There's a flurry of mergers. What do we make of it?
First, the Publicis-Omnicom merger is meant to be defensive in nature against the encroachment of Google (GOOG) and others that deal directly with the powers that be. When PepsiCo (PEP), for example, wants to do a Twitter buy, it sits down with Twitter, not its ad agency.
To me, this is a good deal for Omnicom (OMC) shareholders, but as far as long range implications it would be better if either or both went out and bought Twitter. To me, all this deal does is verify what we know: the world has changed and the old-line firms seemed to be eclipsed by Google, Facebook (FB) and Twitter. The conventional press is saying Google and Facebook should be worried. The buyers today are scooping up Google and Facebook because this merger is a verification of what some knew, but now everyone knows: the upper hand for Internet ads belongs to Internet companies, not Madison Avenue.
But this deal makes a ton of sense from a non-Web perspective as costs get taken out a lot faster than clients get lost because of conflicts. Nice.
Elan (ELN) is a special situation because Perrigo (PRGO) moves more heavily into proprietary drugs, something that has been the focus of late for this fantastic consumer products knock-off company. It follows the move Actavis (ACT) made acquiring Warner Chilcott, picking up drugs, but in some ways, more importantly, picking up Irish tax status. Of course, you don't need to buy an Irish company to locate in Ireland, as we know from Alkermes (ALKS). But it sure can help. Got me wondering if Shire could be in play, although be careful as it has its own steep patent cliff.
Then there's Saks (SKS). Talk about a great opportunity. Now this one may verge on looking like a take-under, not a takeover, but remember this stock started percolating at $11-12, so you've gotten a terrific return. CEO Steve Sadove did quite well for shareholders, even as he could never get the growth they wanted because of the need to endlessly shut down legacy stores. Now Lord & Taylor can grow by taking over leases and Saks can grow by no longer being distracted by the need to deal with the shutdowns. My hope is that Off-Fifth, the outlet strategy, can really take off. But what a blessing for this company, which has had to rely so heavily its one Fifth Avenue store. Now the risk is spread.
All three deals can only be described as wins for all. But as for the stocks, I think the good news is pretty much baked in for Ominicom, I do not know Hudson's Bay well enough to say what to do with it, owing to its Toronto status, and I would be a buyer of Perrigo knowing that this deal seems very additive to 2014's numbers.