For the phamra industry, the long-term trends look promising, especially in light of the aging population. While companies face lots of pressure to cut costs, this is a good thing for the generic drug industry. And, as should be no surprise, we are seeing some dealmaking.
Israeli generic-drug maker Teva is looking for opportunities to bolster its markets. Acquiring Barr would give it a nice platform in Europe (this was actually because of an acquisition of Pliva in 2006). What's more, the company has a nice offering of drugs such in the contraceptives category.
Teva, already the largest generic drug company in the world, has gotten even bigger with this deal. Taken together, the combined entity will have revenues of close to $12 billion.
With its resources, Teva can continue to snap up some pretty big deals. In the case with Barr, the premium was a whopping 42% (as of Wednesday's close).
So far in today's trading, Teva's shares are up 2.2% to $42.
Several years ago, Oracle's (NASDAQ: ORCL) CEO, Larry Ellison, was clear about his vision: the enterprise software market was in desperate need of consolidation.
It was actually controversial. But, in the end, it was prescient.
Basically, he has struck a variety of small and large M&A deals -- making Oracle a tough competitor for rival SAP (NYSE: SAP).
True, Ellison will say that consolidation is good for customers; that is, it allows for more efficiency (hey, it's easier to deal with a single vendor, right)?
Although, Ellison can be crafty. No doubt, he has a big-time agenda: lowering competitive forces. For example, last month Oracle raised prices on its software offerings.
Something else: SAP has raised prices on its maintenance contracts (this is according to a recent piece in the Wall Street Journal, which is a paid publication).
All in all, such things are smart. In other words, what choice do customers really have? If you have made huge investments in a platform, it's extremely tough to make a switch (especially for mission-critical software).
However, for investors, this is something to note. The price increases should be highly profitable -- because of the high margins.
Reports are swirling that FedEx Corp. (NYSE: FDX) is considering a buyout of TNT NV, a major Dutch mail and express delivery service firm. As expected, both firms had no comment on the rumors.
TNT, which was founded in the 1700s, is ranked #4 on a global basis, with about $17.3 billion in revenues. The company's platform extends from Europe to Asia to Latin America.
No doubt, this is attractive to the folks at FedEx as the deal would make it #2 in the European express delivery service market. The company indeed needs to find a way to diversify away from its dependence on the currently ailing U.S. market.
But if TNT is in play, there are likely to be other bidders the come to the table, such as United Parcel Service (NYSE: UPS). In other words, we could have a dragged out takeover battle.
Today is the day. Today Apple Inc.(NASDAQ: AAPL)'s new 3G iPhone went on sale. Many countries will now be able to join the iPhone mania, selling the handset to eagerly awaiting customers. Most notably, Japan,Australia and Hong Kong are part of the 22 nations rollout.
Anheuser-Busch (NYSE: BUD) shares are surging 4% in premarket trading after The New York Times reported deal with InBev is now near. Not only that, but it seems the talks are of a friendly deal. This is quite a change from the recent law suits between the two after A-B rejected the Belgian brewer's $46 billion, or $65-a-share, takeover offer.
Shares of MasterCard (NYSE: MA) are rising 3.5% in premarket trading on news that the company will be added to the S&P 500 Index on July 17 in place of ACE Ltd. (NYSE: ACE). Shares of ACE are down over 5%.
With the markets in a swoon, marquee assets are on sale in the US. And, with the drop in the dollar, the valuations look even more compelling. Something else: the surge in commodities -- especially in oil -- is bulging the assets in mega sovereign wealth funds.
In fact, even US icons are under attack, such as Anheuser-Busch Companies Inc. (NYSE: BUD), which is fending off a hostile takeover from Belgium's InBev.
True, there is some good news. For example, our domestic companies will have an edge with exports (it seems that this has saved us from a recession -- at least so far). But, alas, it is little consolation.
Perhaps the most effective way to boost the value of the dollar is to increase interest rates. However, this will be a tough thing to do -- in light of the upcoming election, the housing sump and continued economic weakness.
In other words, US assets should remain cheap. And, foreign buyers can't ignore this. So, it's a good bet that we'll see more and more dealmaking from overseas.
Posted Jun 30th 2008 4:01PM by Tom Taulli Filed under: Deals
Deloitte LLP, which is over 100 years old, has built a wealth of knowledge. In fact, last year the firm posted $9.85 billion in revenues.
Well, Deloitte has put together an interesting series of small pieces – called Straight Talk guides. The goal is to help companies "rely less on guesses."
The guide that caught my attention was "M&A Lies, and Why They're Sometimes True." It's a quick read but has some valuable insights.
Keep in mind that – according to various studies – roughly half of M&A deals fail. That's certainly daunting.
But, this doesn't mean that companies should forgo deals. Rather, many companies have been particularly good at M&A, such as Cisco (NASDAQ: CSCO).
Some of the pieces of Deloitte's advice include:
Don't get caught up in deal fever. After all, investment bankers can push hard (and they are incentivized to do so). Thus, if you detect some serious problems, slow things down – and perhaps even walk from the deal.
Buying a company is fairly straight forward; integration, on the other hand, can be extremely complex. In other words, as you are putting together the deal, make sure you are also planning for the post-sale activities. Actually, one of the biggest issues is forgetting about customers (one study shows that customer neglect can result in a 50% drop-off in revenues after four years).
You need to make sure you see good deals. To this end, it's important to cultivate relationships with various players, such as deal attorneys, CPAs and investment bankers.
Taxes matter. Can you find ways to lower the tax burden?
So, to get the ebook, you can go to the Deloitte site.
Today was a coin toss going into the FOMC meeting, and even after the meeting. The market could have gone either way today when the Federal Reserve said it is hoping inflation to come down later in the year and that it isn't that hawkish on inflation versus growth. Traders took the stance that rates will not be running rampantly higher by the end of summer. The other news on the economic front didn't inspire much either, as new home sales and prices in may continued their decline. Oil prices fell at one point more than $4.00 per barrel after an increase in inventory levels.
Below are the unofficial closing levels for today:
Amgen Inc. (NASDAQ: AMGN) saw a rise despite the short selling interest with bets against the company having risen by more than 100% to 48.4+ million shares as of June 13. Shares were up 1.3% at $46.98 in today's final minutes.
Mastercard (NYSE: MA) shares are trading higher today after the company announced it will pay competitor American Express (NYSE: AXP) up to $1.8 billion to settle an antitrust lawsuit. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MA.
After hitting a one-year low of $120.00 in August, the stock hit a one-year high of $320.30 in May. MA opened this morning at $291.10. So far today the stock has hit a low of $290.10 and a high of $295.16. As of 12:40, MA is trading at $294.10, up $13.17 (4.9%). The chart for MA looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $195 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in four months as long as MA is above $195 at October expiration. Mastercard would have to fall by more than 33% before we would start to lose money. Learn more about this type of trade here.
MasterCard (NYSE: MA) is recently trading at $290 in pre-open trading, above its close of $280.37.
American Express (NYSE: AXP) reached a $1.8 billion settlement with MA over the card issuer's lawsuit with the payment processor over allegations MA and some other banks prohibited financial firms from issuing credit cards through AXP.
MA July option implied volatility of 42 is near its 26-week average according to Track Data, indicating non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
In the agricultural sector, it's been nirvana for investors. But are prices too high?
Perhaps not. Take Bunge Ltd. (NYSE: BG), which is a major fertilizer and oilseed producer. Bunge has agreed to pay $4.4 billion for Corn Products International Inc. (NYSE: CPO), a producer of finished corn products. Some of its customers include biggies like Coca-Cola (NYSE: KO). This is a stock-for-stock deal. In other words, why not take advantage of the high market caps?
Both companies have rich histories. Corn Products got its start in 1906 and Bunge was founded in 1818. But it's the future that matters, and Bunge is certainly bullish on the global growth trends in the agricultural markets. To take advantage of this, it makes sense to bulk up. Corn Products will expand Bunge's offerings as well as provide some diversification.
In fact, Bunge also raised its full-year 2008 earnings forecast from $7.10-$7.40 to $9.35-$9.65. This doesn't even include the impact of the Corn Products transaction.
Serving 25,000 members worldwide in more than 210 countries, Mastercard Inc. (NYSE: MA) is the second largest payment system, behind Visa (NYSE: V), issuing credit and debit brand cards which provide access to its transactions network. For a fee, of course.
And revenue from those fees and other charges is advancing at a solid pace. In general, analysts expect F2008 revenue to increase a solid 20-25%. Further, while U.S. gross dollar volume increases will slow with the slow-growth U.S. economy in 2008, international GDV growth should remain robust.
In addition, Mastercard has multiple opportunities to increase market share, both domestically and internationally, as acceptance of credit card use for non-traditional purchases grows. Analysts are also impressed by debit card and prepaid card program progress. The Reuters F2008/F2009 EPS consensus estimates for MA are $8.647/$10.86.
The risks? Mastercard remains vulnerable to a protracted U.S. economic slowdown, and analysts also are also keeping an eye on the rise of new competitors into the transaction space, primarily PayPal.
The First Call mean rating for MA is: Buy. [21 firms.] Mean 2008 target: $333. [high: $390, low: $245.]
Stock Analysis: Mastercard is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from MA's shares. Note: More-cautious investors may wish to wait until MA pulls-back to $270-280, but keep in mind Mastercard may not retreat to that level. Sell / Stop Loss if you were to purchase shares in this company: $215.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
I'm not sure how management at Lehman Brothers Holdings Inc. (NYSE: LEH) has time to run the business. What's more, with all the turbulence, I'm wondering if many of the employees are working mostly on parsing rumors and fine-tuning resumes.
Of course, this week Lehman got rid of its CFO, Erin Callan and president, Joseph Gregory. The company also raised $6 billion, which was quite dilutive. So from Monday to Friday, the stock price plunged from $33 to $25.81.
Yet, by Friday, things were perking up. The stock price shot up 13.7%. Maurice "Hank" Greenberg, the, who is the former CEO of AIG (NYSE: AIG), said he bought shares. This was also the case with BlackRock (NYSE: BLK) and Putnam Investments.
But there was something else: Wall Street was abuzz with buyout rumors.
In fact, according to a report from CNBC, it looks like the senior management team of Lehman is meeting this weekend (which is a rare thing). Are they talking to possible suitors? Or, is it to review the figures for Q2? Both?
Despite all this, the fact remains that Lehman's potential suitors are also distressed. So, even if there is a deal, the valuation is likely to be muted.
But there is an interesting scenario: Blackstone Group LLP (NYSE: BX) as a buyer or major investor. The firm is well capitalized and may want an investment banking platform. Moreover, the firm's cofounders -- Stephen Schwarzman (CEO) and Peter Peterson (Senior Chairman) -- were formerly with Lehman (back in the 1980s).
I love the long-term prospects of Visa (NYSE: V) and MasterCard (NYSE: MA), but I do have to concede that a pesky lawsuit by Discover (NYSE: DFS) is the one big fly in this story's soup. According to the following article, Discover wants both credit-card companies to pay $6 billion for perceived violations of antitrust regulations. Unfortunately, these damages could be tripled if Visa and MasterCard lose. One of the big problems here is that American Express (NYSE: AXP) already won a settlement of $2.1 billion from Visa late last year and the company established an escrow fund worth $3 billion for litigation payments.
I'll admit, this lawsuit does give me and my credit-card investment thesis a little case of the shivers. After all, tripling $6 billion to $18 billion means that a huge amount of money is in play here, and a successful outcome for Discover would hamper the stocks of the two big card entities. When you read through the litigation risks in Visa's SEC filings (out of MasterCard and Visa, the latter is my favorite since it is still relatively fresh off its IPO and MasterCard has already had a big run), they are pretty scary. And the fact that the $6 billion figure just came to light this week has probably soured the perception of some investors and analysts. Nevertheless, all the previous litigation talk didn't stop Visa's stock from taking off after its IPO earlier this year.
After the 3G iPhone was finally announced Monday, with a price tag and a business model that could take the funky phone to the masses, Apple Inc. (NASDAQ: AAPL) ended lower on some profit taking. But have no fear. Already this morning, Citigroup raised Apple's price target to $287 from $248 with a Buy rating, and Lehman raised it to $234 from $202, maintaining its Overweight rating. Despite the stock trading higher in European markets, it's still not showing signs of recovery in premarket trading in the US.
ThinkPanmure initiated Intel Corp. (NASDAQ: INTC) with a Buy, claiming it is gaining market share over rival Advanced Micro Devices (NYSE: AMD). The analyst also said Intel is gaining prominence in the server, desktop and notebook markets.
Hewlett-Packard Co. (NYSE: HPQ) updated its desktop and notebook computers. It introduced Tuesday in Berlin a new ultra-thin portable, the Voodoo Envy, to rival Apple's MacBook Air. H-P also added a new version of a touch-screen desktop PC and 16 notebooks for consumers and businesses.
For the phamra industry, the long-term trends look promising, especially in light of the aging population. While companies face lots of pressure to cut costs, this is a good thing for the generic drug industry. And, as should be no surprise, we are seeing some dealmaking.
Several years ago, 
Reports are swirling that 
With the markets in a swoon, marquee assets are on sale in the US. And, with the drop in the dollar, the valuations look even more compelling. Something else: the surge in commodities -- especially in oil -- is bulging the assets in mega sovereign wealth funds. 
MasterCard
In the agricultural sector, it's been nirvana for investors. But are prices too high?
I'm not sure how management at 
and 
. He also operates 
I love the long-term prospects of 
Comfort Zone Investing: Exploit volatility with constant dollar investing
Merck earnings preview: No miracles expected
Apple reports Monday -- buy AAPL before earnings?
