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Private Briefingwith WILLIAM PATALON III, Executive Editor
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The wave of deal-making on Wall Street hasn't extended to retail yet. But that's about to change.
That's because retailers make for great M&A candidates - which also makes for some stocks to buy now ahead of this takeover trend.
Takeovers provide chances for companies to cross-sell products and negotiate better with landlords and suppliers. Plus, retailers face low regulatory barriers to deals.
That's why major retailers are among a list of 71 companies Morningstar says are some of the most likely takeover targets this year.
"We think 2013 will bring an uptick of deal activity," said R.J. Hottovy, director of global consumer equity research for Morningstar. "There's no shortage of companies with available capital on their balance sheets and high operating margins, fewer organic growth opportunities and candidates with attractive valuations."
Many retailers have had a tough start to 2013 with consumers feeling the pinch of the higher payroll taxes and rising gas prices, leading to lower consumer confidence.
This has caused retail stocks to perform much worse than the overall market.
J.C. Penney Co. Inc. (NYSE: JCP), for example, has had an abysmal year. JCP fell almost 17% Thursday after reporting a staggering 32% decline in same-store sales for the fourth quarter, and the stock is down 57% in the past year.
While JCP's takeover appeal is limited because it appears to be a sinking ship, others are cheap but still attractive.
In fact, Barnes & Noble Inc. (NYSE: BKS) Chairman Leonard Riggio, and largest BKS shareholder, announced Monday that he wanted to buy the company's stores as sales continue to fall.
And the New York City-based bookseller could be the first in a string of retail takeovers.
We've gone through Morningstar's list and brought you the three retail companies most likely to be taken over.
Here they are, with a summary of Morningstar's analysis:
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