As Hostile Takeover Bids Recede, Investors Bet on Earnings
NEW YORK (TheStreet) -- Just a few months ago, hostile bids for Georgia Gulf (GGC) , Vulcan Materials (VMC) and Illumina(ILMN) seemed to be a savior for faltering shares. Takeovers now seem less likely to work, but investor reaction to stalled premium share bids has been muted.
For many C-suites looking at the prospect of a European meltdown, the U.S. "fiscal cliff" caused by a divided Congress, and a still lukewarm economic recovery, it's been a difficult nine months, but few companies had it harder than those that became the target of activist funds and hostile corporate bidders as their shares tumbled.
Now analyst forecasts and the investor reaction signal that as those bids recede, the prospect of earnings recoveries in coming years may outweigh the share jolt of an immediate deal.
Amid generally weak M&A markets and overall economic uncertainty, a string of unsolicited takeover offers such as Westlake Chemicals(WLK) $1.1 billion bid for Georgia Gulf, Martin Marietta's(MLM) near-$5 billion bid for Vulcan Materials and Roche's $6.8 billion offer for Illumina -- in addition to a flurry of activist campaigns waged by Carl Icahn on Commercial Metals(CMC) , Oshkosh(OSK) and CVR Energy(CVI) -- have given many investors and corporate executives a tough choice: Sell now at a premium to battered share prices or draw up plans to capture an economic or business cycle recovery?
In the case of most of those bids, and recent unsolicited offers by for Avon Products(AVP) and Human Genome Sciences(HGSI) , management seems to favor gutting it out independently. While the verdicts still loom for Avon Products and Human Genome Sciences, among others, recent shareholder votes and analyst forecasts indicate more excitement about the long-term stock earnings of some companies in hostile crosshairs than the immediate gain of a sale.