U.S. Stocks Lower; Sanofi, Genzyme Merger Talk

Arthi Gupta
03 Aug, 2010
New York City

U.S. stocks fall after Procter & Gamble Co reported a decline in earnings. Personal income rises 0.1% in June. MetLife announces offering of 75 million shares and $3 billion in senior debt. Sanofi-Aventis is in talks to acquire Genzyme for $20 billion.

[R]9:35 AM New York – U.S. stocks fall after Procter & Gamble Co reported a decline in earnings. Personal income rises 0.1% in June. MetLife announces offering of 75 million shares and $3 billion in senior debt. Sanofi-Aventis is in talks to acquire Genzyme for $20 billion.[/R]

U.S. stocks declined after weaker-than-estimated earnings, Asian markets rose to three-month high and European markets traded lower.

Sanofi-Aventis, the French drugmaker is reportedly in talks to acquire biopharmaceutical firm Genzyme Corp. for a value of less than $20 billion. Sanofi-Aventis is said to have sent an offer letter to Genzyme with a $67 to $70 per share offer.

The potential combination with Genzyme could see Sanofi’ bolster its drug pipeline and significantly increase its presence in the biopharmaceutical sector.

BP Plc said that the second plan to permanently seal the leaking well in the Gulf of Mexico will be tested on Tuesday.

Dow Chemical Co. reported second-quarter net sales rose 20.3% to $13.62 billion from $11.32 billion in the prior-year quarter. Net income in the quarter was $566 million or 50 cents per share, compared to a loss of $486 million or 47 cents per share in the same quarter last year.

Pfizer Inc., the drugmaker reported second quarter revenues surged 58% to $17.3 billion compared to $11.0 billion in the year-ago quarter. Net income in the quarter rose 9% to $2.47 billion or 31 cents per diluted shared as against $2.26 billion or 34 cents in the prior-year quarter.

Procter & Gamble Co. fourth-quarter net sales rose 4.7% to $18.926 billion from $18.084 billion in the prior-year quarter. Net earnings fell 11.6% to $2.185 billion or 71 cents per diluted share from $2.471 billion or 80 cents per share in the same quarter last year.

D.R. Horton Inc., the homebuilder reported third-quarter increased 51% to $1.4 billion from $914.1 million in the same quarter of fiscal 2009. Net income in the quarter was $50.5 million or 16 cents per share compared to a loss of $143.8 million or 45 cents per share last year.

The U.S. Commerce Department released its report on personal income and spending in the month of June, showing that income and spending both came in nearly unchanged after showing modest increases in the previous month. The report showed that personal income increased by less than 0.1% in June following a downwardly revised 0.3% increase in the previous month.

Federal Reserve Chairman Ben Bernanke told a meeting of the Southern Legislative Conference in Charleston, South Carolina that despite tough conditions for economic growth in recent months, the U.S. economy should still expand at a moderate pace.

Bernanke cited weak recovery in the labor market as a main reason for the sluggish economy, and pointed out that it has been a restraint on household spending. He further added that the budget deficit crises in Greece and other European countries have contributed to the slow recovery. Additionally, Bernanke stated inflation is expected to remain subdued over the next three years.

BP plc said on Monday that the ""static kill"" to permanently plug the damaged deepwater well in the Gulf of Mexico might take place on Tuesday. The company said that during final preparations to commence with the injectivity test, a small hydraulic leak was discovered in the capping stack hydraulic control system. The injectivity test will be rescheduled until the leak is repaired.

The injectivity test is the initial phase of the static kill operation. It consists of a test to push crude down the well and into the reservoir by injecting refined oil. The static kill operation involves pumping large quantities of heavy drilling fluid down into the well.

MetLife, Inc. announced plans to offer 75 million shares of common stock to the public. Net proceeds from the common stock offering will be used to help finance the $6.8 billion cash portion of the purchase price for MetLife’s previously announced acquisition of American Life Insurance Company from American International Group, Inc.

The underwriters will have a 30-day option to purchase shares representing an additional 15% of the offering amount from MetLife, Inc. to cover over-allotments, if any.

In addition to the common stock offering, MetLife also plans to offer approximately $3 billion in senior debt in several series with varying maturities and interest rates. The remainder of the cash portion of the purchase price for the acquisition will be funded with cash on hand.

BofA Merrill Lynch, Credit Suisse, Deutsche Bank Securities, HSBC, UBS Investment Bank and Wells Fargo Securities are the book-running managers for the transaction.