Please ensure Javascript is enabled for purposes of website accessibility

1, 2, 3, 4, I Declare a Bidding War

By Sean Williams - Apr 2, 2013 at 2:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Expectations that a bidding war will escalate send shares of this skin aesthetics company shooting higher by 16%.

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 (NASDAQ: OMPI) -- 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 (BHC -1.41%) 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.

Craving more input? Start by adding Obagi Medical Products to your free and personalized watchlist so you can keep up on the latest news with the company.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bausch Health Companies Inc. Stock Quote
Bausch Health Companies Inc.
$9.79 (-1.41%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.