John Rogers Bullish on Three Takeover Candidates: LAZ, HSP, BAX
Readers can probably benefits from the following takeover candidates as he identifies:These days I am bullish on stocks with a takeover theme in mind. At the top of my list is financial advisory and asset-management firm LAZARD (LAZ). This global investment bank has an enterprise value of $4 billion and about $1.8 billion in revenues. I think of this storied franchise as a three-legged stool. First comes its bread and butter, the restructuring business, which has done well recently as companies have needed to restructure debt, go through bankruptcy proceedings and so forth. Lazard also works on mergers and acquisitions, which are still in the early innings of a recovery. Its asset-management business boasts emerging markets portfolios that have lower correlations to the U.S. economy and can do well in a range of environments.
Among midcaps, I think specialty pharmaceutical and medication delivery company Hospira (HSP) would be attractive to a larger diversified health care operator. Lake Forest, Ill.-based Hospira has growing free cash flow, very manageable debt, a pipeline of biogenerics awaiting approval and a great niche franchise--the key things a diversified health care company would want. Its key products--injectable pharmaceuticals and intravenous pumps--have high barriers to entry and low competition and should enhance the value of health care giants' existing drug lineups. With an enterprise value of $10.5 billion, a buyout is quite digestible by pharma's bigger players. There's even a catalyst: Hospira's CEO, Christopher Begley, has announced his retirement, but he has no named successor in place.
Another relatively large health care company that might be attractive to an international giant is Baxter (BAX). Baxter has an enterprise value of $30 billion. The company has three divisions, two of which tend to be pretty stable. The other, plasma, is cyclical; sometimes there's a bad shortfall in plasma supply, and other times there's too much. When the latter happens, the market panics and the stock gets cheap. We're toward that end of the cycle, so with the stock trading at around ten times forward earnings, I think it's a bargain.
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Read the complete Forbes column article by Rogers.