InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

Does the government owe you an extra $1,003 a month?

Boring, Predictable, No-Surprises Strategy Safely Generates $67,548Last year, a little-known loophole allowed a small group of regular Americans collect over $122,366,000 in bonus government cash. And you can join them. It doesn’t matter how old you are, your relationship status, or even how much money you make. There’s simply no way you can be denied from taking part in this plan, too. I’ll show you how here.

 

Let’s Make a Deal, Brexit Edition

By Jim Pearce on July 8, 2016

Last week I half-jokingly promised my editor that I wouldn’t mention Brexit in today’s column since we’re all tired of hearing about it. But breaking news that Paris-based yogurt maker Danone (DANOY) will buy American organics food producer The WhiteWave Foods Company (WWAV) has compelled me to renege. While this transaction had been in negotiations well before the outcome of the Brexit vote was known, I believe it may portend a wave of similar deals driven by European companies wanting to diversify with U.S. holdings.

This deal makes sense even if the Brexit vote had gone the other way. Danone will immediately double its sales in the United States without cannibalizing any of its other businesses. And Danone didn’t have to surrender a king’s ransom to get the deal done: it will spend $12.5 billion in an all-cash transaction at a cost of $56.25 per share, or roughly 20% higher than the price WWAV shares closed at the day before the deal was announced. That’s a healthy premium, but hardly exorbitant.

(WhiteWave was a holding in Investing Daily’s Breakthrough Tech Profits. We recommended it on March 21, and sold it when the deal was announced—pocketing a healthy 38.4% gain. I explain how we picked WhiteWave below.)

Although WhiteWave had been the subject of takeover rumors for a long time, most of them centered around American companies such as General Mills and PepsiCo. But the outcome of the Brexit vote most likely motivated Danone to up the ante to lock up WhiteWave before someone else nabbed it. There aren’t many companies like WhiteWave available in the food sector, especially one that is such a good fit with Danone’s existing business.

This may be only the first of many large transactions by European companies that can see the writing on the wall. If Brexit ultimately results in a full or partial breakup of the European Union, then a lot of companies headquartered in England, France, Germany and Italy will need a new game plan to achieve long term growth. And right now it doesn’t look like China will be the answer to their prayers, given its decelerating economy and fiscal shenanigans. That leaves American companies as the most likely source of future growth.

So it looks like investors have a new game to play: Let’s Make a Deal, Brexit Edition. The rumors will fly, and a lot of money will be made and lost as speculators either win big or lose big by trying to guess what’s behind door number two: a takeover bid or empty rumors.

Winning the Game

But it doesn’t have to be guesswork. You can give yourself an edge by applying a logical system for identifying likely takeover targets. Our WhiteWave pick came from one of our Breakthrough Tech Profits experts, Dr. Joe Duarte, who recommended WhiteWave because it scored highly in his Applied Technology Investment System (ATIS), which hones in on undervalued companies using technology to disrupt mature industries.

Of course, Joe had no way of knowing that this particular transaction was imminent, but he did know that WWAV was applying technology to the food business in a way that allowed it to create competitive products more quickly and cheaply than its competitors. And that is precisely the kind of company that a potential buyer would like to own. By purchasing WhiteWave, Danone is also gaining its management team, intellectual property and other resources that can be applied across the entire enterprise.

Unlike conglomeration, where a number of disparate businesses are cobbled together to mitigate sector risk, these Brexit-inspired acquisitions will be foreign businesses buying firms within their own sector to reduce geographic and currency risk.

Sounds good in theory, but the hard part is in figuring out which combinations will work, and which will not. For every successful intra-sector merger there is also an AOL/Time Warner fiasco that can nearly kill a business. That’s why most companies will not be as quick as Danone and WhiteWave were to agree to terms: The costs of Brexit is not yet clear, nor are the benefits of taking extreme action to avoid it.


You might also enjoy…

 

Here’s What’s Really Going to Crush the Market

Most folks understand the basic concept of inflation… things cost more money. But tragically, most don’t understand the real implications of what it means for their financial future. 

Or just how dangerous it’s becoming right now. Today.

And there are two reasons for that…

First, the U.S. government’s calculations barely take into account two of the things you and I are paying more and more for every day: energy and food.

Second, since inflation really hasn’t been an issue for the past 30 years here in the U.S., most analysts won’t dare to say it’s on the rise because they’ll suffer professionally. 

But I’ve made a name for myself by always saying what needs to be said. Which is why I’ve prepared a new special report that’ll give you simple instructions on how to protect yourself from the coming storm.

And better still…

It gives you the full story on the six types of investments that are destined to soar 275%… 375%… even up to 575% over the next few years as the winds of inflation flatten the U.S. economy.

You can get your free copy here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.