Last Monday I came across the news article of Abbott Laboratories globally taking over the Pharma division of Solvay. Solvay in India has a listed pharma subsidiary called Solvay Pharma.
Since Monday was a holiday on account of Dussera, I expected the market to not react to the news very fast and digest it completely. The stock had closed the previous trading day at Rs 818. The stock open at 860 and gradually made its way up till and by afternoon I think CNBC had picked up the news and the stock finally closed at 949. I managed to pick stock from 861 to 940 with a average price of Rs 920. Couldn’t move fast in the morning as I got stuck in a meeting but there was clearly a window of opportunity in the morning.
From the way the deal is structured globally there is a open offer that needs to happen according to me from Abbott.
Solvay India released their press release the next day on the deal
Quoting a line from the press release
“ This transaction is expected to closed in the first quarter of 2010, pending the approval by the relevant competition authorities”.
First quarter 2010 sounds so far away that the market lost interest promptly pushed the stock price down and it closed at 909. On Thursday the stock closed at 919 after trading as low as 863 thru the day. Lets see how this plays out.
Now let me come to the more important reason for this post. The law of unintended consequence came into play.
I had earlier in my post in May 2008 recommended Abbott at a price of Rs 540 and the Sensex was at 16525. The link is enclosed here. The rationale was a impending buyback at that point at Rs 630. More importantly the parent and the Indian subsidiary had a track record of buybacks and the business throws out steady cash.
The company did a 5% buyback at Rs 630 and announced a Rs 14 per share dividend along the way.
So how did Abbott India react to the news
25/09 – 577 ( Before the news)
29/09 – 679 ( On Tuesday – up 17.5 %)
30/09 – 731
01/10 - 692
The stock is up 20% since the day of announcement. Frankly I don’t see what role Abbott India will have in this acquisition expect for a possible merger at a later date. I am not complaining :-).
Like the title of this post Kahi pe Nighaein kahi pe Nishaana ( Aim somewhere and hit something else)
kahee pe nigaahe, kahee pe nishaanaa
jeene do jaalim banaao naa deewaanaa
Movie - CID ( 1956 )
Singer - Shamshad begum
Music - Op Nayyar
Here’s the Youtube link to it.