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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (7146)	5/14/1999 11:08:00 AM
From: Michael Burry	Read Replies (1) \| Respond to of 78464

Still holding NH in all my accounts. I look at these as growth cyclicals, and in my original analysis of NH found it to be worth over $35/share, Case over $60. So to me you have a merger of two still-undervalued companies that will be a stronger competitor, with the added bonus of a consolidating market. Distribution synergies are expected to be large, in my understanding. Mike

To: Bob Rudd who wrote (7146)	5/14/1999 11:30:00 AM
From: jeffbas	Read Replies (2) \| Respond to of 78464

Re: Acquisition premium and "The Synergy Trap" (which I have not seen). I absolutely agree where you have a couple of large companies where both are fairly valued, and one goes and offers a premium for the other. Not only have you created a large financial hurdle to overcome with synergy benefits, but their might not even be such benefits when all is said and done. There are some exceptions, however, in my opinion. Acquisitions of any real business make sense when your stock is vastly overpriced relative to the target, as with the conglomerates 30 years ago and the Internet stocks today. AMZN should run not walk to buy Barnes and Noble. Second, there is the concept of critical mass to be an effective competitor in an industry or get recognition on Wall Street (which has implications relative to the cost of capital). Merger of smaller companies for these kinds of reasons can make sense; but these often are non-premium or small-premium mergers.