Mergers, Joint Ventures, and a Few Breakups Ruled the Markets This Week


Although the Dow Jones Industrial Average managed to close higher on Friday, its one-day, 8-point gain still left it down 11 points for the week. The S&P 500 managed to close higher by just 0.12%, but the Nasdaq also slightly lost ground during the week, closing down by 0.05%.

On a percentage standpoint, the markets were rather calm this week, but that can't be said for the M&A side of Wall Street. Whether it's just that time of the year, Cupid's running rampant, or company executives are simply itching to spend money, mergers, buyouts, and acquisitions were happening all over the place this past week.

Mergers and acquisitions
The big news this week was the Berkshire Hathaway acquisition, by way of a joint venture with 3G Capital, of H.J. Heinz for $28 billion. That figure represented a 20% premium to what Heinz shares were trading for before the buyout announcement. Warren Buffett has been telling investors for quite a while that his elephant gun was loaded, and this purchase was probably the big game he'd been hunting. But it's also been suggested that because of the Berkshire-3G partnership, Buffett could have money left to make another big purchase in the near future.

The other major merger this week was the US Airways-American Airlines union, which, like the Berkshire-Heinz move, was also announced on Thursday. But unlike the Berkshire purchase, this potential deal was no secret to the markets, and many expected that it would happen. The new company will now be the world's largest airline and control a number of key hubs both within and outside the United States.

Joint ventures
There were three joint ventures involving Dow stocks this week that grabbed my attention. The first was the American Express-Twitter collaboration. AmEx cardholders can now link their card to a Twitter account and make purchases using the social-media platform by simply sending a tweet. While it will take time to see if this service gains any traction with consumers, I was an instant fan simply because of how simple this feature will make purchasing an item.

Another big partnership, announced earlier in the week, was that Alcoa in a roundabout way, will now be partners with the Chinese government. On Thursday, CITIC Group purchased a 13% stake in an Australian company called Alumina, which owns 40% of a company called Alcoa World Aluminum & Chemicals, of which the other 60% is owned by Alcoa. The Chinese government comes into play because CITIC Group is a state-owned entity. In most cases, partnering with the government is a good thing, and I believe that in the long run, this move will turn out well for Alcoa shareholders.

The last item has yet to be officially announced, but the possible joint venture between Hewlett-Packard and Google'sAndroid operating system grabbed my attention. My Fool colleague Rick Munarriz even marked it as one of his Top 5 Smartest Stock Moves of the Week. A few technology blogs reported this week that the struggling personal-computer manufacturer was gearing up to release a high-end tablet that runs on the Android operating system and that a smartphone may be soon to follow. Anything Hewlett-Packard can do to generate earnings growth will be seen as a positive thing among both shareholders and analysts.

The most noteworthy breakup this week was the announcement that Comcast and General Electric agreed to a deal in which Comcast will purchase the outstanding 49% of NBCUniversal, which General Electric owned, for $16.7 billion. GE sold the first 51% of NBCUniversal to Comcast in 2009 for $13.8 billion and will now own the rest of the unit. This is good for both companies, as NBC fits well with Comcast's other businesses while it clearly was not GE's bread and butter. While both organizations will be better off in the long term because of this deal, Comcast may come out ahead of GE because of the great synergies Comcast can now experience.

Finally, one true breakup announced early in the week was that JPMorgan Chase and a number of top managers were parting ways. As the company's equity-units revenues fell this past year, so did bonuses. A number of top traders left because of shrinking pay, while the company cut three managing directors and 18 executive directors because of the lower revenue experienced this year.

More Foolish insight
Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Representing 14.7% of 2011 global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant, simply click here to get started.

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Fool contributor Matt Thalman owns shares of Berkshire Hathaway and JPMorgan Chase. Follow Matt on Twitter: @mthalman5513. The Motley Fool recommends American Express and Berkshire Hathaway and owns shares of Berkshire Hathaway, General Electric, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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