I don't have any first hand knowledge about MAH/GON yet, but I'll try over the next few days. On the surface, I'd say that both companies look fairly undervalued. GON seems to be a little better since they will get 50% of the company with slightly less than 50% of the stock currently outstanding. Unfortunately, I do mean "fairly" undervalued because I think the market has reason for concern about a few issues.
GON had me a little puzzled with their 10Q. Here are a couple quotes that seemed a little too corny:
"The earnings stability benefit of Geon's strategic raw material investment is being demonstrated."
---How many people actually pat themselves on the back for maintaining similar margins to prior years?
"The use of cash in operating activities increased by $26.7 million from the same period last year, principally due to the non-cash earnings of equity affiliates of $18.7 million in 2000..."
---Last I checked, it didn't take a pre-schooler to tell you that non-cash earnings DO NOT affect cash flow, hence the purpose of removing them on the cash flow statement. Wouldn't their inability to collect A/R in a timely fashion play a bigger role in negative cash flow? A/R has increased significantly, but remains less than 45 days sales which I'd say isn't too bad. But I'm a stickler for A/R collections and don't see a valid reason for that increase.
Who writes this stuff anyway?
Also, if this is a 50/50 deal, how is it that the dominant player seems to be GON, when they have 1/2 the sales of MAH. I understand the market has them valued equally, but why? What is so bad about MAH that deserves 1/2 the value of GON? Is the management at either company that competent? That is what I'll try to find out this week.
And finally, I wouldn't trust McDonald Investments to walk my dog, let alone represent my interest in a merger. They'd sell their own mother to make a buck. |
