Williams Companies Rejects Offer from Energy Transfer Equity
Natural gas pipeline company Williams Companies (WMB) has seen shares jump after Energy Transfer Equity (ETE) confirmed reports that it had made a bid to acquire the company. Despite the all-equity offer of $64 per share representing a 32% premium to Williams’ June 19 closing price, the offer was rejected by the firm as significantly too low. ETE has made multiple attempts to talk with Williams’ management about a possible merger in the past half year, and ETE has said its offer is contingent on the abortion of Williams’ pending purchase of Williams Partners (WPZ). The initial offer came on May 19, six days after Williams Companies announced it would buy Williams Partners for $13.8 billion. The Board of Directors at Williams Companies has approved a process in which it will explore a range of strategic alternatives, including a potential merger, sale of the company, or continuing on the existing growth plan. We wouldn’t be surprised if another offer is thrown Williams Companies’ way, though we’re not rushing to add exposure to the MLP universe at present.
Medtronic Growing Dividend
Dividend Growth Newsletter portfolio holding Medtronic (MDT) declared a $0.38 per share quarterly dividend on June 19, up from its prior quarterly dividend of $0.305 per share, a ~25% increase. The announcement marks the 38th consecutive year of an increase in the company’s dividend payment, and including the latest increase, Medtronic’s per share dividend has more than tripled over the past 8 years. We have been high on Medtronic’s dividend prospects, it has been in the Dividend Growth Portfolio since its inception (1/1/2012); in fact, its stock is the second-highest weighted holding in the portfolio. Medtronic’s current dividend payout ratio is ~35% of fiscal year 2016 estimated adjusted diluted earnings per share, and it is targeting a ratio of 40% within the next few years. Along with increasing the dividend, the company’s board of directors approved the repurchase of 80 million ordinary shares, or ~6% of total basic shares outstanding, and the firm remains committed to returning 50% of its free cash flow to shareholders. Medtronic’s dividend report will be updated with the latest information shortly.
eBay Sells Craigslist Stake
Best Ideas Newsletter portfolio holding eBay (EBAY) sold its 28.4% stake in Craigslist back to the company last week. The position was obtained in 2004 for less than $34 million, and in the closing of the position, all litigation between the two companies will be dismissed. eBay is continuing to focus on its online marketplace, and it is scheduled to spin off its PayPal transactions business in the third quarter of this year. Both of these transactions are efforts by the company to jettison non-central businesses and focus on its core as the Internet space continues to be a rapid developing one. We continue to believe eBay represents one of the rare bargains on the market today.
Hershey’s Shares Melting
Hershey (HSY) shares are near their 52-week low after management cut its guidance last week. The company now expects full year 2015 sales to increase 2.5%-3.5% and adjusted diluted earnings per share to be in the range of $4.10-$4.18. Both of these ranges are decreases from initial guidance of 4.5%-5.5% revenue growth and EPS of $4.17-$4.28. The firm’s North American segment is on track to deliver on its 2015 financial and market share objectives, but its problems start overseas. The company’s China confectionery growth is below expectations, largely due to the slowdown in the Chinese economy affecting the spending behaviors of many consumers. In 2013, Hershey acquired Shanghai Golden Monkey in an attempt to leverage the local brand with iconic Hershey products, but has yet to generate some of the synergies that were forecast. The slowing of growth in China’s economy has only made matters worse as Hershey is forced to reassess the value of Shanghai Golden Monkey. Hershey’s shares have now converged to intrinsic value.