- Nestle is receiving $25 billion in cash from its sale of Alcon to Novartis. They have already stated that they are looking to do a large acquisition. A blockbuster acquisition of a US company would give a much needed cash injection to the stock market.
- Google has $90 a share in cash or $28 billion. Ex-cash their stock trades at about 12 times. A share buyback makes sense, following their search brethren Yahoo who announced a $3 billion share repurchase yesterday.
- Steve Jobs has made fun of companies that repurchase stock so a share repurchase is unlikely. However, it does not make sense to hold over $25 billion in cash. A one time dividend or large acquisition might be more likely.
- A lot of the large European health care companies have huge piles of cash. They have been very slow in spending it but some US biotech companies are trading at very reasonable levels. An acquisition of a company like Gilead is a possibility now that the stock has fallen so far. More likely someone will take over Biogen or Genzyme which are already dressed up for the dance.
Bull Case Possibilities
I mentioned in my previous article, The Bull Case that many companies had strong free cash flow and were trading at reasonable prices. The question is how does that translate into actual gains for the market. Obviously a lot of buybacks and takeovers would help but some nice blockbuster deals would speed things up. The following blockbuster deals could help stabilize markets beyond just a relief rally. These are not predictions, just possibilities: