Now that you understand what the TRIN is.
Here is the Chart depicting Yesterdays spike in the TRIN.
stockcharts.com.
Now read this article from IBD;
M&A Activity Speeds Up In ’07 As Buyout Firms Still Lead Way
Share counts declining in U.S. as equity firms take companies private
BY BRAD KELLY INVESTOR'S BUSINESS DAILY
Not since the dot-com peak has a year kicked off with so much merger and acquisition activity.
As of Feb. 5 there were 3,085 deals worldwide, with a total value of $332.7 billion. That’s up 32% from a year ago, according to Thomson Financial.
It’s the best start out of the gate since 2000, when there were $565.9 billion in deals through Feb. 5.
M&A activity has been picking up since the bear market ended in 2002. Global mergers rose 38% last year to $3.8 trillion. Less than half of that was from U.S. mergers. This year, U.S. takeovers have accounted for 69% of M&A activity.
The recent spate of deals is largely the result of cash, corporate confidence and low interest rates.
Roy Behren, co-manager of the Merger Fund, said private equity firms have been especially active, which has helped reduce U.S. shares outstanding.
Going Private
In the late 1990s, the way to raise enough cash to grow a large firm was to take it public. But the buyout firms’ deep pockets have given them the same cash flow opportunities without the headaches of a publicly traded company.
U.S. private equity groups spent $414.6 billion last year on buyouts, more than triple the 2005 total. Of the 55 transactions exceeding $10 billion in 2006 — the most in six years — half were done by private equity firms.
They’re off to another strong start in 2007 with Blackstone Group’s proposed buyout of Equity Office Property. Blackstone on Tuesday hiked its offer to $23 billion, or $55.50 a share — its latest salvo in a bidding war with Vornado Realty Trust.
Vornado has offered $56 a share for Equity Office, but Blackstone promises all cash.
Cash Market
Private equity firms have huge amounts of capital. They leverage that takeover power by taking advantage of still-low interest rates.
Behren said buyout firms typically put up 20% to 25% of the money and borrow the rest from banks.
“Private equity firms are not the gunslingers they were in the 1980s,” Behren said. “They are more strategic in nature, and purchases are of higher quality.”
An example is Triad Hospitals, which on Monday agreed to be taken private by CCMP Capital Advisors and GS Capital Partners. They’ll pay $50.25 a share, a 16% premium to Friday’s close.
Matthew Toole, an analyst for Thomson Financial, said private equity firms have cast a wide net across a variety of industries for takeover targets.
While private equity firms get much of the attention, many publicly traded firms are also brimming with cash and on the prowl.
Earlier this week, Canada’s Brookfield Asset Management said it’ll buy Longview Fibre for $1.63 billion, or $24.75 a share.
Megamall developer Mills, which warned it might face bankruptcy if it doesn’t find a buyer, got a $1.5 billion bid, or $24 a share, on Monday from mall giant Simon Property and hedge fund Farallon Capital Management. That tops a $1.35 billion offer from Brookfield.
More than 90% of dealmakers call current M&A conditions good or excellent, according to a survey of 1,230 merger professionals by the Association for Corporate Growth and Thomson Financial.
Nearly half expect even stronger activity in the first half of 2007.
“Cash, confidence, competition drove activity last year, and none of those are in short supply as we enter 2007,” Toole said.
But actual shares are in shorter supply thanks to rising M&A activity and record stock buybacks, said Charles Biderman, CEO of TrimTabs Investment Research.
The net float of U.S. shares fell by a record $555.9 billion in 2006. It fell by $47.7 billion last month.
That might help explain why U.S. stocks have rallied despite anemic flows into U.S. equity funds: The money is chasing fewer shares. |
