Temple Inland (TIN) recently received a $30.60/share offer from International Paper (IP), a 44% premium, valuing the Company around $3.3B, or 15X earnings, 0.85X sales, and 3.5X book value. On EV/EBITDA, commonly used in M&A Analysis, TIN is at 9.3 while MWV is at 6.8 and BMS at 6.9, so MeadWestvaco/Bemis look to be better values here, and in an industry seeing a lot of consolidation, a potential takeover target. Remember, that Silgan (SLGN) bought Graham Packaging (GHM) for $1.3B back in April also.
There has been notable call action in packaging names the last few days since the deal was announced, looking for the next target, and seen in names such as Crown Holdings (CCK), Avery Dennison (AVY), Packaging Corp (PKG), Rock-Tenn (RKT), Boize (BZ) and Sealed Air (SEE).
There was notable action in Crown Holdings (CCK) today with 3,450 In-the-Money October $37 calls bought to open today, detailed to subscribers in full earlier today. However, MeadWestvaco (MWV) traded 2,036 calls on the day with offer side buyers, more than 10X daily call volume as 739 June $35 calls traded and 1,184 July $35 calls. IV was up modestly and the action was unusual, although very cheap contracts, but potentially thinking buyout.
MeadWestvaco Corp (MWV) is a $5.55B packaging Company mostly geared to the consumer related industries that trades 14.4X earnings, 0.96X sales, and 1.63X book value.
On May 14th UBS recommended IP as its top pick, but also noted it liked TIN and MWV, raising its target to $37 a few weeks prior. RBC has a $40 target and JP Morgan a $38 target. MeadWestvaco shares have a confirmed uptrend off the Summer 2010 lows, through the March 2011 lows, coming into play at $31, support, and currently in a narrow channel down, consolidating while momentum indicators begin to trend bullish, near a bullish MACD and ADX crossover.
Purely on valuation and technicals I have to favor Bemis (BMS), a $3.5B maker of flexible and pressure sensitive packaging. Shares trade 12.8X earnings, 0.68X sales and 1.86X book, cheaper than most of its peers and offering a 2.9% dividend yield. Sales grew nearly 30% Q/Q and EPS at 73.36% clip. There is 5.1% of the float short, or 7.17 days to cover. The Company was positive on business fundamentals at a Goldman Conf. in late May. KeyBanc raised shares to Buy with a $38 target on February 3rd. Specialty resin prices have impacted results in the past, as a commodity cost, but I am unable to find a good source for how pricing is currently tracking. The chart is a thing of beauty, an ascending triangle that finds support at the 200 EMA and bounces, and is now looking to breakout at the $33.50 level, strong volume buying the last 3 days.
The entire group is looking fairly cheap on valuation with healthy dividends, and the potential for M&A, so I like a lot of the names.
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