Obagi Medical (OMPI) Bidding War Could Take Stock as High as $27/Share

Cantor Fitzgerald today maintained a Hold rating on Obagi Medical Products (NASDAQ: OMPI) and raised its price target of $22.00 (from $19.75). This morning Merz announces a competing $22/Share bid for Obagi, topping Valeant's (NYSE: VRX) offer of $19.75/share. Although he maintained a Hold rating, analyst Adeyemi Ogunkoya said he doesn't rule out a bidding war.

"Based on our read of the proxy statement filed by Obagi on March 26, we think that Merz was "Bidder C," the pharmaceutical company that submitted an initial bid of $16.50, which was raised to $18.50 before the company began due diligence," said Ogunkoya.

"The Merz offer only goes ~$40M above Valeant's original bid of $360M. Because of the strategic value of Obagi's physician network to both companies, we think that Valeant at a minimum, may consider matching the Merz offer, and Merz could certainly go higher. Historical valuations in the space have been as high as 5x sales (like the recent Sun Pharma acquisition of Dusa) which should therefore put an upper limit of $27 on the bidding range, in our view."

For an analyst ratings summary and ratings history on Obagi Medical Products (NASDAQ: OMPI) click here. For more ratings news on Obagi Medical Products click here.

Shares of Obagi Medical Products closed at $19.71 yesterday.

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