NEW YORK (Real Money) -- Too many of everything!
That's right, we have too many of everything in this stock market and in the real economy. So when we cull the weak and let the strong survive, when we merge companies out of existence to eliminate overcapacity, we go higher.
That's why hardly a day goes by without a deal of some sort to recognize that the CEOs of this country are well aware of the overcapacity.
Monday we learned that the publicly traded company of Ann Taylor (ANN) will be disappearing within the confines of Ascena (ASNA) for cash and stock. The deal, which gives shareholders a huge 21% premium, will be fabulous for Ascena because it needs a higher-end offering to complement its current iterations and it can save money immediately. Ascena's talking about saving $150 million in synergies over three years, but I think it will be more than that because I am sure CEO David Jaffe, who is on Mad Money Monday night, will be able to figure out which stores are winners and which ones are not needed. That's a tough thing for Ann's management to do, but it is expected now that Ascena's taking it over.
We know apparel's been weak. Some of that is that people are being more frugal. Some of that is because there are many purchases online that steal from bricks-and-mortar sales. But let's face it. We all know we are overstored in this country. This move will take out some stores and rationalize.
Or how about Par Pharma getting bought by Endo International (ENDP) Monday morning? There are way too many companies making generic drugs. We've got Endo and Par and Perrigo (PRGO) and Mylan (MYL) and Teva (TEVA) and Actavis (ACT) and Valeant (VRX) all in that business fighting for shelf space and pharmacy benefit manager share. So Endo shells out $8.05 billion in cash and stock to snare Par.
At the same time, we know Mylan's trying to buy Perrigo and Teva's trying to buy Mylan. Now Mylan has rejected Teva's bid, and I don't think there's much hope for that deal. But I do think Mylan will manage to get Perrigo in a deal that will represent a quantum leap for Mylan and will be terrific for Perrigo shareholders. Most important, though, will be a potential lift in margins from these warriors who have always been pitted against each other.
We know there's already fervid acquisition activity in the biotech world, with Alexion (ALXN) last week paying $8 billion for Synageva (GEVA), or 136% higher than where it was the day before. Not that long ago, we saw AbbVie (ABBV) buy Pharmacyclics (PCYC) for stock and cash in a deal so large that it crushed the acquirer. But now the stock is all the way back to where it was, so others, perhaps even Johnson & Johnson (JNJ), which suddenly has a red-hot stock ahead of a meeting this week, might be willing to do something bold without worry, as we know they, too, were interested in Pharmacyclics.