SHORT KG ( KING PHARMACEUTICAL ), BUY ALO (ALPHARMA)
KG today made public its $33 cash offer for ALO ( Alpharma ). Normally stock of the acquirer falls, but here KG stock has jumped. The reason for jump is KG representation that the deal will be accretive in the second year. We believe this premise to be false for four reasons:
1. ALO is an attractive target and other acquirers may jump in. In the end, even if KG is successful, the price may have to go up by as much as 20%. Such increase will not make the deal accretive in the second year as represented by the company.… Please click here or the title below to read more.
August 22, 2008