11/26/09 Thursday Hershey Could Buy Cadury (But Shouldn't)

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Post #231 The following is brought to you by Intellivest Securities Research, Inc. Towards the end of this Blog is a list of the Dow 30 CEO's, a ranking of the Dow 30 by market capitalization as of close of 11/6/09 and an update of the Dow 30's most recent SEC filings as of 11/6/09.

Today's read of the print edition The New York Times yielded the following stories about Dow Jones Industrial Average 30 component companies and the Dow with stories about the Dow aggregated first and then items about Dow Jones Industrial Average 30 companies presented alphabetically, followed by symbol and Wednesday's closing price and related data:

Dow:: NYT pB9 "Data on Homes Sales and Jobless Claims Lift Mmarkets" says a drop in unemployment claims and a rise in new home sales pulled the stock market higher on Wed. in light trading ahead of Thanksgiving. Modest gains on Wed. left the Dow Jones Industrial average and the Standard & Poor's 500 stock index at 13 month highs. The economic news, as well as a drop in the dollar, stoked investors' appetite for higher returning but riskier investments like stocks. For months, investors have been weighing their desire for bigger returns with fears that the stock market will falter if the economy looks as if it won't maintain a recovery. Investors drew confidence from a handful of promising economic reports. The gov said new claims for unemployment insurance fell by 35,000 last week, to 466,000. The drop in claims suggests the job market is healing, but concern remains that the improvement be temporary.

The Dow Jones Industrial Average closed Wednesday at 10464.4 up 30.69 or 0.29% from Tuesday's close of 10,433.71. Of the 30 Dow Companies: 10 declined, 1 was unchanged and 19 gained. The biggest gainer dollar-wise was Caterpillar
CAT $59.04 +1.04 1.79% 6,234,686 NYSE and percentage-wise was Boeing BA $52.93 +0.96 1.85% 3,019,355 NYSE. The biggest decliner dollar-wise and percentage-wise was Kraft KFT $26.8 -0.42 1.54% 9,780,952 NYSE.

As of the close of the market Wednesday, the current divisor for the Dow found at page C4 of The Wall St. Jrnl is .132319125 unchanged, the trailing P/E ratio is 17.87down from Friday's 17.90 (year ago it was 16.85) the P/E estimate is 16.04 up from Friday's 15.82 (year ago it was 8.95) and the current dividend yield is 2.70 up from Friday's 2.69 (it was 4.03 a year ago).

Wednesday's Dow Jones Industrial Average closing numerator was 1384.64 up 4.06 from Tuesday's closing Dow numerator of 1380.58. This is the sum of all 30 closing prices. A short cut to the Dow numerator is to multiply the closing Dow by the Divisor. Now, if you divide the Dow numerator increase of 4.06 for Wednesday by the divisor you get the increase in Wednesday's Dow close of 30.69.

The average closing price (the closing numerator divided by 30) of Wednesday's Dow Jones Industrial Average was 46.17 up 0.09 from Tuesday's Dow Jones Industrial Average closing price of $46.08. The median closing price of Wednesday's Dow Jones Industrial Average was 39.14 up 0.31 from Tuesday's median closing price of $38.83. The lowest volume Wednesday was again 3M MMM $77.91 +0.30 0.39% 1,937,115 NYSE and the highest volume again was Bank of Am BAC $15.95 -0.15 0.93% 97,078,835 NYSE.

If Wednesday morning before the market opened you had purchased 100 shares of each of the Dow Jones Industrial Average 30 shares (assuming you could buy fractional shares and assuming no transaction costs) and sold at the close you would have made $450 ($138,510 - $138,060).

Wednesday's Closing Dow closing numbers:
Symb/Last/Change/% Change/Vol./Market

AT&T T $27.08 -0.02 0.07% 20,842,171 NYSE:

Alcoa AA $13 +0.08 0.62% 18,182,746 NYSE:

American Express AXP $41.72 +0.28 0.68% 7,078,444 NYSE:

Bank of America BAC $15.95 -0.15 0.93% 97,078,835 NYSE: NYT pB2 "Hershey Could, But Shouldn't" says Hershey could get the financing to bid $17 bil to beat Kraft's bid for Cadbury but investors would be unwise to entrust Hershey with more of their cash without lots of sweeteners. Hersey would need to incur debt equal to five times next years combined earnings before interest, tax, depreciation and amortization in the amount of $10 bil in order not to run afoul of the articles of incorp. that give the Milton Hershey Trust voting control despite owning just a third of the firm. Hershey is being backed by JPMorgan Chase and Bank of America. Hershey could then sell new stock but if the trust's economic interest falls below 15%, its Class B stock would lose its supervoting rights. Hershey could sell enough shares to raise the rest of the purchase price and only dilute the trust's economic interest down to 17.5%. The trust would still control 64% of the Hershey vote. But a deal that perpetuated the trust's control should raise a red flag for other investors since the turst hasn't done a great job of safeguarding shareholders' interest. In '02, Hershey, with the trust's backing, rejected an offer worth $45.50 a share from Wrigley. The stock has't traded near that price for years. That year, Hershey failed to buy the Adams gum division from Pfizer, leaving it to Cadbury. Just 2 years ago, it passed up a chance to merge with Cadbury in a deal that would have brought the same strategic benefits as the bid it is contemplating but without the need to pay a premium. Article concludes shareholders of Hershey should reject a plan that would saddle it with debt and still leave control in the hands of the trust.

Boeing BA $52.93 +0.96 1.85% 3,019,355 NYSE:

Caterpillar CAT $59.04 +1.04 1.79% 6,234,686 NYSE:

Chevron CVX $79.64 +0.61 0.77% 7,537,939 NYSE: NYT pA22 "Additional Names of Visitors Are Released by White House" by Helene Coooper says the Obama admin releaed more names of White House visitors during the first 7 months of Pres. Obama's terms and included: GE's CEO Jeffrey Immelt who came to see Obama's chief Congressional lobbyist, Phil Schilip. The first list released last month included Jamie Dimon of JPMorgan Chas, Rex W. Tillerson, CEO of Exxon Mobil and David J. O'Reilly of Chevron.

Cisco CSCO $23.74 unch unch 27,050,331 NASDAQ-GS:

Coca-Cola KO $58.11 -0.08 0.14% 6,683,560 NYSE:

Disney DIS $30.61 +0.38 1.26% 10,269,599 NYSE:

Dupont DD $35.15 +0.48 1.38% 3,946,648 NYSE:

ExxonMobil XOM $76.47 +0.50 0.66% 13,255,550 NYSE: NYT pA22 "Additional Names of Visitors Are Released by White House" by Helene Coooper says the Obama admin releaed more names of White House visitors during the first 7 months of Pres. Obama's terms and included: GE's CEO Jeffrey Immelt who came to see Obama's chief Congressional lobbyist, Phil Schilip. The first list released last month included Jamie Dimon of JPMorgan Chas, Rex W. Tillerson, CEO of Exxon Mobil and David J. O'Reilly of Chevron.

GE $16.18 +0.06 0.37% 48,108,601 NYSE: NYT pA22 "Additional Names of Visitors Are Released by White House" by Helene Coooper says the Obama admin releaed more names of White House visitors during the first 7 months of Pres. Obama's terms and included: GE's CEO Jeffrey Immelt who came to see Obama's chief Congressional lobbyist, Phil Schilip. The first list released last month included Jamie Dimon of JPMorgan Chas, Rex W. Tillerson, CEO of Exxon Mobil and David J. O'Reilly of Chevron.

Hewlett-Packard HPQ $50.05 -0.14 0.28% 12,738,854 NYSE:

Home Depot HD $27.85 +0.29 1.05% 11,446,514 NYSE:

Intel INTC $19.34 -0.05 0.26% 46,670,864 NASDAQ-GS:

IBM $127.28 -0.65 0.51% 3,963,989 NYSE:

J.P.Morgan Chase JPM $42.16 -0.32 0.75% 26,105,464 NYSE: NYT pB2 "Hershey Could, But Shouldn't" says Hershey could get the financing to bid $17 bil to beat Kraft's bid for Cadbury but investors would be unwise to entrust Hershey with more of their cash without lots of sweeteners. Hersey would need to incur debt equal to five times next years combined earnings before interest, tax, depreciation and amortization in the amount of $10 bil in order not to run afoul of the articles of incorp. that give the Milton Hershey Trust voting control despite owning just a third of the firm. Hershey is being backed by JPMorgan Chase and Bank of America. Hershey could then sell new stock but if the trust's economic interest falls below 15%, its Class B stock would lose its supervoting rights. Hershey could sell enough shares to raise the rest of the purchase price and only dilute the trust's economic interest down to 17.5%. The trust would still control 64% of the Hershey vote. But a deal that perpetuated the trust's control should raise a red flag for other investors since the turst hasn't done a great job of safeguarding shareholders' interest. In '02, Hershey, with the trust's backing, rejected an offer worth $45.50 a share from Wrigley. The stock has't traded near that price for years. That year, Hershey failed to buy the Adams gum division from Pfizer, leaving it to Cadbury. Just 2 years ago, it passed up a chance to merge with Cadbury in a deal that would have brought the same strategic benefits as the bid it is contemplating but without the need to pay a premium. Article concludes shareholders of Hershey should reject a plan that would saddle it with debt and still leave control in the hands of the trust.

NYT pA22 "Additional Names of Visitors Are Released by White House" by Helene Coooper says the Obama admin releaed more names of White House visitors during the first 7 months of Pres. Obama's terms and included: GE's CEO Jeffrey Immelt who came to see Obama's chief Congressional lobbyist, Phil Schilip. The first list released last month included Jamie Dimon of JPMorgan Chas, Rex W. Tillerson, CEO of Exxon Mobil and David J. O'Reilly of Chevron.

Johnson & Johnson JNJ $63.3 +0.12 0.19% 7,167,593 NYSE:

Kraft KFT $26.8 -0.42 1.54% 9,780,952 NYSE: NYT pB2 "Hershey Could, But Shouldn't" says Hershey could get the financing to bid $17 bil to beat Kraft's bid for Cadbury but investors would be unwise to entrust Hershey with more of their cash without lots of sweeteners. Hersey would need to incur debt equal to five times next years combined earnings before interest, tax, depreciation and amortization in the amount of $10 bil in order not to run afoul of the articles of incorp. that give the Milton Hershey Trust voting control despite owning just a third of the firm. Hershey is being backed by JPMorgan Chase and Bank of America. Hershey could then sell new stock but if the trust's economic interest falls below 15%, its Class B stock would lose its supervoting rights. Hershey could sell enough shares to raise the rest of the purchase price and only dilute the trust's economic interest down to 17.5%. The trust would still control 64% of the Hershey vote. But a deal that perpetuated the trust's control should raise a red flag for other investors since the turst hasn't done a great job of safeguarding shareholders' interest. In '02, Hershey, with the trust's backing, rejected an offer worth $45.50 a share from Wrigley. The stock has't traded near that price for years. That year, Hershey failed to buy the Adams gum division from Pfizer, leaving it to Cadbury. Just 2 years ago, it passed up a chance to merge with Cadbury in a deal that would have brought the same strategic benefits as the bid it is contemplating but without the need to pay a premium. Article concludes shareholders of Hershey should reject a plan that would saddle it with debt and still leave control in the hands of the trust.

McDonald's MCD $64.45 +0.23 0.36% 7,598,964 NYSE:

Merck MRK $36.57 +0.35 0.97% 11,147,952 NYSE:

Microsoft MSFT $29.79 -0.12 0.4% 32,011,135 NASDAQ-GS:

Pfizer PFE $18.59 +0.28 1.53% 42,086,456 NYSE: NYT pB2 "Hershey Could, But Shouldn't" says Hershey could get the financing to bid $17 bil to beat Kraft's bid for Cadbury but investors would be unwise to entrust Hershey with more of their cash without lots of sweeteners. Hersey would need to incur debt equal to five times next years combined earnings before interest, tax, depreciation and amortization in the amount of $10 bil in order not to run afoul of the articles of incorp. that give the Milton Hershey Trust voting control despite owning just a third of the firm. Hershey is being backed by JPMorgan Chase and Bank of America. Hershey could then sell new stock but if the trust's economic interest falls below 15%, its Class B stock would lose its supervoting rights. Hershey could sell enough shares to raise the rest of the purchase price and only dilute the trust's economic interest down to 17.5%. The trust would still control 64% of the Hershey vote. But a deal that perpetuated the trust's control should raise a red flag for other investors since the turst hasn't done a great job of safeguarding shareholders' interest. In '02, Hershey, with the trust's backing, rejected an offer worth $45.50 a share from Wrigley. The stock has't traded near that price for years. That year, Hershey failed to buy the Adams gum division from Pfizer, leaving it to Cadbury. Just 2 years ago, it passed up a chance to merge with Cadbury in a deal that would have brought the same strategic benefits as the bid it is contemplating but without the need to pay a premium. Article concludes shareholders of Hershey should reject a plan that would saddle it with debt and still leave control in the hands of the trust.

Procter & Gamble PG $62.87 +0.07 0.11% 8,226,881 NYSE:

3M MMM $77.91 +0.30 0.39% 1,937,115 NYSE:

Travelers TRV $52.76 -0.33 0.62% 2,873,242 NYSE:

United Technologies UTX $68.31 +0.04 0.06% 2,721,191 NYSE:

Verizon VZ $32.03 +0.16 0.5% 16,409,241 NYSE:

Walmart WMT $54.96 +0.11 0.2% 9,056,794 NYSE:
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Here are the CEOs of the Dow 30 Companies:

T Randall L. Stephenson
AA Klaus Kleinfeld
AXP Kenneth I. Chenault
BAC Kenneth D. Lewis (on 10/1 he announced his resignation as of year-end).
BA W. James McNerney, Jr.
CAT James W. Owens who will be replaced by Douglas Oberhelman in 2010.
CVX David O'Reilly who will be replaced by John Watson at year end.
CSCO John Chambers
KO Muhtar Kent
DIS Robert Iger
DD Ellen Kullman
XOM Rex W. Tillerson
GE Jeffrey R. Immelt
HPQ Mark Hurd
HD Frank Blake
INTC Paul S. Otellini
IBM Samuel J. Palmisano
JPM Jamie Dimon
JNJ William C. Weldon
KFT Irene Rosenfeld
MCD Jim Skinner
MRK Robert Clark
MSFT Steve Ballmer
PFE Jeffrey Kindler
PG Bob McDonald
MMM George W. Buckley
TRV Jay S. Fishman
UTX Louis Chenevert
VZ Ivan Seidenberg
WMT Mike Duke

Here are the Dow Jones Industrial Average 30 ranked in order of market capitalization rounded to the nearest billion as of
11/6/09 followed by number of shares outstanding rounded to the nearest 1/2 billion:

1. Exxon Mobil XOM $349 [5]
2. Microsoft MSFT 254 [9]
3. WalMart WMT 198 [4]
4. Procter & Gamble PG 178 [3]
5. JPMorgan Chase 171 [4]
6. Johnson & Johnson JNJ 164 [3]
7. GE 163 [10.5]
8. IBM 162 [1.5]
9. Chevron CVX 155 [2]
10. Cisco CSCO 155 [6]
11. AT&T 153 [6]
12. BAC 130 [6.5]
13. Coke KO 126 [2]
14. Hewlett-Packard HPQ 117 [ 2]
15. Pfizer PFE 116 [7]
16. Intel INTC 106 [5.5]
17. Verizon VZ 69 [3]
18. Merck MRK 69 [2
19. McDonald's MCD 67 [1]
20. United Technologies UTX 61 [1]
21. 3M MMM 53 [.5]
22. Disney DIS 53 [2]
23. Home Depot 44 [2]
24. American Express AXP 44 [1]
25. Kraft KFT 40 [1.5]
26. Caterpillar CAT 36 [.5]
27. Boeing BA 34 [1]
28. DuPont DD 30 [1]
29. Travelers 28 [.5]
30. Alcoa AA 11 [1]

Here are the latest SEC filings as of 11/7/09 other than ownership filings and, except for certain cases, I do not include third party shareholder proposals:

Symbol & Co. Name/Date of Filing/Form Filed/ Comments

T AT&T: 11/6/09 8K announced the completion of the acquisition of Centennial Communications Corp. a regional provider of wireless and wired communications services for $945 million in cash.
11/5/09 10-Q

Alcoa AA: 10/23/09 10Q

American Express AXP: 10/30/09 10Q

Bank of Am BAC: 11/6/09 10Q

Boeing BA: 11/5/09 8K to reflect certain adjustments that have been made to prior year consolidated financial statements that were previously filed with the SEC on Form 10-K for the year ended December 31, 2008.

Caterpiller CAT: 10/30/09 10-Q

Chevron CVX: 11/5/09 10Q

Cisco CSCO: 11/4/09 8K On November 4, 2009, Cisco reported its results of operations for its fiscal first quarter 2010 ended October 24, 2009. Advisor, $750,000.

Coke KO: 10/29/09 10QA

Disney DIS: 10/27/09 Amended S-4 related to the takeover of Marvel.

DuPont DD: 11/5/09 Prospectus relating to $1,000,000,000 3.250% Notes due January 15, 2015 & $1,000,000,000 4.625% Notes due January 15, 2020

ExxonMobil XOM: 11/5/09 10Q

GE: 11/6/09 10QA

Hewlett-Packard HPQ: 9/24/09 8K saying at its Securities Analyst Meeting, HPQ addressed how it is uniquely positioned to grow and expand in the global information technology market. “We expect the IT industry to return to growth in 2010 and believe that HP will outpace the market,” said Mark Hurd, CEO.

Home Depot HD: 9/3/09 10-Q

Intel INTC: 11/5/09 8K Regulation FD Disclosure that on November 4, 2009, NY Attorney General Andrew Cuomo filed a lawsuit against Intel in the US Dist. Ct. for the District of Delaware alleging that Intel has violated the federal antitrust laws, the New York Donnelly Act (N.Y. Gen. Bus. Law § 340 et seq.), and § 63(12) of the New York Executive Law. The lawsuit alleges that Intel has engaged in a worldwide campaign of illegal, exclusionary conduct to maintain Intel’s alleged monopoly power and prices in the market for x86 microprocessors. The lawsuit seeks unspecified damages trebled, restitution, disgorgement, an injunction, $1,000,000 for each violation of the Donnelly Act, and attorneys’ fees and costs. Intel strongly disagrees with the plaintiff’s allegations and claims, and intends to conduct a vigorous defense of the lawsuit.

IBM: 11/5/09 8K announcing its Form S-3, effective August 3, 2007, relating to $2,000,000,000 of debt securities of the Registrant.

JPMorganChase JPM: 11/6/09 Reg. FD disclosure relating to an investor conference.

Johnson & Johnson JNJ: 11/4/09 10Q

Kraft KFT: 11/3/09 10Q

McDonalds MCD: 11//5/09 10Q

Merck MRK: 11/4/09 8K announcing the consummation on November 3, 2009 of the merger of Merck & Co., Inc. &, Schering-Plough Corporation.

Microsoft MSFT: 10/23/09 10Q

Pfizer PFE: 11/5/09 10Q

Procter & Gamble PG: 10/29/09 10Q

3M MMM: 10/20/09 10Q

Travelers TRV: 10/22/09 10Q

United Technologies UTX: 10/23/09 10Q

Verizon Communications Inc. VZ:/11/2/09 8K announcing VZ adoption of Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (SFAS No. 160).

Wal-Mart WMT: 8K 9/18/09 pricing agreement relating to a $1 bil Euro Note Offering.