News, Tracked.com Topics

Another Manic Monday…of Mergers, That Is

By Taryn Cooper, at 12:13 pm on March 1st, 2010

I have to admit, after working for years on an investment banking floor, I still get riled up on Monday mornings when deals are announced.  Oh boy, were they announced today!

Out of four high-ish profile announcements, AIG selling its Asian unit to Prudential plc, Merck KGaA buying life-science company Millipore, Astellas Pharma submitted an unsolicited bid for OSI Pharmaceuticals, and MSCI agreed to acquire proxy advisory firm RiskMetrics.  Those four deals along provided about $50 billion in transaction value to the league tables this morning.

The AIG deal was valued $35.5 billion.  I’m not certain what kind of sign this is for AIG — garbage in, garbage out?  Whatever the case, $35.5 billion is not something to shake a stick, whether or not this is perceived to  be a strong subsidiary that they could get some value from.

What interests me are the pharmaceutical and healthcare consolidations, usually signifying a “healthier” economy (not “healthy” just “healthier” by  most standards).   When you see consolidations in this industry, “they” will come (meaning: investors, driving up the markets!). In fact, as we speak, drug stocks are reported to be “stoked” by this merger activity.

An unsolicited bid, which is just a nice way of saying “hostile” (though technically, a hostile bid is when the target formally rejects the acquirer’s offer), leads me the acquisition of proxy advisory firm RiskMetrics.  RiskMetrics is a great tool to view how strong companies are, regarding their board and internal structure, who may be vulnerable to unsolicited or hostile targeted bids.  MSCI is an interesting acquirer of this set as they are index focused and potentially looking to  build out their index portfolio with a purchase of Russell Investments after a failed bid for the famed Dow Jones indexes.

All in all, a healthy Merger Monday is a good sign of things to come.  That and sun after a particularly blustery weekend!

Tags: , , , , , , , , ,

Tracked.com Topics

Judging an M&A By Its Cover

By Taryn Cooper, at 5:07 pm on February 17th, 2010

I have to admit I have a bit of a “soft spot” in my heart regarding mergers and acquisitions, since my background was in M&A.  Today an interesting deal occurred where Walgreen Co acquired Duane Reade stores for $1.75 billion (cash and assumed liabilities).

Usually M&A activity this early in the year is a hopeful sign of what’s to come in the turning of the economy.  Generally, we’ll see large consolidations in certain industries that may provide a sign to where the economy is going to go.  Unfortunately, I can’t say I am hopeful about this deal per se and have to wonder about the ulterior motives behind it.

Living in the New York metro-area, Duane Reades are everywhere.  Everywhere.  The old radio jingle was “Everywhere you go…Duane Reade!”  So yes, it is literally translated.

Walgreen stores, to me, seemed to be a bit more regional.  They were more common in the United States, but here on Manhattan as an example, there are only nine stores (actually, that is about seven more than I remember).  I can certainly find their stores more say in Florida than I could Duane Reade.  But less than $2 billion for total consideration in the deal?  That comes out to around $7 million for each store.  That sounds like a lot but when New Yorkers have these as the most convenient drug store, I feel like that is a bit low.  We all know how New York City real estate is overpriced anyway…

Duane Reade has over 250 store fronts (according to their website).  They’d also recently gone through a transformation in becoming more swanky, customer-focused and modernized (called “Look Boutiques” as stated in the Marketwatch column) .  Needless to say, I am shocked to see that the Duane Reade that is synonymous with New York City especially will  now be operating as Walgreens.  I can get over that personally I am sure.  However, back to those ulterior motives, was Oak Hill (owner of Duane Reade) losing money on these stores?

On a side note about M&A transactions, the tech sector is seen to have a bit of a bump in 2010.  Although total closed deals in 2009 fell below 50% year-over-year, 85% of the total value of closed technology transactions in 2009 happened in the final six months.   Evolution of technology companies, especially those that were upstarts prior to the economic downturn could be seeing some interest this year with larger companies looking to bulk up their product lines and be streamlined.  Stay tuned!

Tags: , , , , , , , , ,

News

Wall Street Wrap – Abbott and Xerox go Shopping

By Robert Perrego, at 5:16 pm on September 28th, 2009

Merger Monday returned in force today as Abbott Laboratories (NYSE: ABT) put up $6.6 billion cash to buy Solvay SA’s pharmaceutical unit and Xerox Corp. (NYSE: XRX) placed a stock and cash bid for Affiliated Computer Systems (NYSE: ACS) totaling $6.4 billion.  Cisco Systems Inc. (NSDQ: CSCO) caught an upgrade and, with no real bad news today, the market was off to the races.

Abbott currently markets TriCor and Trilipix cholesterol drugs in the United States and pays Solvay royalties, and this acquisition now gives them full global rights to these drugs.  Abbott sells $1.34 billion worth of TriCor/Trilipix and now this acquisition gives them full participation in the lucrative cholesterol drug space.  Abbott gained $1.25 on the day (+2.64%, $48.58) as the market approved of the deal, possibly because the deal is for cash for a proven money making franchise and no dilutive new shares will be used.

Xerox sounds like they are taking a page from the International Business Machines (NYSE: IBM), Hewlett Packard Co. (NYSE: HPQ) and Dell Inc. (NSDQ: DELL)  playbook by expanding into the software and services space and diversifying their business away from producing technical machinery and hardware.  The initial price for ACS was a 33% premium but dropped as Xerox shares lost $1.29 today (-14.45%, $7.68).  Each share of ACS will receive $18.60 per share in cash plus 4.935 Xerox shares.  ACS gained 13.98% on the day (+$1.25, $53.86).

Tech behemoth Cisco Systems got upgraded to ‘overweight’ from ‘equal weight‘ by Barclay’s and jumped 4.37% today (+$0.99, $23.61), further energizing the tech sector.

The Dow Jones Industrial Average gained 124.17 points (+1.28%, 9789.36) and the S&P 500 was up 18.60 points (+1.78%, 1062.98).  The Nasdaq 100 was the percentage gain winner edging out the S&P 500 up 1.79% (+30.44, 1724.59).

Even with the action in tech, finance led the sector race up 3.96% with tech and energy running even both up 2.06%.  Inside the finance sector, the life/health insurance space was strongest gaining 5.42%, with the Principal Financial Group (NYSE: PFG) adding 8.41% (+$2.17, $27.97) even in the face of a Bernstein downgrade.

Gold was up early, but traded off to finish relatively unchanged at $990.00 an ounce (4:40 p.m.) as the dollar rallied mid-day.  Oil gained 82 cents to trade $67.10 at 4:40 p.m.  The dollar index future, the DXY, was up 34 cents to close at 76.99 (+0.44%).

There were no economic releases today, but the week is full with major releases starting with Consumer Confidence tomorrow at 10:00 a.m. (expected 57.0), 2Q first revision of GDP on Wednesday at 8:30 a.m. (exp. -1.2%), Jobless Claims Thursday morning at 8:30 a.m. (exp. 537K) and the Employment Situation on Friday at 8:30 a.m. (exp. -170K, 9.8%).  Besides these headline numbers, there are many other housing, manufacturing and personal finance numbers to fill the week with twists and surprises.

Let’s hope the run up today gives us enough

Tags: , , , , , , , , , , , , , , , , , , , , , , ,