More Misguided Monday Takeover Talk

The same nonsense often produces twice the headlines.
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The Business Press Maven would have married her, but I didn't like her looks or personality.

Yes, I'm using a telltale streak of bitter sarcasm to make a larger point, but listen closely because this kind of stuff really inverts my yield curve.

Only two weeks ago this morning, The Business Press Maven

was in a total snit about why he did not like Mondays. Namely, that's the day when the wackiest false takeover rumors hit the papers, wires and television.

See, if you want to float a false rumor (say you're a trader looking for a price pop or an investment banker looking to jawbone a company into takeover play -- about half my readership), then Sunday is the day for you. News is light, which means reporters are desperately looking for the next day's material. Moreover, few people are around to counter a thin takeover rumor -- you know, the sort of basic common-sense opinion like "That'll never happen because it's a dumb move plus they've spoken about it a thousand times and never agreed on price."

And saying that a merger will only happen if they agree on price is like saying you'd marry her if it weren't for her looks and personality.

So let's follow up on two Mondays ago. Part of the reason why the business media get away with this junk is that the only follow-up is their own -- usually also on Mondays -- to say that the merger won't happen.

Same nonsense, often twice the headlines.

Two Mondays ago, the

New York Post

ran some thin, outdated takeover talk about

Bally Total Fitness

, the troubled fitness center whose stock had just atrophied even further. Since that headline -- "No Dumbbells" -- we have had no takeover, not even any legitimate talk. Talk about dumbbells.

Probably better was the Monday morning missive about

Cadence Design Systems

(CDNS) - Get Report

from

The New York Times

. The article had all the signs of Monday morning filler: The headline was written in the passive voice -- "Specialized Software Maker Is Said to Be in Buyout Talks" -- and the article itself backed off the premise of the article. That, of course, raises the question: Why the article?

Talk about a Cadence deal has been rife for a long time. And no one could ever agree on price, which means no chance of marriage.

That gets us to the real advantage of these Monday takeover-rumor stories: They're like a 2-for-1 sale. One or two or three Mondays later, you can run another article (more material on a slow day!) saying, "Uh, guess what? It's not going to happen."

Except for all those millions of investors who don't know what you're up to and who take the original article seriously, no one is the worse off for it.

Look at

today's headline from

The New York Times

about those same Cadence Design "takeover talks": "Talks for Chip Software Maker Are Said to Bog Down on Price."

We're told that the company is too expensive for such a risky field that private equity has generally avoided and, well, we knew all this two Mondays ago. But it took until this Monday to declare the thin talk nonsense. And check out this line, the second in the article: "Though negotiations between Cadence and the two firms, the Blackstone Group and Kohlberg Kravis Roberts, may resume at some point..."

Wait. Let me guess. It's going to resume on a future Monday.

So what is today's version?

How about this incomplete, basically promotional

merger declaration from

The Wall Street Journal

, infamous for its Monday Morning Mergers? "Ethanol Producers Expect Consolidation" reads a bumptious headline. They're not just praying for it; they expect it! Why? Well, basically because, uh, leaders have emerged in the field and, well, their business is lame, plus, um, there is a huge supply glut.

If you can round up three less motivating reasons for a batch of takeovers, do send them to me. But the article was put together on a Sunday, so who is around to take issue? Here are the first three lines of the story. I would enjoy their comic spirit more, if I weren't so concerned about how many investors will chase this nonsense unaware:

"Ethanol plants, which have sprouted up across the U.S. over the past two years, are ripe for the picking, as leaders begin to emerge in the renewable-fuels sector. Some ethanol producers have begun to position themselves for a wave of consolidation that is expected to be driven by a drop in profitability. With ethanol-production capacity in the U.S. forecast to double by 2009, analysts are warning of a coming supply glut."

And it takes two to make a marriage, right? Tell it to the

Journal

:

"Infrastructure to distribute ethanol widely and technology to use a gasoline blend that contains mostly ethanol are trailing, leading to a potential oversupply of the fuel. Such conditions could force firms to sell out."

All those bad conditions and oversupply are forcing firms to sell. That I understand. But who, in the face of this, is being forced to buy? If it is not an arranged marriage, I don't see the incentive that will lead to huge industry consolidation. But, hey, it's Monday. A single quote from a merchant banker is enough to build such an article around. Anyhow, if you manage to spot a dissenting opinion in this article -- a necessity in journalism, but rarely in these Monday morning articles -- let me know.

Let's get busy waiting for several Mondays from now. Guess what will happen then? We'll see an article about how these ethanol takeovers are not materializing.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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