Expected Takeover With 75% Upside

This bizarre saga is finally nearing a turning point, and this seems to be a good moment to step in.

A midsized medical technology company has suddenly become the center of a surprisingly messy takeover fight. An industry giant wants to buy it. Two major shareholders who together control more than a third of the stock oppose the deal. They call the offer opportunistic and the sale process flawed. The bid arrived right after the company’s sales fell off a cliff, which drove the stock down more than 50%. The activists insist the issues are temporary and that the buyer is simply trying to grab the business at a fire sale price. Management itself had endorsed the “temporary setback” view before the offer appeared. Then the most recent quarter delivered a sharp rebound in sales, strengthening the activists’ case.

The buyer has been circling for nearly two years. Before the downturn, it was willing to pay almost twice the current offer..

At this point, two paths look most likely. Either the bidder raises its offer, or the activists take control of the board and run a proper sale process that brings other suitors to the table. The potential upside implied by activist targets is about 75%, and even that still sits below what the current buyer was offering last year.

The acquisition is highly strategic, but still small in absolute size to the buyer.

This post is for paid subscribers, to continue reading please log in or sign up.