The merger & acquisition activity is back in full swing in 2010. A number of notable M&A deals have been announced so far this year, and takeover rumors surrounding some companies, continue to make headlines.
Let's take a look at some of the firms that are now in the takeover rumor mill.
Vanda Pharmaceutical Inc. (VNDA) , which won FDA approval for its antipsychotic drug Fanapt last May, has been a long-standing potential takeover target.
Fanapt is Vanda's first-ever product to be approved. The FDA approval of Fanapt on May 7, 2009, sent the stock soaring to $7.84, an increase of 625% from the previous day's close. With Vanda having no financial wherewithal to launch the drug, industry observers were expecting Vanda to enter into a takeover deal with a large pharma company. Analysts were then expecting GlaxoSmithKline plc (GSK) and Forest Laboratories Inc. (FRX) to be the possible bidders for Vanda.
Following the FDA approval and on the possibility of an outright acquisition, the stock continued its upward run and touched a two-year high of $16.65 in the first week of August last year. However, with no takeover news being announced, the stock run-up lost steam after the first week of August and has since been trading in the range of $10-$11.
Last October, the company signed an agreement with Novartis AG (NVS) to develop and commercialize Fanapt in the U.S. and Canada. Novartis launched Fanapt in the U.S. early this year.
Vanda's buyout rumors are back again and this time, Novartis is reportedly speculated as a possible bidder. Shares of Vanda, which have gained nearly 14% in the past two trading days, closed Thursday's trade at $12.19.
Since its inception in March 2003, Vanda has incurred significant losses and as of the end of 2009, had a deficit accumulated during the development stage of about $260 million. The company had a total cash of $205 million and zero debt on its balance sheet as of the end of 2009.
Psychiatric Solutions Inc. (PSYS), an operator of mental psychiatric facilities, which has been rumored to be in takeover talks with private equity firms since last fall, saw its shares rise as much as 25% to $30 on Wednesday afternoon after the company confirmed that it had been "approached by third parties in connection with a potential acquisition."
The company could agree to a takeover deal if the offer price represents a 25% premium to its current market price, the Wall Street Journal said, citing people familiar with the matter. The deal would also have to include the assumption of Psychiatric Solutions' outstanding $1.2 billion of debt, the journal added.
Psychiatric Solutions, which has not revealed the names of companies that have shown interest , said it has retained Goldman Sachs & Co. and Shearman & Sterling LLP as its financial and legal advisors, respectively. Private-equity firm Bain Capital is reportedly among the possible bidders for Psychiatric Solutions.
Shipping and rig contractor DryShips Inc. (DRYS) is yet another company that is rumored to be a potential takeover target, possibly by Danish shipping and oil group Maersk.
However analysts doubt the veracity of the rumors because DryShips, like many publicly traded companies in the dry bulk shipping sector, has anti-takeover provisions to ward off a takeover attempt. Moreover, Maersk is reportedly conservative in its long-term approach and the possibility of it attempting a takeover of DryShips is remote, according to analysts.
DryShips had $693.17 million in total cash and $2.68 billion in total debt as of the end of 2009.
DryShips stock, which was trading as high as $131 in November of 2007 amidst the rally in the Baltic Dry Index, now trades around $6.
Citrix Systems Inc. (CTXS) is not new to takeover rumors. The provider of server virtualization technologies has been in acquisition cross hairs since 2007. IBM, Hewlett-Packard Co. (HPQ), Cisco Systems Inc. (CSCO) and Microsoft Corp.(MSFT), which have been eyeing for a real stake in the virtualization space, had been mentioned as potential buyers.
In January of this year, rumors of Oracle Corp. (ORCL) acquiring Citrix made headlines and the takeover chatter resurfaced again last month. Citrix' share price has gained over 13% for the year-to-date period and currently trades around $47.
Dairy company Dean Foods Co. (DF) was last week's topic of takeover speculation. Rumors were rife that Dean Foods could be acquired by French company Groupe Danone SA. However, Dean has refused to comment on the rumors.
Dean fared poorly in the just concluded fourth quarter, hurt by increased competition and rising commodity costs. The company has also given a weak forecast for this year - with earnings for the first-quarter and full year 2010 projected well below Wall Street analysts' estimates.
Dean also faces antitrust lawsuit related to its April 2009 acquisition of Foremost Farms USA's Consumer Products Division.
As of December 31, 2009, Dean had about $47.63 million in total cash and $4.36 billion in total debt.
Shares of video game retailer GameStop Corp. (GME) rose 5% Thursday to over $19 on speculation of takeover by a private equity group. Last year, rumors that electronics retailer Best Buy Co. Inc. (BBY) was eyeing GameStop for a possible acquisition were doing the rounds.
In January, the company reported holiday same-store sales that were down 8.6% and total sales that were flat compared to the same period a year before, hurt by economic weakness and unexpected shortages of key products such as New Super Mario Bros. Wii, Nintendo Wii and Sony's PlayStation 3 consoles.
The company had also lowered its earnings forecast for the fourth quarter and full year of 2009. GameStop is scheduled to report its fourth-quarter and full year 2009 results on March 18.
GameStop has lost more than 20% of its stock price in the past one year.
According to market research firm NPD Group, the U.S. retail sales of video games dropped 15% in February and 13% in January.
Bottom line: None of the companies in the rumor mill , except Psychiatric Solutions, has confirmed the takeover talks. So for now, the rumors will continue to remain just rumors.
For comments and feedback: editorial@rttnews.com