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5 Spinoffs 'Ripe' For Takeover

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5 Spinoffs 'Ripe' For Takeover
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In a report issued by The Edge Consulting Group, analysts Jim Osman and Sanjiv Thakur look into five spinoff candidates they say are "ripe for takeover."

ADT

ADT Corp (NYSE: ADT) was spun off Tyco International plc (NYSE: TYC) about 30 months ago. Since then, it has built a leading market position (supported by a huge subscriber base) and a business model that has no problem generating recurring cash.

This has made it a highly attractive takeover target. Potential buyers, the report said, include Comcast Corp., AT&T, Time Warner Cable and DirecTV.

The analysts at The Edge see ADT as a long-term fundamental growth story, with potential upside of more than 27 percent.

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Alent

Alent PLC (LON:ALNT) was spun off VESUVIUS PLC ORD 10P (LON:VSVS) on December 2012. With "a leading position in attractive niche end-markets, global reach, high cash generation abilities, and consistent earnings growth," the company stands as an alluring takeover candidate. Potential buyers include several larger chemical firms (like Total S.A., BASF and Dow Chemicals) seeking to move towards the specialty chemical business, Osman and Thakur note.

In a takeover scenario, the firm sees an upside of approximately 22 percent.

Lands' End

Lands' End, Inc. (NASDAQ: LE) is a small-cap spinoff from famed retailer Sears Holdings Corp (NASDAQ: SHLD). Independent for just one year, it has become a strong takeover candidate on the back of its strong brand name, "large customer base of affluent, college-educated, professional and style-conscious men and women, large geographical reach."

Shares offer an upside of +43 percent for a takeover scenario, the firm assures. Potential suitors include Fast Retailing Co., Gap, Nordstrom, Michael Kors, Ralph Lauren, and Urban Outfitters, The Edge reports.

Post Holdings

Post Holdings Inc (NYSE: POST) was spun off Ralcorp Holdings, Inc. (NYSE: RAH) in early 2012, about a year before the latter stopped trading in the NYSE.

"With a combination of a broad product portfolio of iconic brands, presence in active nutrition, health and protein segments, established distribution network as well as wholesale relationship. Likewise poor earnings, a high debt load and a rich history from its Chairman(Bill Stiritz) in successful Spinoffs and divestitures make POST a strong takeover candidate," the analysts say.

They see an upside of more than 28 percent in a takeover scenario, with potential buyers including Kraft Foods Group, General Mills, Kellogg Company, ConAgra Foods and Tyson Foods.

Time

Finally there's Time Inc (NYSE: TIME), a media company that Time Warner Inc (NYSE: TWX) spun off last year. Its consumer reach, strong titles portfolio growing digital media revenue and expected consolidation in the industry make it an attractive takeover candidate for companies like Meredith Corp., Gannett, Advance Publications and Hearst Corp.

The analysts think the stock trades at a huge discount and could return about 26 percent on a potential takeover.

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