At a 29% premium to Covidien's prior closing price, the company's investors became wealthier overnight. The stock closed Wednesday at $89.29. Shares are up 32% on the year to date, outperforming the health care sector's 13% gain. But it's not time to get complacent.
Instead of thanking Medtronic, try to understand the nature of its proposed offer. You will find that Covidien is still undervalued by 8%. From my calculations, the stock is worth at least $97 per share. The company reports fiscal third-quarter results Friday.
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