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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Takeover Play Saks Still Has Strong Upside Potential

Stocks in this article: HOT SKS

By Brian Skally

Since my last update, my Absolute Returns portfolio initiated small positions in a post bankruptcy oil and gas company, Par Petroleum (PARR) and in the luxury retailer Saks Inc. (SKS), the subject of a buyout by Canada’s Hudson Bay (HBYAF)

Our position in Saks was initiated during a temporary dip in prices following a report that the company’s debt could be downgraded to junk status by rating agency Standard and Poor’s.

If you assume that a buyout would be debt financed and add significantly to the company’s existing debt pile, then a downgrade appears logical. However, in our opinion, a sell off in its equity is certainly not logical, given that the triggering event of the debt downgrade would be a takeout of the equity at a premium to the market price.

In our view, the buyout offer is at a price that arguably undervalues the enterprise, or at least the real estate on the company books. This prompted the almost inevitable legal investigations on behalf of disgruntled shareholders.

Regardless, the company will now have a period of 40 days to solicit alternative third party bids. Starwood Capital (HOT) was recently reported to be among those interested in acquiring Saks, fueling investor hopes of a bidding war.

However Starwood, with their expertise, and led by Barry Sternlight, are unlikely to overpay for a company, and given that the stock is up considerably this year, the potential upside may be less than investors are hoping for.

Other notable events among the portfolio holdings were two major developments at French media conglomerate Vivendi. First, the company appears to be finally making progress in its attempt to divest its majority stake in Maroc Telecom and has entered exclusive talks with Etisilat regarding the sale.

Secondly Vivendi (VIVEF) struck a deal with Activision and a consortium of investors to sell the majority of its stake in the video game maker. This deal will be remembered as one of the few transactions in which the majority holder not only failed to get paid a control premium but actually sold its interest at below market prices.

We continue to hold a reasonable percentage of cash and as always are seeking attractive opportunities in which to deploy it. We remain, as before, constrained by the limited availability of opportunities in a buoyant market.

The investments discussed are held in client accounts as of July 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

Brian Skally

Brian Skally

I am employed full time in the private shipping sector, having previously worked as private consultant in the maritime industry

null

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!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

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