Yesterday, I posted my thoughts below, but one more idea. As I'm not a lawyer, and don't have warm feelings towards them to boot, if RVP were to agree to a buyout by BDX as opposed to a settlement, it may be able to bypass paying the lawyers their contingency fee, or at least a portion of it.
In addition to clarify one of my points below, if BDX settles for $250M, it would take a $90M profit from the transaction in this quarter as it already wrote off $340M. If BDX buys the company, then it would take the entire $340M back as profit, if my accounting is right. Food for thought...
I have never seen a clearer case to settle, or to agree to an acquisition by BDX. In either event, the number should be about $250-300M. Here are some considerations:
1. BDX is looking at a downside risk of $400 million, in addition to a reputational problem and a potential injunction against such competitive behavior in the future. In addition, to its own legal fees as well as the opportunity cost of time and energy.
2. In the hands of BDX and its distribution prowess, RVP's product would offer great synergy.
3. In the event of a buy out, the amount that Shaw is getting for the patent would be passed along to BDX, and this would bolster the bottom line. I calculate this to be approximately $30-40 million in enterprise value for BDX.
4. BDX has already taken a $340 million write down, and as a result, this acquisition/settlement would bolster the bottom line for this quarter.
5. If no settlement is reached, RVP's competitive position will deteriorate with the advent of time.
6. Although unlikely, the potential of a worst case scenario for RVP in the appeal court, should encourage Shaw to take as much as possible now. Even if it's a 10% chance, Shaw stands to lose everything, as opposed to potentially walking away with $50-100M now.
As such, if I were RVP's and/or BDX's lawyer, I would be pounding on the table that this deal needs to happen right now for $250-300M.