6 Stocks, 3 Mergers, and 1 Unhappy Activist

With many investors expecting the Fed to raise rates this week and the high yield bond market beginning to show signs of rolling over, several new and pending merger stocks are trending today. In this article we take a closer look at Baker Hughes Incorporated (NYSE:BHI), Halliburton Company (NYSE:HAL), Jarden Corp (NYSE:JAH), Newell Rubbermaid Inc. (NYSE:NWL), Dow Chemical Co (NYSE:DOW), and E I Du Pont De Nemours And Co (NYSE:DD), as each stock trends on the latest news surrounding their proposed mergers.

Moreover, we will also examine relevant hedge fund sentiment toward each of these equities. In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, hedge fund experts at Insider Monkey look at the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds returned 102% since the end of August 2012 and beat the S&P 500 Index by 53 percentage points (see the details here).

With crude prices taking another leg lower today, Baker Hughes Incorporated (NYSE:BHI) and Halliburton Company (NYSE:HAL) are in the spotlight after Reuters published a report stating that EU regulators have competition concerns over the two oil service giants’ prospective tie-up. Although Halliburton has already agreed to divest over $5 billion in overlapping businesses to lessen the concerns, the EU regulators may want even more concessions. Halliburton executives are scheduled to meet with EU regulators next week to discuss the deal and the preliminary EU regulator scrutiny should end on January 12. Although Baker Hughes Incorporated (NYSE:BHI) and Halliburton Company (NYSE:HAL) shares are both in the red year-to-date because of the low crude prices weakening oil service demand, their shares have done better than their peers thanks to the merger. If the merger is nixed, however, the two companies will not be able to achieve the substantial synergies promised and their shares could take big dips, as evidenced today by the mere speculation that the deal could be in jeopardy; BHI shares are down by 6.69%, while Halliburton shares have fallen by just over 1%.

Capping off a successful decade-and-a-half bull run, Jarden Corp (NYSE:JAH) has agreed to merge with Newell Rubbermaid Inc. (NYSE:NWL) in a deal that will produce a $16 billion-a-year consumer goods giant named ‘Newell Brands’. Under the terms of the deal, Jarden Corp (NYSE:JAH) shareholders will receive $21 in cash and 0.862 Newell Rubbermaid Inc. (NYSE:NWL) shares for each Jarden share they own. Management expects the deal to generate around $500 million in cost synergies over four years and to be immediately accretive to normalized EPS. Because of the deal, Jarden shares have surged by 4.31% today, while Newell shares have retreated by 5.7%. Among the winners in the merger announcement is Larry Robbins’ Glenview Capital, which owned 4.03 million shares of Jarden at the end of September.

On the next page, we examine the Dow Chemical Co. and Dupont merger, which has one activist not at all pleased.

Dow Chemical Co (NYSE:DOW) and E I Du Pont De Nemours And Co (NYSE:DD) are in the news again after the Wall Street Journal published an article stating that Dan Loeb of Third Point wants Dow Chemical CEO Andrew Liveris removed. Although he supports Dow Chemical Co (NYSE:DOW)’s merger with E I Du Pont De Nemours And Co (NYSE:DD), Loeb wonders if the deal was rushed to prevent him from publicly speaking about Dow. Loeb and Dow had an agreement that basically gagged Loeb until last weekend. If Loeb were allowed to speak, he may have gotten Dow Chemical shareholders more of the pie. If Liveris isn’t removed, he will be Chairman of the combined company that will have revenue in excess of $90 billion a year. Shares of Dow and Dupont are each down by about 4.5% this morning.

Disclosure: None