"The safety industry is consolidating," he said. "Just last month, 3M closed on its acquisition of Ceradyne, a maker of ceramic body armor and vehicle armor, for a 46% premium to where the stock was trading before the deal was announced at the beginning of October. 3M paid $860 million for Ceradyne, which means they valued the stock at 30 times next year's earnings."
Although Mine Safety sold their body business, Cramer said they're still part of the same safety industry as Ceradyne.
"Meanwhile, the stock is relatively unknown and under-covered by the analyst community, which means it's much cheaper than a more well-known more exploited play would be. That's why I could easily see another big conglomerate with a focus on safety making a bid for this one."
According to Cramer two possible acquirers are Honeywell and DuPont.
"Both Honeywell and DuPont want to add to their safety offerings, and they can both afford to pay up, although I see Honeywell as the more likely suitor. Plus, with a market cap of just $1.5 billion, Mine Safety is small enough to be easily digested by either of these giants."
And Cramer added there's a lot for either suitor to like.
"The company's North American fire business was up 22% year over year, and their overall gross margin increased by 220 basis points."
"Also, Mine Safety has been moving away from its dependence on the military budget, something that's important as defense spending could get slashed if we go over the fiscal cliff."
"And Mine Safety's non-fire non-military business, what they call their core products, made up 64% of the company's revenues in the latest quarter—that's up from 55% in 2009, so they're definitely moving in the right direction."
Because fundamentals are strong – Cramer sees Mine Safety commanding a respectable premium.
"We know Ceradyne got taken out at 30 times earnings, if Honeywell were to pay just 20 times earnings for Mine Safety, then you would get $53 a share, or a nearly 30% premium to where the stock's trading right now," he said.
If Cramer's argument has you on the fence – this may put you over.
"If you want to buy this stock for takeover speculation, Mine Safety will pay you to wait for a deal with its respectable 2.7% yield," Cramer said.
What's the bottom line?
When playing a stock for a takeover, look for an industry that's consolidating, and a takeover target that's cheap and has both strong fundamentals and obvious suitors.
According to Cramer, Mine Safety Appliances gives you all of that.
"I think either Honeywell or DuPont could snap this one up to increase their safety exposure, and it pays you a decent yield if you play it for a flier," he said.