Aug

20

 I was just doing some work on Intel. (I have a small position and added to it this morning.)

Before the open, Intel announced the cash purchase of McAfee at a substantial premium to its closing price. They paid a 2.7B$ premium to MFE's close, and the market immediately took $3.7B off the market cap of Intel. (This was before the market went down a lot.) So this means that the value of MFE inside of Intel is worth less than the value of MFE outside of Intel. This is not entirely crazy, but it doesn't smell right to me.

It means that the market place:

1) Puts more value on the cash that was sitting inside of Intel than on yesterday's market cap of MFE … or

20 it believes that Intel will harm MFE's business.

Vincent Andres comments:

Maybe the "substantial premium" (60% !) has been considered as shocking in today's mood. (Not considering if the deal is good or not) was such a premium really necessary to make the deal? Kind of bad execution? 


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2 Comments so far

  1. Not the secretary on August 20, 2010 12:28 pm

    Seems as if you presuppose the market correctly valued McAfee before Intel’s offer- a fair assumption, were it not for the following remark about the market’s reaction to the news: “This is not entirely crazy, but it doesn’t smell right to me.” Can’t have it both ways; can’t say the market had McAfee right and Intel wrong without adding more to the disucssion. Then again, the problem disappears simply by rejecting the initial assumption that the market correctly valued McAfee.

  2. ld on August 21, 2010 6:04 am

    I cannot figure out what Intel and McAfee have in common or how their joint efforts will result in growth for Intel. This one makes little sense so far.

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