Investopedia: Colfax Makes A Bold Bid

For some companies, M&A is in their DNA. Although most investors have likely never heard of fluid-handling specialist Colfax (NYSE:CFX), the company's major shareholders are the founders of Danaher (NYSE:DHR) and investors familiar with that conglomerate's long acquisitive history will see a similar story here. What is most remarkable about this most recent proposal, though, is its sheer audacity - if Colfax succeeds in acquiring Charter International (Nasdaq:CHITY), it will dramatically increase the company's debt load, revenue base and market exposure.


The Deal That May Be
It should be noted immediately that while Charter's board supports Colfax's bid, it is not a sure thing yet by any means. Nevertheless, Colfax has offered $2.4 billion in cash and stock for Charter International - a remarkably large bid given Colfax's present market capitalization of about $900 million.

Colfax is proposing to acquire Charter for 910 pence (about $14.45) per share, a 7% premium to the standing offer from Melrose to acquire Charter. That 7% premium may not sound remarkable, but Colfax is offering a package that includes about 80% cash, while Melrose's bid was only 35% cash. Based on current expectations, Colfax is offering about 0.75 times estimated 2011 sales, 8 times estimated 2011 EBITDA, and a little less than 14 times estimated 2011 earnings per share. (For related reading, see A Clear Look At EBITDA.)



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