Davidson Kempner Capital Management LP doesn’t usually conduct activism in public by itself. Its attempt to kill the $12 billion takeover of Qiagen NV, a European company that makes instruments that detect Covid-19, was a high-profile place to start.

The hedge fund says a bid from U.S. diagnostics group Thermo Fisher Scientific Inc. is too low given the testing business will become stronger due to the pandemic. Its campaign has helped secure a justified 10% bump on the opening bid, to 43 euros ($50.71) per share. It still wants more.

Judged on near-term valuation multiples, the deal can be seen as cheap despite the sweetener. It’s worth 22 times the $2.28 earnings per share Berenberg reckons the company will make this year. (Qiagen says it will make “at least” $2 per share.) That’s substantially lower than the earnings multiples on which diagnostics peers trade. It’s also at the bottom of Qiagen’s trading range prior to a shock sales warning in October that pummeled the shares and led to the sudden replacement of its chief executive officer.

On Davidson Kempner’s own forecasts, the earnings trajectory is even stronger and therefore the multiple even lower.

But competitors in the industry don’t have identical businesses. Moreover, the absolute return on invested capital from this deal still looks middling for Thermo Fisher unless it can unearth greater synergies than it’s announced. What looks cheap on a relative basis, either over time or with reference to traded peers, may still be make for a pricey acquisition.

Either way, no rival bidder has emerged, the offer closes today and the market isn’t pushing the shares above the revised bid. Investors are loath to believe in a possibly brighter, standalone future. No wonder. The board wasn’t able to get a new permanent CEO in place to restore confidence before Thermo Fisher’s approach. Shareholders who stayed in the company have done so hoping for a just such a takeover bid and many will have already sold to short-termist merger arbitrageurs.

The question now is whether the current shareholders are willing to take a chance on the shares eventually getting to the bid price fueled by their own steam by rejecting the offer, and whether they are relaxed about how far the shares could fall in the meantime. 

Neglected, unloved stocks like Qiagen should make good targets for well-resourced activists. However, any campaign must push against the combined forces of bidder, target and an apathetic market if it is to prevail. When almost everyone is holding the stock for a deal, and one surfaces, breaking up the party is going to be tough — especially when the buyer ups the bid. Holders of some 17% of Qiagen stock have already accepted the offer.

Big hedge funds need to be bolder and more contrarian if they are to make returns nowadays. If Davidson Kempner is being prompted to be more strident in its activism, others may follow.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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