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- upside for the dealmakers,
- this dumb market, and
- Obama's newest craziness.
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Big Upside for the Dealmakers
Posted at 1:45 p.m. EST, Feb. 22, 2010
The two biggest deals of 2010 --
(APD - Get Report)
attempt to snare
(ARG - Get Report)
(SLB - Get Report)
-- make so much sense to the acquirers that you have to own both of them.
The easiest is Air Products. Because that bid's hostile, it is likely that Airgas either forces them to buy higher or Airgas finds another suitor. If Air Products walks away, it soars. It another bidder comes in and it loses, it soars. And if it gets its target for not too much money, it soars. Why the latter? Because Air Products would own a huge share of the market, and it is acquiring a better company with faster growth. The competition for pricing will diminish and a nice oligopoly against the other companies that provide industrial gases will allow for better margins.
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Schlumberger gives the big national companies one-stop shopping and a turnkey solution -- so important for these political appointees who run national oil companies. Schlumberger has a long-term view and knows that Smith International used to trade at a dramatically higher price. SLB functions as a sort of high-tech general contractor, and the Smith takeout makes it so SLB can get in, survey the land, come up with a great plan to get it out of the ground and now drill it with Smith -- it just makes so much sense.
Both are brilliant moves. Airgas rejected the Air Products bid today, which starts a dance of sorts, the end of which is unclear ... except for a higher price for APD. (Put aside my belief that Airgas would do better independently because it is a much better company than APD.) SLB gets knocked back to an appropriate entry point that should be seized, and not just because oil's at $80. That's the lid. That's been the lid. It's where everyone knows to sell the group, so ease in to that one.
Home runs for both either way.
: Still trying to process the
(MIL - Get Report)
bid I'm not sure there's money to be made at these levels.
At the time of publication, Cramer had no positions in the stocks mentioned.