Megamergers are back. But don't think just the giants are buyout bait. "In health care, hotels--or media and entertainment--alluring takeover bets can be found among small-cap companies," argues investment adviser Charles LaLoggia. Since few analysts pay attention to them, small companies sell far below their true values, he notes. And they're low in price, so the pool of potential buyers is large, he says.
The publisher of Special Situation Report, LaLoggia has caught some big winners among his small-cap picks. They include ReLife, which got a $180 million offer from HealthSouth Rehabilitation on Sept. 19., and Optical Radiation, which agreed in July to be acquired by Benson Eyecare.
Two current LaLoggia takeover bets--RoTech Medical and Salick Health Care--are in outpatient health care, and a third, Microtel Franchise & Development, owns and operates low-cost lodging. All three of them are trading close to their all-time highs, but LaLoggia is convinced they're still way undervalued.
RoTech, now at 9, has a takeover value of $32 to $35 a share, figures LaLoggia, who notes that this provider of home health-care services and products is growing at 30% a year. Among other things, RoTech furnishes respiratory care, chemotherapy, and intravenous feeding for cancer and AIDS patients. LaLoggia expects a major hospital company to make a pass at RoTech, although he has no knowledge of any approach so far.
1 MILLION PATIENTS. Salick Health, operator of 10 cancer-surgery centers and 9 kidney-dialysis clinics, is also trading on the NASDAQ at about 9. LaLoggia puts its buyout value at $35 to $40, mainly because he thinks that Salick will treat 1 million patients over the next 12 months and perhaps double its sales, to $200 million. The leap, he says, is partly due to a pact signed in July with Physician Corp. of America, a Miami health-maintenance organization, to provide cancer-treatment services to 100,000 of its members. Salick sees the deal adding $10 million in revenues.
Microtel, which operates 12 motels with small, no-frills rooms priced 10% to 30% below the cheapest national chain, has been growing rapidly. LaLoggia says the stock, now at 31/2, is worth $13 to $16 a share in a buyout. Microtel expects to expand to 30 or 35 motels by the end of 1995. It is negotiating for a site in Biloxi, Miss., near the dockside casinos. Richard Sands, president and CEO of Canandaigua Wine, has a 7% stake in Microtel.