There are still great deals occurring. However, they are occurring with companies that are doing well but are underappreciated, companies like Keurig (GMCR) and Jarden (JAH) and Newell Rubbermaid (NWL).
That's right; yesterday's $14 billion purchase of Green Mountain by JAB, which is a family of European multi-billionaires that seeks to challenge Nestle's dominance, and today's report that Jarden may be merging with Newell-Rubbermaid, are manifestations of how undervalued companies are in a market being pulled down by worries about plunging commodities and quarter-point interest rate increases.
All these three companies have one thing in common: they are found in your homes; by the millions and millions of units. We may think that Green Mountain failed with its new iteration of its coffee maker last year, and that KOLD, its revolutionary fresh carbonated drink maker, is a total loser. Almost every analyst I speak to has already pronounced it dead on arrival.
However, about one in every five households has a Keurig, so this is not some one-off device. This is one of the greatest success stories of the era. You can make an awful lot of money owning a company like that, as JAB figures and, frankly, management of Green Mountain figured, if it could just get the new machines right. It couldn't. At least, not in time to save its own independence.
Still, with this last quarter Green Mountain had fixed a lot of the damage inflicted in 2014. Not only that, but the company was telling you with that huge buyback and just announced dividend boost that it was doing really well -- better than Wall Street thought -- and almost no one listened. The same people who hated it before hated it after. Go listen to that last conference call. It was insane. Here is a company that admitted all of its mistakes, said they were corrected, and yet still got no credit for what it said or has done.
I thought Coca Cola (KO) would scoop in and buy the rest of the 17% it didn't own when the stock failed to jump after what was truly a good report. Looks like it won't have to, as Coca Cola takes its $25 million profit on the deal and goes home as part of the 77% premium to the price the week before.
Now, Newell-Rubbermaid has been on the new high list for a very long time and it has a fantastic set of products, driven by innovation. Yet, given its dominance and consistency, it was not outrageously expensive -- slightly more than a market multiple on 2017 earnings, which, remember, are now around the proverbial corner for most growth manager.
This is a different Newell-Rubbermaid from the one that drifted for ages under managements that came up with very uncreative ways to sell multi-colored sharpies. Now it is a factory of new products that are integral to owning and investing in a home, one of the few secular growth stories in the American firmament. CEO Mike Polk has done an amazing job, something that was actually predictable given his work as worldwide product and advertising manager at Unilever during the period when Unilever (UN) passed Procter & Gamble (PG) as the innovator in the field. He's a non-promotional guy, but the brands like Levolor, Graco, Sharpie, and of course, namesake Rubbermaid, have become a fount of new products spreading their tentacles through the aisles of the big box retailers that are still thriving in an atmosphere where retail is clearly struggling.
Meanwhile, Jarden has become one of the great growth acquirers of the era, including, recently, the Josten's brand of class rings. I know, it sounds like an odd one, but the company's become legendary for taking old brands and infusing them with new iterations. That has allowed Jarden to expand along the same trajectory as its prospective partner.
Jarden's stock had become a big winner under the auspices of chairman, co-founder and public face Martin Franklin, although it would be wrong to credit him with all the recent success, as the more low-key -- who wouldn't be compared to Franklin -- Jim Lillie is the CEO. As the company accumulated brands, it systematically beat numbers, but of late its stock has ceased to be rewarded with the multiple it deserves for its consistency that's similar to that of Newell-Rubbermaid, but within a longer time frame. It's only up less than 5% for the year. This merger would allow these companies to bargain better with companies like Wal-Mart (WMT) that are seeking to wrest away the profit margins of both of these giants.
Both deals are fabulous for shareholders. All three of the executives involved should be applauded. They didn't have to do these deals. Their stocks could ultimately have worked their way higher because of superior performance. However, they wanted to get higher faster and escape the tide of negativity that surrounds this market except for an exalted few companies, and make good money for all involved ¿ including, of course, themselves.
