As a member of the Motley Fool Rule Breakers team, I find this to be a bittersweet event. See, Millennium was singled out by fellow analyst Karl Thiel to newsletter subscribers as one of two recommendations in the December 2005 issue. So, on the one hand, the all-cash deal is a sweet exit strategy. Takeda is paying $25 a share for Millennium, a 147% premium to the price that Karl found initially attractive. The flipside is that a cash buyout ends the ride, putting the promise of Millennium's pipeline and potential into a much larger company.
Don't get me wrong. This past week's pop is great. It's actually one of the biggest benefits of investing in young growth stocks that are redefining their respective industries.
This isn't the first company to have been swept off the Rule Breakers scorecard. It comes with the territory. If a nascent company has a better mousetrap or is carving out a new market, it will be that much more attractive for a larger player struggling to make it happen organically.
One of my earlier newsletter picks was Provide Commerce, the company behind ProFlowers.com. Providing field-fresh flowers directly from the growers was rattling the floriculture industry. The company was growing faster than more conventional rivals like FTD
Those two were logical suitors, but it wound up being Liberty Media
Click Commerce is another Rule Breakers recommendation that handed over the keys to a larger company, offering a healthy exit strategy for shareholders. The RFID software enabler was snapped up by Illinois Tool Works
There is also Archipelago Holdings, a stock that caught David Gardner's eye with the popularity of its ArcaEx electronic trading exchange. The New York Stock Exchange was so impressed by Archipelago that it acquired the company to help create what is now NYSE Euronext
The moral of the story is that it pays to be the one to buy in before nervous rivals get the same idea. There are risks, of course. Small growth stocks will be volatile. However, if you aim well -- and by that I mean analyzing a company's market position and competitive strengths and realizing that it would make an attractive buyout candidate -- you will be ahead of the pack.
Millennium Pharmaceuticals and NYSE Euronext remain active Rule Breakers stock picks. A 30-day trial subscription may be all you need to begin unearthing potential buyout candidates. I'll see you there.
Longtime Fool contributor Rick Munarriz is a fan of weddings, especially the ones with big dowries and fancy receptions. He does not own shares in any of the stocks in this story. Rick is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy always wears a pink carnation with its white sport coat.