A Big Year for Deals Turns Huge

Over the past year, companies have gone after more logical targets. Among recent takeover proposals is a $59 billion merger between J.P. Morgan (JPM Quote) and Bank One (ONE Quote).

The J.P. Morgan announcement in January followed a $47 billion proposed deal between Bank of America (BAC Quote) and FleetBoston (FBF Quote) last October.

More recently, Rite Aid (RAD Quote) is reported to have put in a bid for J.C. Penney's (JCP Quote) Eckerd division. Both companies were profitable in their latest quarters.

"Seasoned managements are looking for clear similarities in terms of customer base," said Marlin.

Even Oracle's (ORCL Quote) $9.4 billion hostile bid for PeopleSoft (PSFT Quote) could make sense for that reason.

Comcast's proposed deal begs an obvious comparison to AOL's ill-fated acquisition of Time Warner, which was completed in January 2001. While Comcast's equity isn't as gassy as AOL's at the height of the bubble, its shares are still fetching about 108 times this year's earnings estimate of 29 cents a share, hardly a low multiple. Disney fetches 31 times 2004 earnings forecasts for 89 cents a share.

One analyst said the offer announced Wednesday is more similar to its previous takeover of AT&T's (T Quote) cable operations.

In 2001, "Comcast approached AT&T with a low bid, and the deal was ultimately done at a higher price," said Tom Burnett, president of Merger Insight, an affiliate of Wall Street Access. "I am not saying that is what is going to happen here. But that is the pattern."

All the action has meant a resurgence of high-margin advisory fees for the investment banks that put the deals together. Several stocks reflected that trend Wednesday, including Goldman Sachs(GS Quote), up $4.94, or 4.8%, to $107.12; Morgan Stanley(MWD Quote), up $2.88, or 5%, to $59.86; Lehman Brothers(LEH Quote), up $4.77, or 5.8%, to $86.70; and Bear Stearns(BSC Quote), up $4.04, or 4.8%, to $86.93.