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 Conceptus (NASDAQ:CPTS), a maker of minimally invasive contraceptive devices for women, soared 20% after the company agreed to be purchased by Bayer (NASDAQOTH:BAYRY) for $1.1 billion.
So what: The deal, which represents a 20% premium from Conceptus' closing price on Friday, is for $31 per share in cash and values Conceptus at a whopping 30 times this year's EBITDA! The move does make sense as Bayer was able to generate more than $4 billion from its women's health care business last year, and it already has a lineup of contraceptive pills and devices in its product portfolio.
Now what: It's a great day to be a Conceptus shareholder, but I can't help but feel that Bayer is paying far too high a premium for Conceptus. In November I made an underperform call on Conceptus in CAPS -- a call which puts egg all over my face for sure -- on the idea that it was trading at an astronomical forward P/E and had much of its revenue tied to Europe. Bayer might be further securing its dominance in women's contraceptive care, but I feel it made a poor choice in paying such a high premium for Conceptus.
Craving more input? Start by adding Conceptus to your free and personalized watchlist so you can keep up on the latest news with the company.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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