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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Obagi Medical Products (UNKNOWN: OMPI.DL ) -- a maker of skin aesthetics, as well as prescriptions and over-the-counter treatments for skin ailments -- jumped as much as 16% today after receiving a takeover offer from German drug maker Merz Pharma.
So what: The offer from Merz, which is expected to be funded entirely by cash on hand without the need for additional financing, is for $22 per share. What's interesting about the bid is it comes just two weeks after Obagi agreed to be purchased by Valeant Pharmaceuticals (NYSE: VRX ) for $19.75 per share. Merz contends that it had been in talks to purchase Obagi long before Valeant's offer was presented, and that its all-cash deal reflects a clearly superior bid.
Now what: The expectation now is that Valeant will try to one-up Merz's offer, as is evidenced by the fact that Obagi is trading at nearly $1 more than Merz's $22 all-cash offer price. Trying to play the bidding war game can occasionally garner a trader short-term profits, but it ends in losses as many times as it results in gains. Obagi and Merz would make a smart fit since Merz is looking to expand abroad, and its $22 cash offer is almost certainly going to be voted the better offer by Obagi's board. Unless Valeant really wants to boost its offer, Obagi is Merz's to lose.
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