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Should you tender Matrix shares?
The open offer for Matrix from Mylan opens today. Deepak Jasani of HDFC Securities and Shahina Mukadam of IDBI discuss the fundamentals of the business and give their suggestions on what to do if one holds the stock.
At the same time, this is a win-win deal for just about everybody. If you look at it from Mylan's point of view, while they are not paying something, I would call it neither cheap nor expensive, it is in line with acquisitions that we have seen in the past.
We have seen TEVA and IVAX which was on similar lines. This acquisition is giving Mylan a much stronger position in Europe and also cheaper manufacturing facilities - India being a cheaper manufacturing facility - for its future requirement of bulk drugs.
So I think on a longer term basis, it is good. But if you start valuing Matrix by its standalone numbers like India valuations, I don't think this year they will do more than Rs 6-7 of earnings. So at the current price, it looks exceedingly expensive - in fact more expensive than what Mylan is. So in the shorter term one can see a huge dip in prices from here on. I wouldn't be surprised if the price falls by 30-50% post closure of this offer.
Q: Is that something that the investor should keep in mind that the stock probably held out because of the offer and standalone, looking at the recent quarterly numbers, probably it deserves to be at a slightly lower price point?
Jasani: Certainly, based on the recent quarterly results. Another thing, after Mylan has came into picture, Matrix's results have suddenly not started to perform or have dipped. So that puts questions in mind of the investor.
The other point that one will have to keep in mind is whether Mylan would like to increase its shareholding beyond 71.5% stake, which it will have, post this offer.
Jasani: Certainly, based on the recent quarterly results. Another thing, after Mylan has came into picture, Matrix's results have suddenly not started to perform or have dipped. So that puts questions in mind of the investor. 
