A major merger agreement has Action Alerts PLUS portfolio manager Jim Cramer and Director of Research Jack Mohr "ecstatic."
News that France's Danone (DANOY) would acquire WhiteWave Foods (WWAV) sent the organic food producer's stock soaring, up more than 18% in Thursday's trading session. Under the terms of the agreement, Danone will purchase WhiteWave for $56.25 per share in an all-cash transaction, which represents a total enterprise value of approximately $12.5 billion, including debt. The price is a 24% premium over WhiteWave's 30-day average closing trading price of $45.43. Danone expects synergies of $300 million by 2020.
"We believe this is a compelling transaction that delivers significant cash value to our shareholders," said WhiteWave CEO Gregg Engles said in a statement, "Danone is a unique company with distinctive capabilities that will enable WhiteWave to reach its next phase of growth."
Cramer and Mohr wrote in a note to subscribers Thursday that they are thrilled to see the best-case scenario play out for this long-time holding. They raised their price target to $60. But Cramer and Mohr said they would not be surprised to see counterbids emerge, "as WhiteWave looks like a once-in-a-lifetime opportunity for any fledgling packaged food company with dry powder."
WhiteWave has been a holding in Cramer's Action Alerts PLUS charitable trust since March 2015 and has gained 28.5% in that time. It represents 4% of the current stock portfolio.
In other portfolio news, AAP holdings Wells Fargo (WFC) and Occidental Petroleum (OXY) stock were on the move in repsonse to analyst actions.
Wells Fargo shares were only down slightly during trading despite a downgrade and lowered estimates by the team at Raymond James, which lowered their rating to Market Perform from Outperform and trimmed earnings estimates by $0.05 to $4.09 for the fiscal year. The analysts said the rationale behind the decision was the "larger-than-peer [net interest margin] contraction as it continues to build liquidity related to compliance of [total loss-absorbing capacity]."
Meanwhile, analysts at Nomura cut their price target on Wells to $48 from $58. The Wall Street consensus for the one-year price target range is between $44 and $64, according to Bloomberg data.
Analysts are forecasting sales of $22.2 billion and earnings of $1.01 per share for the next quarterly report. Wells Fargo is scheduled to report earnings on July 15.
"From a broader perspective, when it comes to earnings, we again note that Wells is less tethered than some of its peers to a high-interest rate environment as it derives almost half its revenues from a fee-based model (the revenue comes in for that business regardless of net interest margins) and has been expecting rates to remain lower for longer," Cramer and Mohr said in a note last Friday.
The Action Alerts PLUS portfolio had held Wells Fargo stock since February of 2015. It has lost nearly 14% since then.
Shares of Occidental Petroleum ticked lower as Raymond James also downgraded its recommendation for the company. Analyst Pavel Molchanov downgraded the oil and gas exploration-and-production company to Outperform from Strong Buy. But he maintained a price target of $85, which is above the consensus average of $78.72, according to Bloomberg data.
Wall Street analysts also updated the anticipated earnings per share for the second quarter. Data from Thompson Reuters shows that analysts are forecasting a loss of $0.18 per share; four weeks ago, the consensus earnings estimate was a loss of $0.21 per share. Occidental is scheduled to announce its second-quarter results on August 3.
In the Weekly Roundup for the week ending July 1, Cramer and Mohr wrote that "Occidental remains one of the premier companies in the E&P space," adding that they view the company's dividend as safe. "We still expect shares to be range-bound as investors adjust to the new era of oil and as Brexit implications on the oil market are further digested," Cramer and Mohr said.
Occidental has been in the Action Alerts PLUS portfolio for a little over a year, with an initial buy date of June 2015. The stock has increased more than 3% in the time span.