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 Mindray Medical (NYSE:MR), a developer and manufacturer of medical devices such as patient monitoring and support products, rose 11% during Thursday's trading session after receiving a go-private offer from three of the company's top executives.
So what: According to the proposal, which came out shortly after the market opened for trading, both co-CEOs and the Chairman of the Board for Mindray Medical have offered to buy the company for a roughly 9.2% premium to yesterday's close, or $30 per share. Under normal circumstances a company's board of directors would discuss any buyout proposal, but because members of the board are making this offer, an independent committee needs to be established to weigh the offer. The three executives looking to take Mindray Medical private currently own 28% of all outstanding shares.
Now what: The go-private offer is just what shareholders needed as Mindray has a perpetuating streak of missing Wall Street's EPS estimates come earnings time. Although Mindray is relatively inexpensive at 17 times forward earnings, and it should pick up business in the U.S. and overseas as life expectancies increase, competition among medical-device makers is also increasing -- even in China -- which can hurt margins. It could be tough for Mindray to overcome the potential for margin erosion.
You'll note that Mindray shares actually closed about 1.5% above the offer price on Thursday, implying that Wall Street and investors expect management will need to sweeten the deal in order for the company to be taken private. Personally, I'm not one to bet on a higher offer coming in, and would suggest that investors lucky enough to own shares into today's announcement consider taking their profits.
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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