Newspaper article St Louis Post-Dispatch (MO)

Takeovers Are Taking over on the Corporate Scene

Newspaper article St Louis Post-Dispatch (MO)

Takeovers Are Taking over on the Corporate Scene

Article excerpt

Get ready to invest in takeovers.

The economy is doing poorly, which is making the corporate merger business boom. And lucky investors could be in for a bonanza, no matter what the stock market does as a whole.

One reliable Wall Street source tells me that there are at least a half-dozen corporate mergers now being discussed and that each would be worth more than a billion dollars. And scores of smaller deals are also being considered.

A couple of weeks ago I wrote that the merger and acquisition business was picking up and that takeover transactions this year were running sharply ahead of 1992 levels. And I quoted sources as saying that some big deals were in the works.

Since that time, Mattel has announced that it plans to buy Fisher Price, AT&T has gone after McCaw Cellular and Merck & Co. announced plans to acquire a company called Medco Containment. All are monster-sized deals.

But the takeover boom won't end there. Dozens of other transactions are being discussed. The conversations are mainly between healthy corporations with rising stock prices and companies that have been hurt by the recession.

"You are going to have enormous numbers of industry consolidations," said Peter J. Solomon, a long-time Wall Street takeover specialist who now runs his own firm in New York.

"In a non-growing economy, you can't grow market share - it's too expensive." So corporations instead decide to take over other corporations.

"My backlog is enormous. Everybody is interested in talking with everybody," said Solomon.

Others confirm that more giant deals are being talked about these days. Nobody is sure whether these conversations will ultimately lead to transactions. But everyone agrees that there is a new dynamic in place.

Because stock prices are so high, companies can make acquisitions using their inflated-priced shares. And because the economy is doing so poorly, there are enough desperate sellers who are afraid to confront the next economic downturn.

Also, if a company is interested in making an acquisition for cash, interest rates are low enough to make the deal worthwhile.

But most of the deals already announced and those being considered are stock-for-stock transactions. …

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