Business Week's Gene Marcial suggests that Dow Jones (DJ) may be ripe for a takeover and that an LBO might be in the future for Sun Microsystems (SUNW).
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INSIDE WALL STREET
How Now, Dow Jones
Is Dow Jones (DJ ), publisher of The Wall Street Journal and Barron's, buyout bait? It's a question that Wall Street has raised regularly over the years, but some pros think the case is stronger this time. One major New York investor, who requested anonymity, has written to the board urging a sale. He wants a change in management which, he argues, overpaid in buying MarketWatch for $528 million. The money should have been used to buy back shares or boost the dividend, he says.
The stock has dropped 50% in the past five years, while the Dow Jones industrial average is off just 3.8%. "It's ridiculous that it has underperformed for so many years," says the investor. Since last June the stock has slumped from 48 to 32. William Bird of Smith Barney is the latest analyst to downgrade Dow Jones to a "sell." Earnings have been sluggish, and ad revenues lackluster. If the stock continues to fall, "Dow Jones could become an acquisition target," says George Putnam III, editor of The Turnaround Letter -- even though the Bancroft family controls the voting stock. "We've seen instances in which the younger generation has forced the sale of a family company," notes Putnam.
Roy Hammer, a trustee for the Bancroft family trust, says "we're not looking to sell the company." With a market cap of just $3 billion, Putnam notes, Dow Jones is "an attractive target for a larger company" or a private equity group. Some investors, such as T. Rowe Price Group (TROW ), which owns 15%, protested a recent move by Dow Jones that allows the Bancrofts, who have 62% of voting rights, the flexibility to sell as much as half their current stake and still retain control. Chief Operating Officer Richard Zannino wouldn't comment on buyout talk. But, he says, at 33-34, "our stock is a heck of a deal -- a bargain." The investor urging a sale says Dow Jones assets are worth 70.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
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A New Dawn For Sun Microsystems?
Sun Microsystems (SUNW ) stock is in the shadows -- down from 5.55 in November to 3.54 on Apr. 27. Although the steep sales slide is over, most analysts are still cool to Sun. But maybe not for long. CEO Scott McNealy is considering taking Sun private with the help of Silver Lake Partners, says a hedge-fund manager close to McNealy and the private equity fund. Silver Lake has done LBOs for Seagate Technology (STX ) and SunGard Data Systems (SDS ). Advertisement
This manager sees an LBO offer of $5 to $5.50 a share. Sun's cash stash of $7.5 billion, or $2.50 a share, makes an LBO doable, he says. The idea is to shrink Sun by selling assets, bolster its core hardware, software, and service businesses, and go public again. Spokespersons for both Sun and Silver Lake declined comment.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. |
