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business newsWimm-Bill-Dann Foods Deal Is a Winner for Russia
By
Justin Sharon
Dec 02, 2010 5:05 pm
Russia's biggest dairy products and fruit-juice maker will be bought for an initial $3.8 billion by Pepsi. The news sent its shares surging by the most ever in its 18 years of existence.
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Then at 10:37 a.m. came news Russia will host soccer’s 2018 World Cup. (One suspects, given the beverage preferences of Putin’s predecessor, that our Bolshevik buddies will be toasting their success with something slightly stronger than OJ right now.)
The price, equivalent to $33 per ADR, represents a roughly 32% premium before today’s surge took it to the top of all NYSE performing stocks and is the Purchase, New York company’s biggest-ever purchase outside the United States. Pepsi will initially acquire 66% of Wimm-Bill-Dann and ultimately aim to buy the entire entity for a fee that will rise to $5.4 billion. In doing so it acquires a firm whose brand names -- unless something is lost in translation -- are as colorful as their beverages with labels like Jolly Milkman and House in a Village.
It commands an impressive 26.4% market share of the baby food market in Mother Russia, although this is perhaps damning with faint praise in a nation that's losing population at a faster rate than any advanced country in the peacetime history of the world. Investors may experience a hangover after realizing the firm, whose stock traded at a premium to peers, was forecast to show a significant slowdown in EDITDA and net income growth rates from 2012 amid increased competition and maturing markets. Although Pepsi is paying a pretty penny, CEO Indra Nooy says the deal -- dependent on Russian government approval -- “is financially attractive and gives us a strong, high-growth platform in the dairy category.” It is expected to be marginally accretive to core per share earnings from the first year and analysts see synergies of $100 million by 2014.
Please see Most Influential CEOs: PepsiCo’s Indra Nooyi Pushes for People Power, Diversity and WikiLeaks Shed Light on Russian Business Practices.
That baffling murder-suicide mystery involving a prominent Hollywood publicist that currently has all of LA in its grip provides redundant proof that even the most outlandish movie can’t hold a candle to reality. If, however, this morbid tale ever does make it to the big screen, there’s a better-than-average chance you'll see it in a cinema belonging to Regal Entertainment Group (RGC), America’s largest movie theater operator. The 8-year-old Knoxville -- no relation to Jackass Johnny, even if the latest 3-D incarnation of his franchise has pulled in $155 million since its October opening -- Tennessee outfit operates about 6,768 multi-screens in 548 US locations. Its stock is up more than 4% after declaring the issuance of an extraordinary cash dividend of $1.40 per share.
Regal, whose properties also include United Artists, also stated an intention to increase its quarterly per-share payout ratio 17% to $0.21. Last year it also inked a deal with Sony Corporation (SNE) to install all of its theaters with 4k digital projection over the upcoming half decade.
Still, risks are real and include an always unpredictable quality of film fare coming out of Tinseltown. While December sees Oscar-worthy highbrow offerings hit silver screens in time for the Academy Awards deadline day, January tends to be stuffed with all the industry’s turkeys. And with Netflix (NFLX) on such a roll recently, many movie buffs clearly prefer clicking a mouse over schlepping out to theaters, which have been home to a rat or two. And then there’s the bedbugs.
Read "Warrior's Way" Opens on Weak Box Office Weekend, The Death of the Hollywood Alpha-Male, and 3D Not Just for Drive-Ins Anymore for related content.
If you come across any investors singing "The Future’s So Bright I Gotta Wear Shades" this afternoon, then it’s a reasonable assumption they're sporting sunglasses from Luxottica Group SpA (LUX). The high-end specialty retailer, located in Europe’s catwalk capital of Milan, enabled those Chilean miners to see the light once more, and its shares finished higher by more than 5%.
In addition to Oakley, the world’s biggest eyewear brand also boasts labels like Ray-Ban and Oliver Peoples and owns stores including LensCrafters, Sunglass Hut, Pearle Vision, and Budget Eyewear. Despite the last named, Luxottica has always been more about class than mass ever since its establishment in 1961. (An iconic year for sunglasses -- just ask Audrey.) The company is embarking on a stock buyback program and operates in an affluent sector that's been thriving recently, as evidenced from fresh highs out of Coach (COH) and Tiffany (TIF).
Such stocks often tend to take a post-Black Friday breather however, and uninspiring same-store sales out of Saks Inc (SKS) and privately owned Neiman Marcus this moring may not augur well.
Luxury Consumers Defined by Species and Hermes Beats Walmart at Own Game seek out the high ground, while Mall Brands: Pacific Sunwear sets its sights on a more mass-market side of retail.
Our headline downgrade definitely justified the dubious honor, ending today as the second-worst percentage performer on the entire New York Stock Exchange even as the Dow finished up triple digits. Mall-based specialty retailer Aeropostale (ARO) imploded more than 13% after announcing November comps came in 1% lower and saying Co-CEO Mindy Meads will be leaving. Completing the trifecta of terrible news, it also earned a trio of analyst ratings reductions. Raymond James researchers reduced it to Market Perform from Outperform, MKM Partners moved it to Neutral from Buy, and Wedbush cut the stock to Neutral while lowering its target price to $25. In Wedbush’s opinion, Aeropostale, founded in 1987 and thus far older than its core 14- to 17-year-old demographic, faces a challenge to delivering sales on top of difficult comparisons and corresponding margin declines. That the casual apparel and accessory firm also lowered fourth-quarter guidance also cast a pall on the stock.
From not-so-distant brighter days, Aeropostale, Buckle Shine in Dreary Retail Sector and How Aeropostale Defies Recession for Teens shows just how quickly sentiment can sour for fashion frims.
No positions in stocks mentioned.
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