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Published March 24, 2008 at 1:29 PM
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Blog 24/7 Wall Street has assembled a list of 11 companies that may not survive the current economic climate as independent businesses. (The new issue of The Deal covers similar ground in retail, looking at what could be a devastated sector in a recession.) While most of the names would come as no surprise to Dealscape readers, a few of the matches seem like long shots -- the most notable of which is the suggestion that Wal-Mart Stores Inc. gobble up Sears Holdings Corp.
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As for some of the targets, Dealscape has suggested similar deals as 24/7 Wall St. for E*Trade Financial Corp., Qwest Communications International Inc. and Washington Mutual Inc., each of which has seen some distress of late.
Indeed, some of these mooted mergers are highly unlikely despite 24/7 Wall St.'s big caveat of a "deep" recession that would create the harsh climate that would allow them to pass muster with regulators. Consider:
- McDonalds buys Wendy's. McDonald's Corp. didn't bite on Wendy's International Inc. during its recent auction, and it is even less likely to chomp in a sour economy. McDonald's would be better served by expanding its international presence rather than domestic market share. And why would McDonald's need more locations in an already mature U.S. fast-food landscape?
- Ford merges with Volkswagen. In a mooted Ford Motor Co.-Volkswagen AG deal, the issue might come down to which family blinks first, the Fords or the Pieches of VW. The Piech family controls Porsche AG, VW's largest shareholder. In the past, the family has upped its stake in VW to prevent a sale or stymie a merger. It would certainly act to prevent a deal that would dilute its control over VW. And what about the Ford family? Again, if the pain is deep enough or bankruptcy loomed, the Fords might be willing to seek a partner to bail Ford out. But could the two families coexist? And what about the nationalistic backlash in both countries?
- Wal-Mart acquires Sears. Eddie Lampert might cheer to offload Sears, but why in the world would Wal-Mart deviate from what it does best by picking up dying retail brands like Sears and Kmart? Acquiring Sears would lead to overlapping locations, and captive brands -- some pretty good -- such as Sears Hardware, Land's End and the Great Indoors that would undermine Wal-Mart's highly effective discounting strategy. Besides, doesn't Wal-Mart get enough criticism for its nonunion, few (or no) benefits policy to take on the inevitably messy integration of the Sears work force?
Of course, anything is possible. Who would have thought that J.P. Morgan Chase & Co. would buy Bear Stearns Cos. at even $10 a share? - Matthew Wurtzel
See story from 24/7 Wall Street
See Dealscape: Could an E*Trade sale be in the cards?
See Dealscape: AT&T coy about dealmaking?
See Dealscape: WaMu's setback, makes it appetizing target
See story about J.P. Morgan buying Bear from TheDeal.com
See Wendy's auction info from Auction Block
See Ford's auction info from Auction Block
See Dealwatch: Ford Motor Co.
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