Wednesday, December 3, 2008
(Cont'd from above)...

Jim (cont'd):    The number one...

Premier breast implant maker, Mentor, had shrunk so much that JNJ could buy it for a just a little more than $1 billion... It paid $31 smackers. Hey, two years ago, the stock was at $50... Now JNJ can move in and take over the breast implant business on the cheap.

JNJ did the same thing with Omrix, which makes surgical sealants... that's another good business... buying it for $438 million, or $25 a share. Hey listen, that stock used to be at $40 bucks!...

JNJ was already a distributor of Omrix' products, and had helped it take share. Now it's bought control of the production at a vastly reduced price.

I want to praise JNJ for being so forward thinking but, at the same time, I want to curse... that's right, curse!... every other company that's just slouching on top of a huge pile of cash, doing nothing, when they could be making similar smart acquisitions.

Every company that's self-funding and has money... in other words, doesn't need to go hat in hand... should be buying other companies in their industry right now... that they think will make them money... like JNJ is doing with Mentor Corp. (MNT) and Omrix (OMRI)....

Hedge funds have gone so wild, okay... they have driven so many stocks down... to a point where the opportunities should be too great to risk!... Buy, buy, buy!...

You could make a few smart acquisitions right here, and be sitting pretty... for years!... Because these prices are so low. But, instead... companies are paralyzed. They should get moving before the Obama administration comes in, and the government opens up an anti-trust division... Yeah, I think, remember, they moved it to the Commerce Department?...

Since business can't use "J Dating," that means it's time for Cramer to put on his matchmaking hat...

I'm going to give five companies the best advice they ever got, so they can follow in JNJ's footsteps... beautiful marriages of their own... one wedding today, and then two tomorrow, and then two Friday... when we go into "Vegas" mode...

My first match is for Pfizer (PFE)... although any other big pharma company with loads of cash... pretty much all of them... could do the same thing.

It's time for Pfizer, or some other interested suitor, to buy Allergan Inc. (AGN)!...

This is a shotgun wedding situation for AGN... a company that's all about smooth, wrinkle-free skin. It makes botox and other durable fillers... Larger breasts with its implant business... skinnier bodies with its lapband product... and longer eyelashes... All the stuff that I think greases the wheels of capitalism!... And now, these days since we own all the banks... socialism too!...

AGN has a real eye medicine... yeah, it's got a real business... but it's problem is in... well, it's aesthetic...
What's the problem?...

JNJ's getting married to Mentor. AGN is a $10 billion company. So, until JNJ came into the picture, it was competing with puny little Mentor, less than one-tenth the size... Now, it's going to be competing with JNJ, a company 15 times its size...

AGN, which we love, love, love... AGN needs to find a rich suitor, to prevent JNJ from eating its lunch. And this is where Pfizer comes in...

AGN has fallen from its peak of $70.40 on January 14th of this year, and had a market cap then of $21 billion... enterprise value... what... the cost to acquire the company at the current price at $22 billion... Now it's at $36. It's been cut in half... a 49% discount. The market cap's just a little over $10 billion. Enterprise value of $11 billion.

You know what AGN's become? It's become a steal!... Buy, buy, buy!...

The company has a 14% growth rate... terrific! Aesthetic products, and it's trading at just 13x earnings? Meanwhile, we've got Pfizer with a $26 billion cash hoard... enough to buy two AGNs and a meager 1% long-term growth rate. What better way for Pfizer to reinvigorate itself, than to move into business by looking good... by being good... by marrying AGN, the leader in many of its markets... on the cheap.

Now, I will tell you that a less polished, more bawdy Cramer would have said, you're getting two breasts for the price of one, known as "buy one, get one" in the trade, but I'm too much of a statesman, in the tradition of Churchill, or maybe Richard Belzer, to make that Borse Belt (?) joke now...

If you want to speculate on AGN getting a big from someone... that makes sense to me... Mentor got taken out at 19.8x earnings... Hey, slap that one on AGN... A $54 stock...

And, if no takeover comes... if the rest of big pharma reigns paralyzed, AGN has a lot of flexibility to expand. That's right, they don't need a takeover. Remember, I don't speculate on takeovers... on substance just on takeovers... This one's got it. By the way, Cowan believes the company could cut $200-250 million in costs a year, to help offset any sales declines because of the recession.

Here's the bottom line...

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The Bottom Line!:     Wonder of wonders... miracle of miracles... We need to see more happier range legs, like Johnson & Johnson (JNJ*)'s marriage to Omrix (OMRI), and then its marriage to Mentor (MNT)... Pfizer (PFE), or anybody who's interested and has the dough... Now is the chance to marry Allergan Inc. (AGN) at bargain-basement prices. It works out for everybody. Now, I've got four more pairs of companies that I think should get hitched, but you're going to have to wait until tomorrow and Friday, so I can boost my numbers... to hear about them.

[verbatim recap]

Read Jim's next Segment here