U.S. Indexes Higher, Cigna Offers $4 Billion for HealthSpring

Arthi Gupta
24 Oct, 2011
New York City

U.S. indexes open higher after positive economic data in Asia and European leaders sound optimistic notes on the rescue fund and Greek bailout. Cigna agreed to acquire HealthSpring for $3.8 billion. Oracle offered $1.5 billion for RightNow and Mattel bid $680 million for HIT Entertainment.

[R]10:15 AM New York – U.S. indexes open higher after positive economic data in Asia and European leaders sound optimistic notes on the rescue fund and Greek bailout. Cigna agreed to acquire HealthSpring for $3.8 billion. Oracle offered $1.5 billion for RightNow and Mattel bid $680 million for HIT Entertainment.[/R]

U.S. indexes traded higher after Chinese manufacturing expanded in October and Japan report better than expected exports in September. Also, European leaders sounded optimistic note on the bank recapitalization and struggled to convince banks to take higher losses on Greek bonds.

The leaders pledged to release details of the agreement and final loss that the banks will have to take in Greek bonds on Wednesday.

However, financial markets were unnerved after the EU members sought the additional financing from countries outside the region to bolster its rescue fund above $1.5 trillion.

Italy also faced direct pressure from Germany and France to “leave within its means” and lower its spending and devise a plan to lower its debt.

The European Union finance ministers on Friday agreed to disburse the next tranche of financial aid to Greece, worth €8 billion.

Also, the European Banking Authority informed the EU finance ministers that banks may need between €100 billion and €110 billion of new capital and increase tier 1 capital ratio to 9%.

The German lower house of parliament Bundestag will discuss leveraging of the euro-zone bailout fund on Wednesday, before the EU summit, government spokesman Steffen Seibert told reporters in Berlin today.

Euro-zone private sector economy contracted in October at the fastest rate since July 2009. The flash composite output index fell to 47.2 in October from 49.1 in September.

Germany''s manufacturing sector decreased in October, preliminary data from a survey by Markit Economics showed. The flash purchasing managers'' index for the manufacturing sector fell to 48.9 in October from 50.3 in September, marking the fastest decline since June 2009.

Asian markets traded higher on positive economic data from Japan and China.

Japan''s Ministry of Finance reported that exports rose 2.4% and imports rose 12.1% from a year ago in September logging a trade surplus of 300.4 billion yen.

China''s manufacturing purchasing managers'' index rose to 51.1 in October from 49.9 in September, according to results of a private survey.

Cigna to Acquire HealthSpring

Cigna Corp. signed an agreement to acquire all the outstanding shares of HealthSpring Inc. for $55 per share in cash, representing a total transaction value of approximately $3.8 billion.

The offer represents a 37% premium over the closing stock price on October 21.

Oracle to Acquire RightNow

Oracle Corp., the business software maker agreed to acquire RightNow Technologies, Inc., the cloud-based customer service provider for $43 per share or about $1.5 billion net of RightNow''s cash and debt.

ArcelorMittal Acquires Controlling Stake in Macarthur Coal

Peabody Energy Corp. and ArcelorMittal announced that their joint venture had relevant interest in approximately 59.85% of Australia-based coal mining company Macarthur Coal Ltd. The companies also increased the price of the purchase of shares in the open market if at least 90% of shareholders agree to the purchase.

The stake increase was possible after China based Citic Resources agreed to sell its stake. The companies noted that their takeover bid for Macarthur is now unconditional.

Entergy to Buy Rhode Island State Energy Center

Entergy Corporation reached an agreement with a subsidiary of NextEra Energy Resources, LLC to acquire the Rhode Island State Energy Center, a 550-megawatt power plant, for approximately $346 million.

Smucker Purchases Sara Lee Unit

J. M. Smucker Co. said it inked an agreement to acquire a majority of the North American foodservice coffee and hot beverage business of Sara Lee Corp.

Terms of the deal call for $350 million to be paid at time of closing, with an extra $50 million paid in declining instalments over the next ten years.

Mattel Acquires HIT Entertainment

Mattel, Inc. agreed to buy U.K.-based media firm HIT Entertainment for $680 million in cash from a consortium led by Apax Partners funds. The deal is anticipated to be financed with a combination of cash and debt.

Earnings Review

IDEXX Laboratories, Inc. ((IDXX)), the veterinary diagnostic product company reported third quarter revenues grew 12% to $301 million from $269.6 million in the year-ago quarter. Net income in the quarter rose 11% to $38.5 million or 66 cents per diluted share compared to net income of $34.7 million or 59 cents per share in the year-ago period.

Kansas City Southern ((KSU)), the freight railroad company said third quarter sales rose 24% to $545 million from $438.3 million last year. Net income in the quarter doubled to $100 million or 91 cents per diluted share compared to net income of $50 million or 48 cents per share last year.

Kimberly-Clark Corp. ((KMB)), the paper-based consumer products maker stated third quarter net sales increased 8.1% to $5.38 billion from $4.98 billion in the comparable period. Net income in the quarter slipped 7.9% to $432 million or $1.09 per diluted share compared to net income of $469 million or $1.14 per share last year.

Lorillard Inc. ((LO)), the cigarettes maker reported third quarter net sales grew 3.5% to $1.62 billion from $1.57 billion the previous year. Net income in the quarter fell 2.6% to $267 million compared to net income of $274 million in the prior-year quarter.

However, earnings per diluted share grew to $1.94 from $1.81 last year. Lower number of outstanding shares increased earnings per share by $0.18.