TheStreet's Jim Cramer predicted that 2017 will see lots of dealmaking activity "no matter what" at TheDeal's economy conference at the J.W. Marriott Essex House in New York on Thursday. Deals may be helped in part by a less strident anti-trust department under Donald Trump's administration, the founder of the Deal's parent, TheStreet (TST) noted.
Cramer laid out his reasons for why 10 companies could be takeover targets next year. He noted that while these are only prospective targets, they would make logical sense.
"Every one of these deals should be done," Cramer said, adding that if the fundamentals weren't any good, he wouldn't be recommending them. Cramer noted these companies will do "quite well" on their own even without a takeover. Following are the 10 candidates he identified and his rationale for their acquisition:
1. Advanced Micro Devices (AMD) . The company makes chips in the "hottest" area of semiconductors: gaming, which has double-digit growth, Cramer noted. AMD should be bought by Micron Technology (MU) , according to Cramer. Micron stock has been stuck in the teens and the company is acutely aware it needs to get out of there, Cramer said. "I could see Micron soar on this," Cramer said of a possible acquisition of AMD. The deal would help Micron gain exposure to fast growing markets and be "less trapped" in cellphones and tablets. He noted that AMD does not want to be acquired and it just reported a good quarter.
2. Xilinx (XLNX) . The $13 billion in market cap company designs programmable technologies and should be acquired by Broadcom (AVGO) , Cramer said. "It's time for Broadcom to make another deal. Why? Every time Broadcom buys a company, the stock goes higher," he said, largely because it so effective at the kind of integration that escapes other acquirers. In particular, Xilinx has heavy exposure to aerospace and data center sectors, which Broadcom does not currently play in. Last month, Broadcom agreed to buy Brocade Communications Systems (BRCD) in a $5.9 billion deal, including debt.
3. Marvell Technology Group (MRVL) . "I can't believe this one hasn't happened yet," Cramer said, referring to a takeover of the $7 billion integrated circuit maker for PCs and tablets. Marvell's main emphasis is automobile, Internet of Things, storage networking, machine data and learning and artificial intelligence. The troubled company has been pressured by activist investor Starboard Value, he noted. The two most likely acquirers of Marvel are Western Digital (WDC) and Seagate Technology (STX) as both are trying to be more than disk drive makers, according to Cramer. The addition of Marvell to either company would be greeted as positively or even more so than Western Digital's acquisition of flash memory company SanDisk earlier this year, Cramer said.
4. Cypress Semiconductor (CY) . Cramer believes AMD should buy the semiconductor company, which is undervalued. He noted Cypress has a strong balance sheet and is half the size of AMD, which makes computer chips for video games. Cypress is trading around $10 per share amid a selloff in tech stocks, in part because long-time CEO T.J. Rodgers, whose merger with Spansion Cramer said was "brilliant" but unappreciated by the market, has since left the company, so he wouldn't stand in the way of a deal.
5. Apache (APA) . Cramer believes Occidental Petroleum (OXY) would be the logical buyer for the oil and gas company. Apache, which is entirely domestically focused, is trading around $67 per share. If the company bought Apache for as much as $85 per share, Occidental stock would go up, Cramer contended, thanks in part to the latter's strong balance sheet and the fact that its long-time parsimonious CEO was recently replaced by a freer spender who needs to prove her worth to investors.
6. National Oilwell Varco (NOV) . The stock "used to be so much higher. I don't mind if this one gets bought," Cramer said. In late October, General Electric (GE) agreed to merge its oil and gas unit with Baker Hughes (BHI) . The new company, which benefits from GE technology that can predict when equipment will give out, could be a possible acquirer of National Oilwell Varco.
7. KB Home (KBH) . Although housing has been in the doldrums because of rising interest rates, Cramer recommended finding a target with valuable land because of its scarcity. For that reason, he focuses on homebuilder KB Home, which Cramer noted has "so much land around San Francisco. No one has the land they have around San Francisco." He added that starter homes in the area go for $1.3 million (and that he'd rather be a home seller there than a buyer). He said PulteGroup (PHM) could improve its lagging growth prospects with an acquisition of KB Home.
8. Advance Auto Parts (AAP) . The $12 billion company is a "natural fit" for its competitor O'Reilly Automotive (ORLY) , Cramer said. The auto parts industry is fragmented and badly in need of consolidation, he noted. The two companies together would have 10,000 stores.
9. People's United Financial (PBCT) . KeyCorp (KEY) should buy this fellow regional bank, as the former's CEO, Beth Mooney, bought First Niagara earlier this year, which gave her branches in Connecticut, Massachusetts, New York and Pennsylvania. The First Niagara deal has produced tremendous dividends for shareholders already, Cramer noted. And People's United has branches in many of KeyCorp's markets, providing an opportunity for branch closings and cost savings. People's shares are also trading at a lower multiple of book value than KeyCorp, enhancing a deal's chances of being accretive.
10. Arconic (ARNC) . The company was formerly part of Alcoa (AA) and separated from it last month. Honeywell International (HON) and Eaton (ETN) should be prospective buyers as aerospace makes up about 41% of Arconic. Cramer noted that such a deal would resemble the $37 billion deal that Warren Buffett made for Precision Castparts in 2015. "If Warren Buffett likes Precision Castparts, then I like Arconic," Cramer said.