First, forget what Cramer said today. Second, forget about what you think you know about APD...
Why else would the share price of APD & PX spike today, just after private equity announced their interest buying in Air Liquide yesterday, and ***BEFORE*** Cramer started talking about APD? Does someone know something? There were no questionable options volumes, but the share price spike was certainly on my radar screen... I contend that PX and APD may be up for sale... here's my APD argument, although my PX argument isn't too dissimilar...
My theory: Maybe some determined private equity guys have started forcing everyone's hands in a premature consolidation of the global gas business... maybe the private equity guys will also attract the likes of some major energy/chem players like Shell, XOM, BP, CVX, BASF, or even Dow to the party, who want to be vertically integrated with their own gas supply??? Take a serious look under the hood -- here we have the recent Linde consolidation of BOC. M&As are up globally at record highs. Every private equity company in the world is looking for the next best thing to buy. APD is a smaller market cap than Air Liquide, with NO stubborn French gov't shareholder ownership. Why would the APD CEO just now announce his resignation? Why would APD sell their chemicals businesses if not to look more like PX, who has a higher p/e -- perhaps to reduce any regulatory conflicts with some competing chemical suitors? As far as private equity is concerned, APD probably has a lot of "fat" to trim, which should make it more profitable overnight.
It makes perfect sense to me. APD for sale??? Isn't everything for sale? Me thinks so!!! STRONG BUY!!!
I stand corrected. I do not believe, at this juncture, in light of a 25% sales haircut that AP will continue to rise. I sold out this evening in anticipation of a sell off. I could be dead wrong but 25% is quite substantial and even revenue improvement may not be enough to maintain their eps.
You could be right. APD trimming the fat wouldn't hurt their offer price. And as you point out it must be a company outside the industry.
Either way, APD a strong buy at he current price.
"Why would the APD CEO just now announce his resignation?"
Nothing to do with prospect of APD being bought. If JPJ3 really thought this was a possibility soon, he would have stayed to engineer the deal, (assuming the B.O.D. still wanted him).
I think he just wanted to cash out and relax - while he was still young enough and healthy enough to go sailing. After all, how much do you need?
Any comments/additional info?
Interesting speculation http://www.sharewatch.com/story.php?storynumber=32427
Especially with Reilley now on the board http://news.dow.com/corporate/2007/20070820b.htm
I read an interesting article in WSJ today, that said BASF was going to ramp up its acquisition activity after sitting on the sidelines for about a year, post-Engelhard.
In the article, the BASF CFO said he would not discount the possibility of a larger acquisition. I thought, "How about APD?"... There are some not-so-obvious synergies between APD and BASF. For instance, BASF has ts own emulsions business, which may solve APD's dilemma concerning the emulsions sale, but this is more of the tail wagging the dog scenario. Most importantly, and a pretty obvious synergy is BASF needs gas, and prefers vertical integration and captive demand to buying from companies. After all, they are "The Chemical Company". Furthermore, APD is hugely profitable, provides predictable earnings growth, and probably will for decades to come.
I don't really know anything specifically, I just think it makes some sense for BASF to consider APD as a target. Does anyone think I'm crazy? I didn't even mention the timing of APD's CEO departure.