3 mergers Cramer says investors shouldn't miss
It's been a while since a number of important deals all went down at the same time. But it's happening now and Cramer doesn't want you to miss the message.
"M&A is a vital part of the market," Cramer explained. Not only does it highlight changing dynamics within a sector but it also helps investors gauge whether stocks are fairly valued, broadly.
That is, if a takeover target is too expensive, the deal just won't happen. "And the lack of M&A this year has led many to believe that stocks are too high," Cramer said.
Therefore, the Mad Money host thinks the following mergers are of the utmost importance; due to what they say about the sector and the market as a whole.
Perrigo & Elan
"We've long championed Perrigo as a maker of knock-off store brand over-the-counter drugs as well as generic medicines. Perrigo can manufacture these products cheaply and charge less than the nationally branded competition, allowing stores like Walgreen's and CVS to make much more money than they do with the big name Johnson & Johnson or Procter & Gamble offerings."
However, Cramer thinks there's something else about this deal that warrants attention.
"This deal allows the company to shift its geographic status to Ireland, changing the tax burden to a much lower rate. I believe that's a big driver. And while I wish there were more to it than that, the combined company will have higher after tax earnings and that's what matters," he said.
Hudson Bay & Saks
The retail sector also came into focus with Hudson Bay saying it planned to acquire Saks for $2.4 billion or $16 a share, that's a 5 percent premium to the company's Friday closing price of $15.31. As an upscale department store, Saks had been struggling in recent years with economic challenges whittling down the store's customer base.
Cramer thinks the deal makes all the sense in the world.
Hudson Bay also owns Lord & Taylor and Cramer said the merger will allow the company to slot Lord & Taylor stores into the real estate vacated by Saks.
In this case, the merger suggests synergies are critical to success in retail.
Publicis & Omnicom
Publicis and Omnicom shareholders will each hold approximately 50 percent of the new company's equity in the deal, which the companies presented as a "merger of equals".
Rather than examine the premium, in this case, Cramer says consider why the companies combined forces.
"Although television advertising dollars still dwarf online dollars, younger people are increasingly turning to their mobile devices for all sorts of news, sports and entertainment," Cramer explained, and this deal may signal the way in which audience consumes programming has reached a critical turning point.
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The Big Takeaway
Although each of these deals has individual merit within their respective industries looking at the mergers broadly, they also suggest to Cramer that stocks are not too expensive to prevent the deal from going down.
"That outlook was just validated in three sectors, advertising, drugs and retail," Cramer said. "I expect that by proxy, they will give bulls momentum. Therefore, I suspect the run's not over and another leg up could be ahead."
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