An Astonishing Flood of Deals

 | Sep 24, 2013 | 12:47 PM EDT
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The status quo just won't cut it anymore. Management teams and shareholders both won't take it. They won't accept their underperformance, and they are taking actions at an astonishing rate.

Look at today. Applied Materials (AMAT), not happy with its lagging stock price, makes a bid, a huge one, for Tokyo Electron. This is a $9.3 billion pact that would give this new company tremendous marketing power. It's a huge deal -- one that would create a powerhouse and give this semiconductor-equipment company a high level of clout with their chief customers, Intel (INTC) and Samsung, that would make for a tremendous disadvantage over pricing.

It is entirely possible that this deal could raise the price of all sorts of consumer goods made by these customers, and I doubt it will get approved. Because of this, the Action Alerts PLUS charitable trust sold its stock into the bid today. Still, it's incredible to me that the company would even try to do it. This is yet one more deal in which the acquirer is going up in value because the merger's so good for the combined entity.

Or how about Greenway Medical (GWAY)? Here's a healthcare-records-keeping company that came public almost two years ago and went to an immediate premium. Then it lost its way, missing estimates one quarter while it moved to a more cloud-computing-based system. So Greenway decides to sell itself to some outfit called Vitera and the stock goes up 15%, just like that. Even as the company had barely been public, it wasn't happy with how its stock was doing, and it took action.

Or how about Tom Sandell, a money manager whom I had never heard of who took a 5.1% stake in Bob Evans Farms (BOBE)? This is one of the first stocks I ever bought, by the way. Sandell took this stake hoping management will unlock hidden value in the chain that comes from having a food-distribution company and a restaurant chain, with 482 stores, under one red roof.

This one amazes me. Bob Evans shares are up 45% this year. What more could you ask of a company? It sells at 21x earnings. It's been a total winner. But I could see it trade up 20 points from the $58 level if it does split up, as Hillshire Brands could easily make a bid for Bob Evans' terrific pork-sausage business, and management could take the proceeds and buy in a ton of stock. It's funny -- when I bought the stock 34 years ago, I thought this break-up could occur, and that it would bring out value. Better late than never, I guess.

You also have to be impressed that National-Oilwell Varco's (NOV) not standing still. It has a distribution business that's doing well, but buried within the manufacturing company. A spin-off will unlock a goodly amount of value. It also shows just how friendly to shareholders CEO Pete Miller is. The stock's a buy.

Finally there's Sotheby's (BID). Here's a stock that got recommended today by Citigroup, and I think the stock's going higher because activist Dan Loeb would like management to bring out more value. I think it makes sense, and Loeb is doing the right thing.

Now, I know that 2013 has been a bit of a bust for mergers and acquisitions. It started strong, but then petered out pretty dramatically. But this kind of relentless drumbeat of companies spinning off properties, and activists pushing for value-unlocking, has swept Wall Street by storm. Yet, I think it is still in its infancy. It's a huge behind-the-scenes prop to the stock market and, given all the money being raised by activists, and all the cheap money still available for acquirers, I think we are going to see more and more of these agitations. What's amazing about these deals is that these companies were all doing pretty well on their own. But "pretty well" doesn't seem to cut it anymore.

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