Editor's note: Contrary to reporting in a previous version of this story, Carl Icahn is the noted investor involved in ImClone's buyout negotiations. The Fool regrets the error.
From tiny acquisitions to massive conglomerate combinations, Wall Street's urge to merge remains strong. How can we tell the dealmakers from the deal breakers?
Breaking down the buildup
To help, we'll turn to the 115,000-plus investors in Motley Fool CAPS. Our data suggests that top-rated stocks offer the best oppportunity to capture the best returns. A combination of two companies with high CAPS ratings should bode well for the new firm's future results, while a high-rated company that joins a lower-rated one may benefit one set of investors more than the other.
Despite troubles in the capital markets, the deals won't stop; they simply might involve more stock and less cash. Here are a handful of recently announced deals, and the ratings for each participating company on CAPS' five-star scale:
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Acquirer
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CAPS Rating
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Target
|
CAPS Rating
|
Deal Price
|
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MasTec
|
**
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Wanzec Construction
|
NR
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$200 million
|
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Wells Fargo (NYSE: WFC )
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***
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Wachovia (NYSE: WB )
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**
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$15.1 billion
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GSI Commerce
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***
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Innotrac
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NR
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$52 million
|
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Eli Lilly (NYSE: LLY )
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****
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ImClone Systems (Nasdaq: IMCL )
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**
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$6.1 billion
|
|
eBay (Nasdaq: EBAY )
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***
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Bill Me Later
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NR
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$945 million
|
|
Symantec
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**
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MessageLabs
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NR
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$695 million
|
CAPS ratings courtesy of Motley Fool CAPS; NR = not rated.
A merger of equals?
Not so fast, Citigroup (NYSE: C ) ! Though the FDIC brokered a hurry-up purchase of Wachovia by the financial giant for just $1 a share, Wells Fargo stepped into the breach with an offer valued at $7 a stub. Under the Wells deal, the FDIC -- i.e., the taxpayers -- wouldn't be on the hook for any losses, unlike the Citi deal.
Although Citigroup objected, prompting the two banks to start sniping at one another, it's understandable that the FDIC would welcome Wells Fargo's entrance into the fray. Since the deposit insurer has limited funds, any deal that avoids putting its capital at risk is a good one.
CAPS member PIcolano views Wells Fargo as a stealth player in the current financial-sector upheaval, which should help it ultimately outperform the market:
In this current financial crisis, you've heard very little talk about Wells Fargo (bad or good) until it's proposal to cart off the carcass of Wachovia. Regardless of whether they succeed in this or not against Citigroup, it leads me to believe that they'll be one of the better financial plays on the market once financials rebound.
Pharmaceutical rumble
Another company that got a thumb in its eye was Bristol-Myers Squibb (NYSE: BMY ) , which had a running war of words with ImClone superinvestor Carl Icahn about whether ImClone could find a better deal than Bristol's $60-per-share offer. When Eli Lilly revealed itself as the mystery rival bidder, it one-upped that offer with a bid of $70 a stub.
CAPS member PizzeriaMan likes that the Imclone acquisition will bolster Lilly's otherwise weak drug pipeline, giving investors the opportunity to purchase the pharmaceutical at some of its lowest prices of the year:
Weak pipeline will be bolstered by ImClone acquisition. Fundamentally strong balance sheet. Available at close to 52 week low.
A value-added offer
What's your take on these deals? Let us know on Motley Fool CAPS. And while there, you can start your own research on these or other stocks. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. There's more than you think.
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