Broadpoint is out with a very interesting call on Matria Health (NASDAQ:MATR), raising their target to $39 from $30, following the announcement that Inverness Medical Innovations has agreed to acquire Matria.
Inefficiencies exist; even with IMA common down ~8% Monday, they value IMA's bid at $36-$37 per MATR share. Firm expects a correction, an increase in the cash component, or the reemergence of other bidders. Either way, MATR shares are worth more.
All things being equal, the firm would expect an 8% decline in the value of IMA common to reflect, at most, a like decline in the Series B convertible preferred - from $400 (par) to ~$368. Keeping the number of units (0.08125) per MATR share equal yields a ~$30 value for the stock portion of the deal. Adding the $6.50 cash component results in a total bid value in the area of $36.00-$37.00, well above yesterday's close.
They doubt MATR holders will approve a deal at $31. IMA may have to substitute cash for the preferred (no easy task given current B/S), or other bidders may reemerge. Either way, MATR shares are likely to trade higher.
Notablecalls: Glenn Garmont from Broadpoint is making a name for himself with this call. No doubt about that. Word on the Street is that there were several bidders for MATR, so they can safely walk away from the deal and have for example Walgreens buy them.
MATR will trade higher following this call. Actionable call alert!