Two more pretty sizeable deals were annouced today. French drug maker Sanofi-Aventis announced it was buying household and personal care product maker Chattem (maker of Selsen Blue, Icy Hot and Gold Bond, among other venerable brands). S-A is paying a 34% premium to the current Chattem price, making this a very Merry Christmas indeed for Chattem shareholders.
Also announced today: Mining equipment maker Bucyrus said it was buying the mining business portion of Terex. Both stocks jumped some 9% on the news.
These deals come on the heels of a number of other announcements in the past few weeks, highlighting an increasingly emerging story--one that may well be THE story for 2010. That is, the amount of cash corporations are currently sitting on. Record amounts. We've all read the stories, over the past 18 months, of downsizing and lack of business spending. This has enabled corporate America to amass a huge cash hoard. Many executives believe the 'safest' way to use that cash is not to hire workers back, not to invest in new plant and equipment, but to purchase already sound and thriving businesses. At hefty premiums to current share prices. And maybe they're not crazy. Warren Buffett, after all, just bought himself a whole damn railroad!
The important point is that large pools of capital exist, and they are being deployed, with a real and substantial upward impact on share prices. This is a far cry from 18 months ago, when we were seeing corporate shotgun weddings where one entity was taking over another at a distressed price.
Makes you go, hmmmm.
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