Mergers And Acquisitions: The Rumor That Just Won't Die
By Ian Cooper
Ridiculous Gap Inc. (GPS) buyout rumors are making their rounds… yet again. And as I’ve said in the past, it’s not going to happen.
Our last mention of the rumor was January 25, 2007, when we said:
“No other retailer, especially Eddie Lampert and Sears, would buy this company because Gap doesn’t own any of its real estate. And two, considering Gap’s hefty market cap, you’re not likely to see many private equity firms laying down that kind of cash for a garbage company trading at eight times its value and losing market share.”
That still holds true, but it doesn’t deter the buyout speculation.
Gap still has too many problems, is too troubled, and too expensive to attract private equity buyers. Plus, Gap is still on the hunt for a new CEO, which makes it seem as if no one’s lining up for the job.
Plus, who’d want to buy a company that just posted a 35% drop in Q4 profit, and warned that the upcoming year would be troubling. It’s now saying that earnings for 2007 may range from 80 to 90 cents a share. That’s well below analyst estimates for $1 a share.
Don’t buy the Gap hype… well, unless you like losing money.
Take care,
Ian L. Cooper, Editor, Early Alert Trader