Morningstar Identifies Likely Takeover Candidates across Equity Coverage Universe; Publishes Merger and Acquisition Insights Report for 2013

Jan 29, 2013, 10:09 ET from Morningstar, Inc.

CHICAGO, Jan. 29, 2013 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today published its merger and acquisition insights report for 2013, "M&A Market Awaits Clearer Economic Signals." Morningstar's comprehensive research report includes investment ideas among its list of potential takeover candidates, merger and acquisition analysis by sector, credit implications of merger and acquisition activity, an examination of the role economic moats and stewardship play in deal-making, and a global outlook for merger and acquisition activity.

"We think 2013 will bring an uptick of deal activity, after we've seen a decline in the number of deals and very little growth in the total value of deals in the last two years," said RJ Hottovy, CFA, director of global consumer equity research for Morningstar and co-editor of the report. "While we don't see the potential for huge blockbuster deals in the near term, there's no shortage of companies with available capital on their balance sheets and high operating margins, fewer organic growth opportunities, and candidates with attractive valuations."

According to Morningstar, the top 11 investment ideas among potential takeover candidates in 2013 are:

  • Abiomed, Inc.
  • BG Group PLC
  • Chesapeake Energy Corp
  • City National Corp
  • Guess, Inc.
  • Icon PLC
  • Kohl's Corp
  • Leap Wireless
  • Mosaic
  • NII Holdings Inc.
  • SandRidge Energy Inc.

While the global economic recovery has remained sluggish, 14 prospective takeover targets Morningstar identified in the past two years have accepted acquisition offers. In 2012, IBM acquired Kenexa at a 42 percent premium, Sprint settled on a deal to acquire Clearwire—though DISH Network has since joined the bidding—and Deutsche Telekom subsidiary T-Mobile and MetroPCS announced a merger. PVH Corp also acquired Warnaco in 2012—a case where Morningstar had identified both the acquirer and the takeover candidate. Four of the 14 prospective takeover targets Morningstar identified were also highlighted as top investment ideas in Morningstar's annual merger and acquisitions insights report in 2012 or 2011.

In the 2013 research report, Morningstar equity analysts identified a total of 71 takeover targets across eight sectors: basic materials, consumer cyclical and consumer defensive, energy, financial services, healthcare, industrials, technology/communication services, and utilities. Potential takeover candidates for each sector were determined by unique and proprietary scoring systems for each sector, based on industry-specific drivers of merger and acquisition activity as well as factors such as free cash flow, management, and capital structure.

Morningstar then examined its list of potential takeover candidates across all eight sectors to identify the 11 most compelling stocks for 2013. Morningstar selected companies that are the most attractively priced based on their price/fair value ratio and ranking in their respective, sector-specific potential takeover candidate list. Analysts also identified potential acquirers in each sector.

The research report also examines which potential acquirers are likely to create significant shareholder value through merger and acquisition activity, along with potential red flags of deals that could harm shareholder value.

A synopsis of Morningstar's merger and acquisition insights report for 2013 is available at view the executive summary, please visit The full report is available to institutional investors through Morningstar Select, the company's institutional equity research portal. For access, institutional investors may contact

About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $195 billion in assets under advisement and management as of Sept. 30, 2012. The company has operations in 27 countries.

©2013 Morningstar, Inc.  All rights reserved.


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