And maybe that's the beauty of it. A company that makes containers, a flashy boot company, a wireless communications provider, a licorice maker and an automated designer of everything from apparel to aerospace and signs all got bids today. The container company, Graham, got a higher bid than a previous company offered, and you can see something that's going on throughout this market: Stocks are too cheap, even as the economy is awful.
Taken case by case, these acquisitions seem silly. What the heck is
going to do with Timberland, especially after that super overpay? It is going to VF-ize the company, meaning it will integrate Timberland into its book of business and make more money from it than Timberland can. The stock is undervalued vs. the brand. That's how VF Corp.'s stock can soar. This company has grown through a series of acquisitions. It has stalled without them. Now it is ignited. The market knows that even at an inflated price vs. where it was, Timberland is cheap for VF, because it has a great set of complementary brands.
Graham? Packaging, we are learning, is cheap. That's why
can get a big bid from
. We don't know much about this bid other than it tops another bid by an outfit called
, and that means a mundane company that makes molded plastic containers and automotive parts is just too cheap to stay independent. Why else would two -- not one, but two -- companies want in?
M&F Worldwide has been a rumored name forever. It's a holding company with lots of different services businesses, including direct marketing, testing and measurement services. However most of us know it as a licorice company. There are too many brands here under one roof, and perhaps that's why M&F Worldwide, which holds 43% of the company's stock, wants to take it out of the public hands and perhaps divvy it up into a company where the parts are worth more than the whole.
Honeywell is always on the lookout to boost its health and safety divisions and its aerospace business, and it looks like it has found a nice bolt-on acquisition with EMS Technologies. Again, this is a company that got little respect or interest from shareholders. It's a total "who cares" stock. The answer is that David Cote, the wise CEO of Honeywell, cares, and he's got a nice acquisition that can help its aerospace business have an edge in communications technology. The acquisition is a little opaque, but the need to fill in holes in Honeywell's product line seems to be sated by this one.
Gerber is a company that has been around forever. It used to be the premier automated company to help apparel companies execute new designs. It has always been a terrific software play, as I know because I once had a huge position in it at my old hedge fund, betting that someone would snap it up. Of course, I owned it right about where the takeout price is, $11, but that's a 35% premium to where it was last week. It was always a bridesmaid until Vector Capital swooped in to take it over.
Now, you could argue that all of these deals are pure coincidence. I would prefer to argue the opposite, that there is nothing coincidental about these deals. They are, I believe, a recognition of the failure of the stock market to work as a market of individual stocks, and they are much more about how stocks trade as a group in a way that wears down everyone who is on the radar screen, meaning they trade together with an ETF, or they are not on the radar screen at all and are just orphans that no one talks about.
Plus, you can argue that these deals are a revulsion against being public altogether. It has become a nightmare, an expensive nightmare with huge costs that weigh down all but the largest companies. The moment a public company goes private, the acquirers save a huge amount of money in compliance and board costs alone. You can't know, unless you serve on the board of a company, how rigid and nightmarish being a public company is.
I wouldn't wish it on anyone.
It looks like the managements of Timberland, EMS Technologies, Graham Packaging, Gerber Scientific and M&F Worldwide agree.
At the time of publication, Cramer had no positions in stocks mentioned.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider ELMG, MFW and GRB to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.