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First let me state clearly that I’m not recommending this as a fixed-income investment, but let’s consider what the market is saying about Biomet (BMET).

Assuming all goes smoothly, the company is to be bought by a private equity consortium in nine months at $44 a share. Yesterday’s close was $41.90 a share. That translates to a gain of 5.01% over the next nine months. That’s not a bad return. Think of it in Dow terms—it would be like bringing the index to over 13100.

On an annualized basis, the Biomet investment is about 6.7% which beats almost any CD you can find. On top of that, the stock could pay another annual dividend this summer. Last year’s was for 30 cents a share, which is another 0.7% return. I don’t see why they’ll cut out the dividend this year.

Of course, the stock isn’t exactly like a bond. The deal still needs to be approved by shareholders and regulators (incidentally, I oppose the deal). But the stock is starting to behave like a fixed-income investment.

If I were a CFO and I needed to park some cash for the next nine months, picking up shares of Biomet could be a shrewd low-risk investment.

Posted by edelfenbein at January 30, 2007 11:18 AM