This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

5 Unexpected Deals Themes for 2012

3. "People may not be expecting corporate divestitures to continue."

In a year of corporate spin announcements, it may be hard for investors to imagine companies doing much more shrinking to grow share value next year. Krouskos of Ernst & Young says that by gauging corporate executives deal watchers should expect just the opposite in 2012 - a continued spin boom.

After a 12% increase in the aggregate value of divestitures so far in 2011, an October Ernst & Young survey shows that spins may only become more en vogue next year. Of the companies polled in the survey, 30% of U.S. companies expect to divest assets or business lines in the next twelve months.

In 2011, spin's to shareholders and divestitures of "non-core" assets have raised capital for some, while presenting growth opportunities for others. Energy giants like Sunoco (SUN), Valero (VLO), Marathon Oil (MRO) and Chesapeake Energy (CHK) have all announced programs to spin secondary assets and streamline their businesses.

With British oil major BP (BP) still holding billions in U.S. oil assets and a program to raise over $40 billion through asset sales - in addition to a consolidation of the U.S. shale industry -- there still may be plenty of energy deals yet to be cut in 2012.

Alternative energy may even emerge as a divestiture theme after a wave of late-2011 solar spins. In December, Warren Buffett's Berkshire Hathaway (BRK.A) entered the divestiture sweepstakes when its MidAmerican energy unit bought billion dollar -plus sized projects being built by First Solar (FSLR) adding to its alternative energy credentials. Meanwhile, KKR (KKR) and Google (GOOG) also teamed up to buy a solar project as well.

See Berkshire's largest 30 holdings.

Spins have also happened in industries like retail, technology and consumer goods, with a major impact to shareholders. Highlights include Sony's (SNY) purchase of a mobile phone joint venture with Ericsson (ERIC), Bank of America's (BAC) sale of Pizza Hut franchises, Citigroup's (C) EMI Music and publishing sale and Sara Lee's (SLE) coffee and hot beverage division sale to J.M. Smucker (SJM), among a host of deals.

"Companies are also divesting assets and spinoffs to free up cash in the future to execute deals. Businesses that are currently struggling to grow recognize the need to do transformative transactions," says Ernst & Young's vice chair of transaction advisory services Richard Jeanneret in announcing its 2012 M&A outlook.

3 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
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 17,719.00 +33.27 0.19%
S&P 500 2,052.75 +4.03 0.20%
NASDAQ 4,701.8670 +26.1550 0.56%

Brokerage Partners

Rates from Bankrate.com

  • 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