It looks like the intensive merger activity will soon leave me with a few less stocks in my portfolio. M-Systems Flash Disk Pioneers has began a new life as a subsidiary of SanDisk Corporation (Nasdaq:SNDK), while PowerDsine is no longer in my portfolio either, following its impending integration into the California-based chip manufacturer Microsemi Corp. (Nasdaq: MSCC). Rumor now has it that drug company Taro Pharmaceutical Industries (Nasdaq: TARO) could be the next Israeli company to be put up for sale.
The financial press has also reported that Biomet Inc. (Nasdaq: BMET), a manufacturer of orthopedic accessories based in Indiana, which I also have in my portfolio, is set to receive a $11 billion takeover offer from its UK rival Smith & Nephew Plc (LSE: SN; NYSE: SNN). The company specializes in implants such as hip and knee replacement joints mainly for older people. Its field has been growing for decades alongside the sharp growth in the world’s older population, which is now living longer thanks to improvements in standards of healthcare. The potential of this market over the next few decades will increase even further as healthcare services and standards of living continue to improve in the Third World.
Four large orthopedic device companies and one multidisciplinary giant, Johnson & Johnson (NYSE: JNJ) are active in this field. In addition to Biomet and Smith & Nephew, which have similar market caps of around $9-10 billion, there is Zimmer Holdings Inc. (NYSE: ZMH), which has a market cap of $18 billion and Stryker Corp. (NYSE: SYK), whose market cap exceeds $22 billion. According to the reports circulating today, any one of these four as well private funds could make a bid for Biomet.
Aside for the speculation over the exact date on which it will take place, Biomet’s impending sale has come as no surprise to anyone and the fact that it is imminent was made clear during Friday’s trading when Biomet touched an annual high of $40. It reached an all-time high of $50 a share two years ago, but it is believed that the acquisition will be closed at $45. Last April Biomet’s CEO and co-founder Dane A. Miller stepped down and the company hired investment bank Morgan Stanley to find it a buyer.
I have a special sentiment for this company, since it was through it that I learned when I first started out on Wall Street 20 years ago, that if you are sitting on shares of a company that is excellent in every respect - market, products and management, you’ve nothing to worry about if Wall Street enters a downturn, however acute it may be. If you can, be brave, overcome your fear and load up with as many shares as you can because the recovery will come quicker than the speed of light.
I bought Biomet stock in September 1987 at $1.50 a share (adjusted for splits at that time). After I saw it plummet to $0.75 with the phenomenal crash that happened in the following month, I kissed my money goodbye. I sold it with a sigh of relief in November, only to weep when I saw it back up at $15 at the end of 1991.
I applied the lesson I learned with Biomet, when I added Microvision Inc. (Nasdaq: MVIS) to my portfolio at the beginning of the year, despite there being no room for comparison, since Microvision is almost a start-up. Since I added it, Microvision took a tumble, hitting the troubling low of $1.16 at the end of August.
By last Friday, it had climbed back above $3. This time round, I did not load up with shares since Microvision is a small company that was on the verge of bankruptcy. It surged 10% on massive volume on Friday, after it received coverage and a “Buy” rating for the first time since the analysts abandoned it in droves several years ago. A small investment house by the name of MDB Capital Group gave it a target price of $6.
Microvision will probably be attending the 2007 International CES conference in Las Vegas next month, where it will unveil a special laser-based projector that will be embedded in 3G cellular handsets. This will enable laptop-sized full color projection displays for applications such as streaming video and digital TV. According to the analysts, if the company can develop this application into a functional working commercial product, it will amount to a monumental revolution that could be a phenomenal success, since the company is already fielding inquiries from leading cellular handset manufacturers.
Published by Globes [online], Israel business news - www.globes.co.il - on December 12, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006