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 Nalco Holding
So what: For each share owned, Nalco shareholders will receive $38.80 in cash or 0.7005 of an Ecolab common share, representing a 34% premium to Nalco's closing price yesterday. Ecolab is making the move to diversify its health care and hospitality-heavy customer base, but given its 8% share price drop today, Wall Street is obviously skeptical of the strategy.
Now what: I'd take Mr. Market's cue on this one and stay away from Ecolab right now. The company is essentially paying about $1.6 billion in cash and issuing about 70 million shares to plunge into a space that has represented a very small part of its success to date. While Ecolab management has identified roughly $150 million in cost savings from the deal, the possibility of "diworsification" is too high to really get excited about it.