venture with Hilcorp Energy for $3.5 billion to Marathon Oil (MRO), and a year earlier, the company sold a J.V. called East Resources to Royal Dutch Shell (RDS) for $4.7 billion. Signaling that recent mergers like Statoil $4.4 billion purchase of shale driller Brigham Exploration (BEXP) might also reflect partnership buyouts.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs