In the investing food chain, both predator and prey offer a path to profits. Cramer’s focus during Monday’s show was on the former, namely Bemis. The company recently used its survival-of-the-fittest instincts to squeeze an acquisition from the wounded Rio Tinto, a move that the Mad Money host called “the kind of predatory behavior we can’t get enough of on Mad Money.”
Bemis makes packaging for foods and other consumer products, and the company has agreed to buy Rio Tinto’s food-packing business for just $1.2 billion. Rio is buckling under the weight of its debt, which has forced it to unload non-core assets. So, for the most part, anything not related to mining, Rio’s bread and butter, has to go. In return, Bemis will get 23 plants in North and South America and New Zealand, and a business that generated $1.5 billion in revenues last year.
The deal benefits Bemis on a number of fronts. Sales should jump 40% as a result, cost savings are expected to reach $65 million, and market share will increase given that 80% of the acquired business is in the US and Canada, where Bemis is already concentrated. Also, the acquisition makes this a much less cyclical company, allowing for more consistent and dependable earnings. Cramer went so far as to call this a potential defensive play.
As investors wait for the buyout to finalize, they can enjoy the 3.6% dividend yield. The free cash flow is there to support it. Don’t expect a hike, though, as the company plans to use its cash to pay down debt. Of course, that’s never a bad thing, and offers another reason to like Bemis. Here’s one more: Only two of 10 covering analysts think BMS is worthy of your money. Cramer expects those opinions to be revised soon enough, and that should send the share price higher.
With prospects this good, Cramer said, Bemis’s ticker, BMS, might as well stand for “buy my stock.” Just be sure to wait for the secondary offering that was announced after Monday’s closing bell. That’s a great opportunity to get this company at a lower price.
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