Cramer's 'Mad Money' Recap: It's Takeover Time

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The year "2006 will be a huge year for mergers," Jim Cramer told viewers of his "Mad Money" TV show Wednesday, and he is convinced that a likely takeover target is UST (UST Quote).

UST, which makes smokeless tobacco, is a stock that no one cares about, said Cramer. Growth is virtually nonexistent for tobacco, but UST's fundamentals are improving, he said.

The company's margins are improving, and tobacco's legal problems -- not that much of a risk for smokeless tobacco -- are drying up. UST also has the flexibility to increase its already huge dividend, he said.

When a stock gets too hated and the fundamentals are getting better, a takeover "makes a lot of sense," said Cramer. He believes that R.J. Reynolds, a subsidiary of Reynolds American (RAI Quote) would be the likely acquirer and believes that a takeover could come at a 25% to 40% premium. UST closed at $38.29 Wednesday.

In response to a question about Lloyds TSB Group (LYG Quote), Cramer said Lloyds is worst of breed, and the stock is "terrible" even if it does pay a big dividend. Stick with Prudential (PRU Quote) and MetLife (MET Quote), he said.

Listen to the Bard

Medical device company C.R. Bard (BCR Quote) is also likely a takeover target, said Cramer. But, Cramer would be interested Bard even if it weren't a takeover target because it has great fundamentals and it's one of the few medical device companies not to receive a subpoena from the Department of Justice in its investigation of industry sales practices.

A takeover, which Cramer believes would happen at about $100 a share, would be the icing on the cake, he said. Bard closed Wednesday's regular session at $67.07.

Cramer said that there are too many medical device companies and that the industry is ripe for consolidation. Because of the strong dollar, which attracts foreign investment, and a low tax rate environment for stocks, "anyone who wants to do a merger deal wants to do it before these two very positive conditions evaporate," he said.