Could CSL Still Win Talecris?

This story features CSL LIMITED. For more info SHARE ANALYSIS: CSL

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Shaw

The immediate reaction to the news the FTC in the US had decided to oppose CSL’s ((CSL)) proposed takoever of Talecris was for price targets on the stock to be cut given anticipated earnings gains from the deal were being removed from broker models. However, according to Southern Cross Equities healthcare analyst Stuart Roberts there is still a chance the company will win out in court.

Roberts reports there is a precedent to the CSL matter in the Arch Coal anti-trust case as that case was centred on the issue of coordinated effects, which is believed the be the FTC’s issue with the Talecris proposal. Coordinated effect is the ability of players in a concentrated market to essentially read each other’s minds in the sense they tacitly coordinate efforts to engage in anti-competitive actions even without any specific plans to act in such a manner.

In the Arch Coal case Roberts notes the FTC argued price spikes in coal were coordinated but they failed to prove this, which is important as if the FTC similarly cannot prove CSL and others in the plasma industry will act in a coordinated manner, then the FTC is unlikely to win the court case.

As Roberts points out, the Arch Coal case shows proving coordinated behaviour is difficult to do even if it exists, meaning CSL has a reasonable chance of winning the court challenge. While any decision is likely several months down the track, Roberts emphasises this delay doesn’t automatically mean CSL has lost and the merger won’t go ahead, which is what is implied by the market’s reaction to the news last week.

As an update, the FNArena database shows CSL is rated as Buy eight times and Hold twice with an average price target of $37.88, down from more than $39.00 prior to the FTC ruling. Shares in CSL today are slightly higher and as at 12.20pm the stock was up 22c at $30.18.

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