A Holiday M&A Party

Maybe it's the Christmas spirit. This week, two hostile parties -- Oracle (Nasdaq: ORCL  ) and PeopleSoft (Nasdaq: PSFT  ) -- came to terms. There also appears to be a peaceful resolution to the hostile takeover bid for the U.K.-based Novar PLC.

Novar had been the target of a hostile bid from Melrose PLC. But yesterday Honeywell (NYSE: HON  ) , the aerospace and defense firm, served as a white knight and agreed to purchase Novar for roughly $1.7 billion (as well as taking on $580 million in debt). The deal is expected to be accretive for Honeywell, which means the company's earnings per share should increase in 2005.

Novar consists of a variety of segments. However, it looks like the main attraction for Honeywell is its security, fire, and building controls products and services. In fact, Honeywell is likely to sell off the other divisions, such as Indalex Aluminum Solutions and Security Printing Services. The deal is highly complimentary and is expected to produce $100 million in annual synergies -- whether in cross-selling or cost-cutting.

No doubt, it appears that M&A is back in vogue, as seen in the aggressiveness of GE's (NYSE: GE  ) recent big deals and expected deals from Sprint (NYSE: FON  ) and Johnson & Johnson (NYSE: JNJ  ) . Wall Street has shown signs of encouragement in response to the deal-making. For example, even though Honeywell announced its lowered outlook for 2005 at $1.90 to $2.00 per share in earnings, the stock was still up $1.14 to $36.45 shortly after the announcement. Wall Street's M&A penalty just might be turning into a plus.

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If more Foolish discussion is what you're after, check out our Honeywell discussion board.

Fool contributor Tom Taulli does not own shares mentioned in this article.


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