The Chart du Jour

Themes for 2001 & Beyond,
And at Least One M&A Deal to Fade

April 3, 2001

By, Barclay T. Leib


Chart constructed using Advanced GET End-of-Day

Back in January, Swiss food giant Nestle plowed in with a takeover offer for U.S. pet-food manufacturer Ralston Purina. Apparently the pet food business is growing faster than the Swiss chocolate business, or else some investment banker got the ear of Nestle's management that this would be a synergistic fit.

The deal valued Ralston's stock at just over $33 a share. Separately, Nestle has announced a 10-1 stock split on their own stock, seemingly trying to act like some aggressive Nasdaq stock of yesteryear -- but perhaps a bit late to the party. Nestle has been trading flat to lower in Europe for the last several months despite all these aggressive moves.

The only thing is: We currently face a growing agricultural crisis in Europe between hoof-and-mouth and mad cow. This could easily someday spill over into the pet-food world -- even in the U.S market. In addition, the combined Nestle-Ralston merger would leave the combined entity with an overbearing 40% market share of the pet food industry in the U.S. We don't think the FTC will allow that to happen.

Overall, we'd bet against this M&A deal going through for one reason or another. Betting that it will go through would certainly not seem worth the remaining $2 spread profit.

On a somewhat similar topic, but for Sandspring.com subscribers only, we publish tonight our monthly missive entitled "Four Themes for 2001 and Beyond". This article, 16 pages in length, touches on several issues within the agricultural arena, as well as other varied topics including a long-term silver cycle. We also spend a bit of time discussing some regulatory changes within the U.S. markets that are starting to impact corporate America and the profitability of the financial sector.


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It may also be of interest to some that because so much time (and thus timeliness) has now transpired, we recently released three of our 2000 subscriber-only articles. These now appear under the public Earlier Articles section of the website. Perusing through them may give one a sense of the added premium level of analysis we provide to subscribers.


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