seekingalpha.com,Should you be getting ready for merger mania? Judging by the massive number of call options that were purchased in the days after the Intel-McAfee announcement, options traders seem to think so.
A Reuters article named Symantec (SYMC), Akamai Technologies (AKAM) and U.S. Steel (X) as possible targets, citing unusual volumes of call options being bought.
We decided to do our own screen on the options market, based on the following criteria:
- Companies with large amounts of cash: When one company buys another, it can use the cash held by the acquired company to help offset the cost of buying that same company. Companies with significant cash positions are therefore far more attractive to the potential acquirer. In our screen, we only focus on companies with Price / Cash ratios below 4, and Price / Free Cash Flow ratios below 10.
- Low Insider Ownership: Because it's common for the target company's management to lose their jobs during a takeover, management will often put up a fight. Companies with low insider ownership are therefore far less likely to resist a takeover. We've only selected companies with inside ownership below 5%. (more)
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