Semantics Suggest Higher Bid Ahead for Illumina: Finerman
On Wednesday pharma investors were trying to figure out if a nearly $6 billion dollar deal was about to go down in flames.
That was the chatter after Illumina rejected a takeover offer from Roche saying the bid was inadequate and that it would be more successful on its own.
Illumina - which has already adopted a "poison pill" defense strategy - told shareholders not to tender any of their shares to Roche, saying the offer was grossly inadequate; that it failed to properly value its unique leadership position and future growth prospects. Also Illumina said the timing was unfair to shareholders.
Roche, which offered to pay $44.50 per share when it launched the bid for Illumina last month, reiterated on Wednesday that it believed its offer was "full and fair" and that it was ready to start discussions with Illumina.
Is the deal dead on arrival?
Although it may sound that way on the surface, trader Karen Finerman says in these situations it’s important to parse through the language used in their response.
And she thinks the semantics used were selected intentionally. Here’s her breakdown:
Illumina: ‘offer grossly inadequate’ ‘just say no’ defense
Illumina: ‘inopportune time’ not for sale right now
Illumina: ‘we’re unique’ pay up!
Roche: offer is ‘full and fair’ not ‘best or final’ offer
Roche: ready to commence discussions we’ll pay more
If you’re an investor, the most important part of the chart is that last line.
“Ultimately, I think we see a higher bid,” she says “I suspect Roche threw out the bid knowing they’d have to bid higher.”
She adds “I’m long the stock. I agree that it's a unique asset and warrants more.”
Pete Najarian agrees. “I also think we see the bid increase.”
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Trader disclosure: On Feb. 8, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Seymour is long AAPL; Seymour is long BAC; Seymour is long CSCO; Finerman is long AAPL; Finerman is long BAC; Finerman is long JPM; Finerman is long IBM; Finerman is long HPQ; Finerman is long NTAP; Finerman is long CMI and short calls; Najarian is long AAPL; Najarian is long BAC calls; Najarian is long C; Najarian is long JPM calls; Najarian is long MS; Najarian is long CSCO and long calls; Najarian is long YHOO; Najarian is long HPQ; Najarian is long WFM calls; Najarian is long V calls; Murphy is short WHR;
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