Jim Cramer contrasted potentially lucrative mergers like Hasbro-Mattel and Broadcom-Qualcomm with General Electric’s list of failed deals.
Usually, CNBC’s Jim Cramer is a big fan of corporate takeovers.
“When one company buys another, it can create so much value that you want to slap yourself in the face, wondering why the heck they didn’t merge years ago,” the ” Mad Money ” host said. “Then there’s the pin action: whenever you get a deal, it tends to boost the value of all stocks in the same sector, which in turn drives up the entire market.”
That’s why Cramer was so bullish on Hasbro’s offer to buy competing toymaker Mattel, which was reported by the Wall Street Journal over the weekend.
Not only would the deal create plenty of powerful synergies, but it would be a smart move by Hasbro, which would be taking advantage of Mattel’s declines after the Toys R Us bankruptcy, he said.
Or take the now-dissolved deal between semiconductor giants Broadcom and Qualcomm, which was unanimously rejected by Qualcomm’s board on Monday.
Cramer agreed with the board’s reasoning — that the $103 billion bid undervalued Qualcomm — but said he would advise holding shares of Qualcomm in case its dispute with Apple ended sourly and the Broadcom “safety net” would have to be put to use.
But then there’s the fallen-from-grace General Electric, a company Cramer said has “become the poster child for bad acquisitions.”
Shares of GE tanked 7 percent on Monday after the industrial giant announced a company overhaul replete with a 50 percent dividend cut and slashed guidance.
Not long after on CNBC’s ” Squawk on the Street,” Cramer called his investment in GE “one of the biggest mistakes of my career.”
After all, GE spent billions buying into the energy and power markets at their peaks, Cramer said. At the same time, it sold NBC to Comcast and let go of some solid financial businesses.
“It’s like they were deliberately trying to get everything wrong,” the “Mad Money” host said.
That said, Cramer had some faith in GE’s new CEO, John Flannery, who vowed on Monday to sell parts of the company to raise money and bring new faces to the board of directors, which was partially accountable for many of GE’s unsuccessful decisions.
“Is GE the stock a buy down here? That’s a rough one. Flannery said today that next year is a ‘massive heavy lift.’ I don’t know, I don’t like to lift massively,” Cramer said.
But if Flannery is at all successful in his major restructuring plans, Cramer said the stock would end up being too cheap to ignore.
“But Flannery has to act fast. There can be no sacred cows. No more hype. No more unfulfilled promises,” Cramer said. “Out-of-control expenses must be reduced, divisions have to be separated, and, if necessary, GE may need to disappear. Why?… Because the previous management wrecked this once great American industrial.”
“I often talk about how important management is to the value of a company,” the “Mad Money” host continued. “But if you want to know the damage bad management can do to an enterprise, just look at GE, the only industrial of this whole era that’s actually gone backwards during a renaissance of American manufacturing.”
Disclosure: Cramer’s charitable trust owns shares of Broadcom, Apple and General Electric. Also, Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com.