SyStemix Inc. shares are probably nearing the top of the rangeat which it pays to buy the stock, according to estimates by twoanalysts.
The stock (NASDAQ:STMX) closed at $55 on Tuesday, up $2. Thestock rose $19.75 on Monday after the announcement thatSandoz Ltd. would acquire 60 percent of the Palo Alto, Calif.,company for $392 million.
Sandoz will acquire slightly more than 4 million sharesoutstanding for $70 per share and purchase for $111 millionabout 2 million newly issued shares at $56 per share.
With 10 million shares outstanding after the deal, the $392million stake implies a per-share value of about $65.
But Merrill Lynch analyst Stuart Weisbrod told BioWorld onTuesday that the transaction is worth $60 to shareholders. "So Istill have a "buy" on the stock, but a weaker one," he said.
Weisbrod based his calculation on the 49 percent of shares forwhich Sandoz will pay $70 per share, plus a $50-per-sharevalue for the remaining stock.
"I had a price target of $50 per share before the deal, derivedfrom my 1995 estimate of $4.60-per-share earnings," Weisbrodsaid. Merrill Lynch was one of the underwriters for SyStemix'sAugust initial public offering of 2 million shares at $18.
Analyst Sam Isaly of Mehta & Isaly in New York, took a longerroute to come to a $57 valuation.
According to Isaly, Sandoz ultimately will pay about $45 pershare. Sandoz is investing $111 million in SyStemix, but willown 60 percent of that, or $67 million. Subtracting that fromthe $392 purchase price gives an actual purchase price of $325million for 6 million shares, or $54 per share.
Isaly then subtracts Sandoz's 60 percent share of SyStemix's$37 million in cash and deductions Sandoz can take underSwiss tax laws and comes up with a number in the mid-$40s asthe actual price paid per share by Sandoz.
From an investor's point of view, the $70 price for the 49percent of shares tendered under the offer, adjusted for theimplied $45 value for the remaining 51 percent, comes to $57per share.
Regarding initial reactions that Sandoz had paid a steep pricefor SyStemix, Isaly told BioWorld, "It wouldn't be wise for meas an investor to contradict such a well-informed buyer."
-- Karen Bernstein BioWorld Staff
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