November 7, 2009
After several months of rallying equities, now is when the buyout spigot starts gushing out of control?
Burlington Northern (NYSE: BNI ) , Diedrich Coffee (Nasdaq: DDRX ) , and Black & Decker (NYSE: BDK ) are just some of the companies that agreed to be acquired this week. Good for them and their shareholders.
However, I'm just wondering about the logic of swallowing down public companies now, after valuations have run up dramatically since the market bottomed out in March. Sure, the justification is that many of the deals being brokered these days involve stock. A cynic would argue that they merely represent one company using its marked-up shares to buy another company's marked-up shares.
You also have Warren Buffett to consider. His Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) is snapping up rail giant Burlington Northern in a $44 billion deal. He has historically been smart and timely with most of his purchases. He isn't the type to let emotion or rallies sweep him up in the moment, forcing him into a bad investing decision.
If anything, Buffett's meaty acquisition may inspire others to dive into the feeding frenzy. That may not make a whole lot of sense, but the market isn't always supposed to be rational.
Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.
- Sirius XM Radio (Nasdasq: SIRI) surprised the skeptics on Thursday, posting breakeven quarterly results before one-time charges, and growing its subscriber count sequentially. Your move, terrestrial radio.
- On the other side of the expectations front, Research In Motion (Nasdaq: RIMM ) shares got hammered after the company delivered uninspiring results. The BlackBerry maker responded with a share buyback. Unlike this week's acquirers, at least the company has the "buy low" part of the mantra down.
Until next week, I remain,