A Christmas Good Buy

NEVER, Neverland (AP) -- In a move that took many Wall Street insiders by surprise, The Tooth Fairy, Ltd. (NYSE symbol: TTF), today announced it was acquiring Santa Claus Consolidated Industries (S

Nov 28, 2007 at 2:06 pm

NEVER, Neverland (AP) — In a move that took many Wall Street insiders by surprise, The Tooth Fairy, Ltd. (NYSE symbol: TTF), today announced it was acquiring Santa Claus Consolidated Industries (SCCI). If approved by stockholders and regulatory agencies, the resulting company, to be known as DentaClaus Global Partners, would be the largest ritual largesse provider in the world, far outstripping rivals like The Easter Bunny Inc., Birthday Bird LLC and the moribund Great Pumpkin Corp (currently under Chapter 11 protection). What makes the deal so unusual is that The Tooth Fairy, while long a major player among children's asset procurement/wish fulfillment administrators, is considerably smaller than Santa Claus, the category leader and an iconic brand.

Initial reaction among investors was positive. "Santa's market penetration and gifting volume is already phenomenal, but it could go even higher once they access Fairy's non-denominational customer base," said Sherman Kronk, an analyst with Morgan Stanley. "I guarantee you, right now on the floor of the New York Stock Exchange visions of robust dividend growth are dancing in traders' heads."

Others were more guarded about the move. "SCCI's earnings remain soft," says Calvin Schnitz of CitiGroup. He attributes this to three factors: "A business model that's recklessly seasonal; the shuttering of their East Indian start-up unit, Mahatma Claus; and, most significantly, their ongoing acceptance of small portions of milk and cookies in exchange for goods and services."

But a weak P/E ratio wasn't enough to discourage The Tooth Fairy's takeover bid. That's because they're primarily after two plum SCCI assets: its high-volume omni-product North Pole manufacturing facility and its unrivaled distribution network.

"Traditionally, the Santa organization completes delivery of an entire year's workshop production in one 24-hour period," says Randall Ploing, an industry consultant. "Even with a much less time-intensive demand, TTF simply can't touch that."

Despite this seeming deficiency, however, The Tooth Fairy's earnings are quite robust. Says Kronk, "Though their per tooth purchase costs have risen from a nickel in the 1050s to as much as $5 today, TTF has successfully passed on these increases to dentition-dependent industries." (Deciduous teeth are essential to the manufacture of fine china, uranium enrichment centrifuges and maraca fillings.) It's speculated that with the acquisition of SCCI's Workshop Division, TTF will launch its own manufacturing subsidiary and compete with companies that until now have been its customers.

Before any deal can be finalized, though, some hurdles must be overcome. First, the Securities and Exchange Commission will have to determine whether allowing two such dominant players to join forces will give the resulting company an unfair competitive advantage and negatively impact gift recipiency, especially among children, the loudest, most annoying market segment.

"What's to prevent this new company from suddenly instituting a policy requiring every Christmas list to be accompanied by a tooth or two just to be considered?" asks youth gift advocate Monique Langostino. "Not only would this deprive children of their customary under-pillow disbursements, but it would unfairly shift the cost of retrieval to the tooth loser."

Then there are the SCCI stockholders. Just last year, they rejected a generous buyout offer from Dubai-based Death to the Infidels Business Systems (DIBS), but only after public fears surfaced that the company might supplant traditional Christmas offerings like bicycles, dolls and candy canes with items of a more radical jihadist bent such as camels, Burqa Barbie and falafels. Whether TTF's less controversial offer will prove any more attractive is difficult to say.

Needless to say, such issues were not part of today's announcement. Rather, company officials took the opportunity to name Kris Kringle, the high-profile, rubicund founder of Santa, as CEO of the new company. In a press conference, Kringle addressed a range of issues, including possible post-merger layoffs: "If we can create a new Yuletide paradigm — adding Christmases throughout the year, accepting blue chip securities in exchange for gifts, et cetera — plus expand our tooth collection efforts into the adult extraction market, we're likely to see more, not fewer, elfin opportunities." (SCCI's strict limit on maximum employee height is presently under investigation by the EEOC.) He also outlined plans to modernize corporate transport, replacing the existing red-nosed reindeer illumination system with a brighter, safer blue xenon-headlighted llama.

Current TTF CEO and proposed DentaClaus Chairman Leona Tinkerbell could not be immediately perceived for comment.

But even should all Kringle's proposed changes be implemented — a prospect that's far from certain — questions remain. Will global warming and the subsequent melting of the ice caps force a disruptive, expensive relocation of Santa's North Pole headquarters? Will American children's demands to receive euros for their teeth rather than the sagging dollar have any effect on profits? How will the new company deal with the ongoing problem of rampant recreational magic dust use at the highest levels of both organizations? Only time will tell.

For now, both companies are focused on just one thing: moving their historic mega-merger forward. This was made especially apparent to reporters when they heard the always-quotable Kringle exclaim as he strode out of the press conference, "Merry Christmas to all ... especially those with loose teeth."

CONTACT BOB WOODIWISS: bwoodiwiss(at)citybeat.com. His column appears here the last issue of each month. His book, Keys to Uncomfortable Living, a collection of humorous and satirical essays, is in bookstores now.