Although the Dow Jones Industrial Average managed to close higher on Friday, its one-day, 8-point gain still left it down 11 points for the week. The S&P 500 managed to close higher by just 0.12%, but the Nasdaq also slightly lost ground during the week, closing down by 0.05%.
On a percentage standpoint, the markets were rather calm this week, but that can’t be said for the M&A side of Wall Street. Whether it’s just that time of the year, Cupid’s running rampant, or company executives are simply itching to spend money, mergers, buyouts, and acquisitions were happening all over the place this past week.
Mergers and acquisitions
The big news this week was the Berkshire Hathaway Inc. (NYSE:BRK.A) acquisition, by way of a joint venture with 3G Capital, of H.J. Heinz Company (NYSE:HNZ) for $28 billion. That figure represented a 20% premium to what Heinz shares were trading for before the buyout announcement. Warren Buffett has been telling investors for quite a while that his elephant gun was loaded, and this purchase was probably the big game he’d been hunting. But it’s also been suggested that because of the Berkshire-3G partnership, Buffett could have money left to make another big purchase in the near future.
The other major merger this week was the US Airways Group, Inc. (NYSE:LCC)–American Airlines union, which, like the Berkshire-Heinz move, was also announced on Thursday. But unlike the Berkshire purchase, this potential deal was no secret to the markets, and many expected that it would happen. The new company will now be the world’s largest airline and control a number of key hubs both within and outside the United States.
There were three joint ventures involving Dow stocks this week that grabbed my attention. The first was the American Express Company (NYSE:AXP)-Twitter collaboration. AmEx cardholders can now link their card to a Twitter account and make purchases using the social-media platform by simply sending a tweet. While it will take time to see if this service gains any traction with consumers, I was an instant fan simply because of how simple this feature will make purchasing an item.
Another big partnership, announced earlier in the week, was that Alcoa Inc. (NYSE:AA) in a roundabout way, will now be partners with the Chinese government. On Thursday, CITIC Group purchased a 13% stake in an Australian company called Alumina, which owns 40% of a company called Alcoa World Aluminum & Chemicals, of which the other 60% is owned by Alcoa. The Chinese government comes into play because CITIC Group is a state-owned entity. In most cases, partnering with the government is a good thing, and I believe that in the long run, this move will turn out well for Alcoa shareholders.