Buyout Blunders: 5 Firms That Should've Said Yes to the Deals
AstraZeneca (AZN) recently became the latest big company to refuse a suitor's advances. Pharmaceutical giant Pfizer (PFE) was shot down last week after making a $117 billion offer for AstraZeneca. Pfizer claims that was its final offer; apparently, it wasn't enough.
Sometimes, those disinterested companies are better off on their own. However, for every Facebook (FB) that correctly scoffed at a large figure (offered $1 billion, it's worth north of $150 billion today), there are many companies that lived to regret turning down. Here are five companies whose owners really should have taken the money and run.
Circuit City is gone. The consumer electronics superstore chain filed for bankruptcy, liquidating all of its stores in 2009.
%VIRTUAL-article-sponsoredlinks%It didn't have to go out that way. There was no shortage of companies proposing to take over the once-vibrant retailer. It turned down private equity firms that wanted to pay $8 a share in 2003 and then $17 a share in 2005. Blockbuster Video -- yes, that Blockbuster -- even started to make buyout overtures in 2008.
Blockbuster was hoping that teaming up with Circuit City would create "an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices." It never panned out. Circuit City was out of business less than a year later.
Take-Two Interactive (TTWO)
Weeks before Take-Two Interactive's "Grand Theft Auto IV" hit stores in 2008, Electronic Arts (EA) initiated a hostile takeover. It offered to pay $26 a share for Take-Two, but with the game expected to set industry sales records (which it eventually did), there was little reason for Take-Two to bow out. It urged shareholders to vote down the deal. They did.
Unfortunately for Take-Two, the video game industry has been in a funk in recent years, and its financial health tool a downturn between "Grand Theft Auto" releases. Take-Two is still around, and it's doing fairly well. Last year's "Grand Theft Auto V" was another blockbuster. However, the stock is trading in the high teens.
Before Facebook there was MySpace, and before MySpace there was Friendster. Google (GOOG) saw the trend in social networking starting to materialize, and just as it bought into video sharing when it picked up YouTube, it wanted some skin in social networking with Friendster.
Google was hoping to acquire Friendster for just $30 million in 2003, but the offer was spurned. It had a few more good years, but eventually, it all went downhill for Friendster. It still exists as social gaming site, though, and is popular in Asia.
Friendster isn't the only company that Google wasn't able to acquire. Groupon reportedly scoffed at the search giant's $6 billion buyout offer just before its IPO. The hangup supposedly was that the daily deals leader wanted a bigger breakup fee in case regulators nixed the pairing of two rising dot-com giants.
When Groupon eventually went public at $20 a share in late 2011, the IPO valued it at a whopping $13 billion. However, Groupon has struggled since then, and with a glut of daily deals providers competing against it, Groupon's enterprise value is now just $3 billion -- half of what Google was offering.
Some will argue that it's too early to call Snapchat's decision to turn down Facebook's $3 billion buyout offer a mistake. It transpired just a few months ago. However, there are few companies out there willing to overpay for profitless dot-com darlings the way that Facebook does. If a billion bucks for Instagram seemed insane, what can one say about this year's $19 billion transaction for WhatsApp?
Snapchat continues to grow in popularity. The ability to send photos that last for only seconds to mobile phones may or may not be a passing craze. However, the difficulty of monetizing Snapchat usage makes it unlikely that its value will ever approach the $3 billion that it left on the table a few months ago.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (C shares), and Take-Two Interactive. The Motley Fool owns shares of Facebook and Google (C shares). Try any of our newsletter services free for 30 days.