[Info-vax] Hewlett: Are They a Take-Out After Six Years of Whitman?

[Kerry Main]

More fuel for whether HPE's rapid diet in the last 18 months
means they are getting ready for buyout- 

Sept 19, 2016 -

http://on.barrons.com/2cAeykR
"Hewlett: Are They a Take-Out After Six Years of Whitman? Asks
Bernstein

Shares of Hewlett Packard Enterprise (HPE) are up 54 cents, or
2.4%, at $22.80, following a note this morning from Bernstein's
Toni Sacconaghi pondering whether the $23 billion (market cap)
company could get acquired.

With Meg Whitman being talked about as a potential cabinet member
in a Hillary Clinton administration, Sacconaghi, who has an
Outperform rating on the stock, and a $24.50 price target, muses
that "its [HPE's] enterprise value would be just $13B -
undersized vs. leading competitors, and potentially a
reasonably-sized bite for a takeout."

"We note that CEO Whitman has now been at HP for 6 years, just
turned 60, and has a long held interest in politics. A sale of
all of HPE could present an attractive final coup."

Sacconaghi sees complications for several potential buyers such
as Lenovo Group (0992HK) and thinks private equity is more
likely, but he's not banking on it:

Possible acquirers include strategic buyers (Huawei, Lenovo,
Tsinghua, Oracle, Cisco and Dell), but all appear to have
stumbling blocks. On net, we believe a private equity buyout
might be more likely: though the deal size (~$18B excluding HPFS
net debt) would be high, we see the transaction as both doable
and value creating. Importantly, we note that any transaction
could be subject to tax if completed (or potentially even
negotiated) in the next year, given the timing of HPE's tax-free
spin-offs, presenting another potential roadblock. We suspect
that HPE will continue to advocate a strong capital return policy
over the next year, but if a buyer does not emerge over time, we
believe there would likely be a shift towards improving growth,
in part through select acquisitions. On net, while a near-term
buyout of RemainCo is possible, it is not central to our
investment thesis. We continue to believe that the implied value
of RemainCo (~6x earnings, ex cash) is simply too inexpensive,
and that risk/reward is attractive.

[KM - my bet is on Cisco with its $60B cash on hand as a means to
go up against the new Dell/EMC for leadership of future
infrastructure market. They could simply drop/sell the current HP
network business]

Regards,

Kerry Main
Kerry dot main at starkgaming dot com