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What: Shares of consumer brands specialist Prestige Brands
So what: When there's an acquisition taking place involving publicly traded companies, generally the target's price will spike and, if it does anything, the acquirer's stock may fall. That was hardly the case today as Prestige's stock shot up after it announced it is spending $660 million for 17 over-the-counter health-care brands from GlaxoSmithKline. Among the brands purchased were Goody's, Ecotrin, Beano, Tagamet, and Sominex.
Now what: In the company's press release, Prestige CFO Ron Lombardi said the acquisition will be accretive to fiscal 2013 (which begins in April 2012) and that it will also improve "overall gross margin and EBITDA profiles" as well as "increase ... our free cash flow." From a shareholder's perspective, that hardly sounds like a darn good deal.
Of course with shares up substantially today, an increase in the overall value of the company due to the acquisition may have been quickly factored in. Also, it's notable that this is the largest asset purchase Prestige has ever undertaken, so investors will want to keep an eye out for any hiccups in the process.
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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.
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