Monday, December 13, 2004

A one-time shot in the arm for M&A ?

A recent proposal that allows US companies to bring back profits made outside the country, at a one-time low tax rate of ~5% (instead of the usual 35%) should add to the existing environment that is predicting a big M&A binge over the next couple of years.

Atleast 4 companies can potentially bring in $10 billion each! Among them, Johnson & Johnson is a likely buyer of more companies ( in addition to Guidant, which is rumored to be announced this week ).

2 of the 4 become even more attractive takeover targets just because of this new cash pile - Schering Plough (SGP) and Bristol Myers Squibb (BMY). These are already juicy baits given their low valuation right now. And, to top it, both pay handsome dividends! I own a few of both and will be adding at current prices.

A detailed analysis of all the companies that can potentially bring back cash under this new legislation, could award a careful investor handsomely.


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