Corning Watch: Is Corning ripe for takeover?
By Larry Wilson, Correspondent - StarGazette July 30, 2014
stargazette.com
Forbes writer speculates that Corning Inc. may be a takeover target.
Story Highlights
- Corning's high, free cash flow as well as proprietary products and low stock price may be attracting attention.
- Some speculate Apple Inc. could be among the suitors.
- Corning's institutional owners and its board would make the ultimate decision.
If you haven't had your nose buried in Forbes magazine this summer (and who has?), you might not know that one contributor to that publication has branded Corning Inc. as ripe for a takeover.
Author Gene Marcial says the Twin Tiers' largest employer is attracting attention for its high free cash flow, its proprietary products and its low stock price.
Marcial quotes Stephen Leeb, editor-in-chief of The Complete Investor:
"The right leadership could turn Corning into a dynamo, especially if it's broken up into parts. Although its business fundamentals aren't in their best position right now, the company has good turnaround potential ... So the odds of a takeover are clearly very high."
Leeb, also president of Leeb Investment Management in New York, thinks a buyer might sell or spin off the Fortune 500 company's liquid crystal display glass business — a big producer of free cash flow. That would produce a big windfall for investors and make the remainder of the company more attractive.
Some of this chatter is reminiscent of the Wall Street pressure placed on Corning in the late 1990s and early 2000s to become a "pure" fiber optics play. Then the collapse of the optical communications market proved how disastrous that strategy would have been.
Two of the potential suitors for a takeover of Corning whose names are being whispered in the market include Apple and Korea industrial giant. Private equity funds may also be interested.
Samsung, a former partner in Samsung-Corning Precision Glass, got a 7 percent stake in Corning Inc. when Corning bought out the partnership last fall.
Corning claims independence as one of its major values and would be hostile to any takeover attempt. The ultimate decision in any such situation would be made by the company's board of directors and its shareholders.
The shareholders with the clout to decide the issue are the institutional owners, not the individual investors with emotional ties to the company.
Such a decision would then be made on the basis of its economic value rather than its impact on the Corning community.
Some of the big investors who would play a major role in determining the outcome of a takeover bid include Vanguard, which owns 5.3 percent of Corning Inc., Dodge & Cox with 4.4 percent, State Street with 4.1 percent, Loomis Sayles with 4 percent and Black Rock with 3.2 percent.
Whether such a bid surfaces, in the long term or the short term, remains to be seen. |
