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Two Companies With Big Possible Gain

|Includes:PAR, Potash Corporation of Saskatchewan Inc. (POT)

As the bidding war continues for Potash (NYSE:POT) and 3Par (Par), each company is posed to jump if a new bid is made. 

 

Dell is battling Hewitt Packard for 3Par, a database storage company.  Last week, Dell offered to buy 3Par for $1.3 billion.  A few days later, HPQ outbid Dell with a $1.6 billion offer.  Now, it is rumored that Dell is preparing a counterbid.  On each bid, 3Par’s stock rose about 40%.  Based of that, I predict 3Par will rise some 30-40% on a new bid.  Further, HPQ may not back down and propose a new bid.  However, with 3Pars market value of $1.59 billion and enterprise value of $1.53 billion, it is unlikely that they will bid more than $2 billion.

 

BHP continues to try to buy Potash.  It is rumored that BHP could bid as high as $200.  At Potash’s current price of $150, that would be a 33% gain.  Plus, other bidders had entered the bidding war.  Brazil’s VALE has been suspected to place a counterbid for Potash.  With a market cap of $44 billion and an enterprise value of $47 billion, Potash can expect as high a bid as $60 billion, which would be about $200.  Potash may even ask for it’s all-time high of $250.



Both companies poses big potential profits if one is able to get in on time.  However, there is always the risk that the bidders could back down.  But based on the similarities in the two companies market value and enterprise value, they seem fairly priced.


All news, market values, and enterprise values are from Yahoo Finance.


Disclosure: POT, PAR
Stocks: POT, PAR