Thursday, September 21, 2006

Mayne Pharma to be Acquired

Mayne Pharma is to be acquired by Hospira. It has been in a trading halt for a couple of days pending a transaction. Yesterday most commentators were still thinking that Mayne would announce an acquisition. But in the last day all the speculation has been about a takeover of Mayne. The takeover price is $A4.10 which results in a $A1972 capital gain for me from a roughly breakeven position at the time of the trading halt. I am still carrying a loss of $A1055 on Symbion the other half of the Mayne Nickless company that demerged last year. It's been a long story since I first invested in Mayne Nickless :) The only question now is whether I should sell or hang on for a possibly higher price. I tend to get impatient during these merger arbitrage situations. This is nice news as the news on the U.S. trading front was not good today for me. The model is still however short but the picture is now a bit unclear.

PS 9:19pm After reading all the info about the proposed takeover I decided that a higher bid was unlikely. The stock opened an hour late at $4.21. I sold at $4.25.

2 comments:

StealthBucks said...

Hi mOOm, I actually enjoy your gooblygook :-) The fact that you are attempting a strategy and developing a model is admirable and probably has helped with your excellent performance. It is interesting that you have indicated that going off your discipline has caused losses.

I kind of look at the phsychology of the trade. Question, is the model right or do you wish it to be so? I imagine that it is right based on your blogs so then, how do you go about focusing on the behavior not the model for success? I invest more on the phsychology and am a voracious reader of economic tactical economists. I let them do the research and spend my times deciphering who is right and who is wrong.

Thus, I ignored Ed Yardeni with Y2K, discount Gazzerelli because she's way too momentum and hype for my style and wrote Blodgett off as a young crackpot.

Finally, I am in sort of agreement with you on the markets short term; just not so drastic. I think we are going down only another 2 to 3% on the S & P, perhaps more in consumer durables, commodities, and the food and consumer goods world. I see rally time for the end of the year and will deploy cash as early as October.

Good luck. Don't let me yank your chain too much.... you are outgrowing me almost monthly on a percentage base. I also assume you'd probably back off a bit if the you had the same equity assets.

I concur on the networthiq analysis on all points. Your observation begs another question. With pension power decreasing in the markets and many boomers receiving reduced payouts. will we see a faltering market due to boomers pulling money from equities through 2030. I think not.... residential withdrawal may be a different story.

mOOm said...

You are correct IMO on the baby boomer effects. Shares should be valued according to the expected value of discounted future free cash flows. Demand for shares should only have short run effects. So the effect has to flow through one of the following:

1. Profit growth of companies

2. The risk free rate

3. The equity premium.

That is harder to work out.

Houses are a completely different issue. Their price depends on demand for housing services, supply and the discount rate (and taxation policy etc.). So a reduction in demand could have an effect.