Mad Money

Mad Money's Monopolistic Merger Picks


By now the Sirius-XM Satellite Radio proposed merger is old news. In fact, we bet you’re absolutely sick of hearing about it by now. But you have to admit it’s a bold move. At least Cramer thinks so.

If Sirius and XM join forces, the lack of competition between the two would almost certainly raise prices for consumers. Not to mention, deals like Sirius’ courtship of Howard Stern -- $100 million over five years – would disappear, and that’s anti-competitive to talent. Even still, Cramer doubts the merger will have any problem making its way past the Justice Department because right now we’ve got a government of, by and for the corporation.

But what if the Democrats win the White House in 2008? The anti-trust department of the DOJ just might have to take its job a bit more seriously. And this is why Cramer senses desperation in the corner offices of Sirius and XM – they’re realizing that time is running out to get a deal of this size approved. 

Now the important thing to remember is that this sentiment – the fear of genuine anti-trust – is echoed in every other industry that could see some real upside from monopolistic practices. Cramer is expecting a wave of these mergers to take place over the next two years. So here’s your chance as Home Gamers to take advantage of a potential jump in stock prices. To aid you in this pursuit, Mr. Skeedaddy himself has put together a list of 10 potential anti-competitive mergers that you, as investors, could ride to big profits. Even if these specific deals don’t happen, many like them most likely will. Remember: Do your homework before you buy

10. Kroger and Safeway merge, spurred on by the "cover" of an aggressive Wal-Mart , something we know is untrue. If these two giant grocery chains came together in anti-competitive harmony, the gross margins at the supermarkets would probably balloon up from 1%-2% to an incredible 3%-4%.

9. Quest Diagnostics and Lab Corp.: These two diagnostic companies with so much in common are locked in a ferocious price war, a cycle of hatred, to win the HMO business. The competition has been keeping prices down for the whole healthcare system, but it's also kept profits down for both companies.

8. Carnival Cruise and Royal Caribbean should get together. They've been duking it out for so long it's scary. The cruise business can only work when the companies can extract exorbitant rates from vacationers, something you won't see without a nice, monopolistic merger.

7. Office Depot and OfficeMax. Justice actually had the guts to nix a merger in the really cut-throat office supply business when Staples tried to buy Office Depot. How dare they? Office Depot and Office Max need to merge soon, before 2008 rolls around and potentially delivers up a democratic white house and a disgustingly functional anti-trust division at the justice department.

6. Cardinal Health  and McKesson. This one's another example of everything that's wrong with competition. The drug distributors like Cardinal and McKesson have been at war for ages, and even though justice blocked a deal between McKesson and AmerisourceBergen , I think they'll give Cardinal a pass.

Bottom line: 2007 and 2008 will be great years for anti-competitive deal-making. Cramer wants you thinking about getting in on the action before it happens.

Questions?  Comments?