NEW YORK, March 17 Initial public offerings for LinkedIn and Dunkin Donuts, takeovers of Mead Johnson Nutrition and Harley-Davidson, and a Cold Stone Creamery sale are among the 10 deals predicted by columnists from Dow Jones Investment Banker for 2010.
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"Technology should lead the market in M&A quantity in 2010 as technology hardware, services and telecom/media are all businesses in transition and will use M&A to avoid obsolescence," said Adam Smallman, managing editor, Dow Jones Investment Banker. "Other areas that may see lots of activity in 2010 include the consumer products, pharmaceutical and automotive industries."
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Telecom, Media and Technology
Rob Armstrong, senior columnist, Dow Jones Investment Banker, believes an IPO of LinkedIn and a sale of Allscripts to possibly Cerner, McKesson or General Electric are possible. Armstrong says, "The hire of a new CEO is a major step for any pre-IPO company and is often intended to show a commitment to potential investors that they have a tangible revenue model. LinkedIn's new CEO, Jeff Weiner, has close connections with venture capital and spent his career at Warner Brothers and Yahoo, so he knows something about going public, and managing a public company."
As for Allscripts, Armstrong says, "With government funds up for grabs and legacy systems showing their age, healthcare IT is in a land-grab phase. Big healthcare IT providers with existing strength in hospital systems -- Cerner, McKesson and GE -- are likely interested in owning a bigger piece of the fast-growing e-prescribing, doctor's office and electronic health record markets. Allscripts would provide a toe-hold in each."
Consumer
Dow Jones Investment Banker columnist Sameer Bhatia suggests that Cold Stone Creamery, Dunkin Donuts and Pinkberry could all possibly IPO in 2010. "Cold Stone Creamery owner Kahala Corp. is likely to take the company public while there's still growth left in the business. They could also possibly sell it to Canadian coffee chain Tim Hortons, which operates 65 co-branded stores with Cold Stone and has the financial capacity to easily acquire it." Bhatia continues, "Recent moves to strengthen the Dunkin Donuts executive team by adding general counsel and global customer, marketing, human resources and communications officers are indication of an upcoming IPO this year. Pinkberry's global expansion makes it an alluring IPO candidate in the near future."
Alessandro Pasetti, columnist, Dow Jones Investment Banker, thinks that a sale of Mead Johnson is compelling. "Mead Johnson's spinoff from Bristol-Myers Squibb has paved the way for a sale of the business in the coming months. Mead Johnson is an attractive buy at a time when valuations in the sector still remain relatively low and food producers are facing an uphill struggle to grow organically. Nestle and Danone are obviously among the potential suitors."
Dow Jones Investment Banker columnist Lisa Lee suggests that Six Flags could be up for sale in 2010. "The theme park company is entangled in a reorganization brawl between senior lenders, bondholders and directors. Theme parks have been a hunting ground for private equity, with Blackstone's purchase of Busch Theme Parks and Apollo Global Management's acquisition of Cedar Fair. Once out of bankruptcy, Six Flags will be a prime target, especially for Blackstone or Apollo."
Pharmaceutical and Biotechnology
In the pharmaceutical market, Armstrong believes a sale of Bausch & Lomb may be possible as global pharmaceutical firms look to diversify away from traditional prescription medicines. "Eye care has proved popular, with both Abbott Laboratories and Novartis making substantial investments over the past year. Bausch & Lomb was taken private in 2007 by Warburg Pincus when its value was depressed following the recall of one of its lens solutions. With that issue largely resolved, Bausch & Lomb could fetch more than $6 billion and potential bidders could include Sanofi-Aventis, GlaxoSmithKline and Johnson & Johnson."
Jacob Plieth, a Dow Jones Investment Banker columnist, predicts an acquisition of Vivus. "Qnexa, a drug for treating obesity, has been filed with the FDA by Vivus. The possible market for an efficacious weight loss drug with a decent safety profile is over $1 billion, and Qnexa is the most efficacious of a new wave of obesity products, all of which need big pharmaceutical partners to be marketed to primary prescribers. This makes Vivus a leading contender for acquisition potentially by Johnson & Johnson, Bristol-Myers Squibb, or other big pharmaceutical companies that have worked in obesity before and still see it as a promising area."
Automotive
Dow Jones Investment Banker senior columnist Ed Tan says that Harley-Davidson has suffered a decline in sales and net income and could make an attractive acquisition target at the right price. "The main factor would be Harley's ability to maintain adequate liquidity for continuing operations and to control loan delinquencies from sales funding. Potential acquirers for both Harley and its MV Agusta division could include private equity or even a Middle Eastern or Asian sovereign wealth fund that is hoping to tap into demand among the Chinese and Indian middle classes."
Additional background material on each of these 10 deal predictions can be found at www.dowjones.com/pressroom/SMPRs/DJIB10.html. For more information about Dow Jones Investment Banker, visit www.dowjones.com/banker.
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