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3 Mergers Cramer Would Like to See

Tuesday, 14 Jun 2011 | 6:54 PM ET
Cramer Talks Merger Mania
There are a lot of terrific takeover opportunities out there, points out Mad Money host Jim Cramer.

The recent flurry of mergers and acquisitions activity suggests stocks are too cheap based on what other companies are willing to pay for them, Cramer said Tuesday. Being as investment banks are always looking for potential mergers and considering how cheap stocks are right now, the "Mad Money" host has three suggestions that he thinks would make for terrific takeover deals.

First, Cramer thinks Lululemon should acquire Under Armour . A $6.9 billion company, Cramer said Lululemon is a rapidly growing athletic apparel retailer with a brand that women love. Its men's business, however, is struggling. So Lululemon should buy Under Armour, which has a market cap of $3.4 billion and is popular with men. Cramer thinks the move would make a lot of sense for LULU because it would fill its men's category.

Lululemon can also afford to do a big deal right now because its share price is so high, Cramer said. Its stock currently sells for 35 times this year's earnings, so if Lululemon pays with stock, Cramer said they would be using a "super cheap" currency. He thinks it can afford to pay roughly $3.8 billion for Under Armour, which is an 18 percent premium to where the stock is trading right now. If Lululemon pays more than that, its stock could take a hit instead of going higher. Still, Cramer thinks the merger could be worth it.

Second, Cramer would like Nike to buy Lululemon. After all, Nike needs the 50 percent of the market it doesn't already own — it needs women and that's what Lululemon will give them, Cramer said. Lululemon's business is also growing at a 25 percent clip, which is much faster than Nike's 11 percent growth rate. Lululemon is a strong brand with pricing power and if Nike doesn’t acquire it, it will have to continue to compete against it. Cramer thinks the deal makes sense for Lululemon, too. The company hasn't been able to get its product to market fast enough. A marriage with Nike could fix that.

Finally, VF Corp. should make a bid for Deckers or Columbia Sportswear , Cramer said. After all, VF Corp. shares shot up by 12 percent on news it plans to acquire Timberland. It makes sense they would acquire another outdoor footwear company, Cramer said. He likes Deckers because it makes UGG brand boots and Columbia produces Sorels. Acquiring either company would help boost VF Corp.'s growth rate, Cramer said. A $11 billion company, he thinks VF Corp. could certainly afford Deckers and its $3 billion market cap or Columbia, which is valued at $2 billion right now.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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