Debt Commission Deadlock; Gilead Bids $11 Billion for Pharmasset

Arthi Gupta
21 Nov, 2011
New York City

U.S. debt panel is expected to not agree on deficit reduction plan as lawmakers prefer to wait till elections next year. Chevron accepted responsibility for oil spill in Brazil. Gilead agreed to acquire Pharmasset for $11 billion and Transatlantic to merge with Alleghany in $3.4 billion deal.

[R]8:45 AM New York – U.S. debt panel is expected to not agree on deficit reduction plan as lawmakers prefer to wait till elections next year. Chevron accepted responsibility for oil spill in Brazil. Gilead agreed to acquire Pharmasset for $11 billion and Transatlantic to merge with Alleghany in $3.4 billion deal.[/R]

The futures of U.S. indexes declined after the U.S. Congressional Super Committee is expected to fail to reach a consensus before the deadline today to cut government spending by $1.2 trillion over ten years.

The index futures are trading lower after law makers show no urgency to cut the government waste, social spending and the largest defense spending in the world riddled with corruption and inflated military contracts that are issued to Republican Party contributors.

Bi-partisan commission saw no urgency to compromise on budgetary cuts and new revenues measures as both parties dug heels ahead of the election next year.

Spain, Greece, Italy, Ireland and Portugal showed no urgency to cut spending and debts until financial markets imposed higher interest rates on the government borrowing that subsequently led to the fall of governments.

European indexes edged lower on the deteriorating sovereign debt crisis in the region. Spain was the third nation in two weeks to change its government. Spain is battling with the highest unemployment of 21.2% in the region, falling economic output and home values and rising government deficit.

In early European trading, indexes slumped more than 2% reflecting the downbeat investor sentiment after Japan’s exports to China declined 7.7% and to the U.S. fell 2.3%.

In addition, China’s Vice Premier Wang Quishan said in an interview that global economy may enter into a long term recession.

Spain Elects New Government

Popular Party won the parliamentary elections in Spain with an overwhelming majority. Mariano Rajoy led party won 186 of the 350 seats in Congress compared with 110 for the ruling Socialist Party.

Alfredo Perez Rubalcaba, replaced Jose Rodriguez Zapatero in an election that was scheduled earlier than March deadline as financial crisis brought to an end of the economic boom after housing market collapsed and unemployed soared to 21%, highest in the European Union.

The new government is facing multiple tasks on several economic fronts. Spanish bond yields soared in the last five months and last week briefly surged above record Italian yields.

Asian markets too traded lower on global economic concerns.

Japan’s merchandise trade deficit was 273.79 billion yen in October, following the downwardly revised surplus of 296.2 billion yen in September, the Ministry of Finance said on Monday. Exports fell 3.7% and imports surged an annual 17.9% in October.

Overseas shipments to China fell 7.7% while those to U.S. dropped 2.3%. The data partly reflected production problems for Japanese companies due to the recent floods in Thailand.

Chevron Accepts Responsibility for Oil Spill

Chevron Corporation reportedly admitted that the company was responsible for the oil spill off the Brazilian coast that began on November 8.

The company stated that its subsidiary, Chevron Brasil Upstream Frade Ltda., continues to work in partnership with Brazilian government agencies to contain and eliminate the remaining oil sheen in the vicinity of its Frade field.

""Chevron takes full responsibility for this incident,"" said Chevron Brazil country manager, George Buck.

Gilead Sciences to Acquire Pharmasset

Gilead Sciences, Inc. will acquire Pharmasset for $137 a share in cash or approximately $11 billion. The company expects the transaction, when completed, to be dilutive to earnings through 2014 and in 2015 and beyond.

Transatlantic to Combine with Alleghany

Alleghany Corp., the property and casualty insurer agreed to acquire reinsurer Transatlantic Holdings Inc. for $59.79 per share in stock and cash, or about $3.4 billion.

The transaction represents a 36% premium to Transatlantic''s closing stock price on June 10, the last trading day before the public announcement of the since-terminated merger deal with Allied World Assurance.

The offer also represents a 10% premium to Transatlantic''s closing stock price of $54.43 on November 18.

Earlier, Transatlantic''s shareholders rejected merger proposals from Allied World Assurance Co. Holdings AG, National Indemnity Co., a unit of Berkshire Hathaway Inc., and insurance company Validus Holdings Ltd.

Valeant Agrees to Acquire iNova

Valeant Pharmaceuticals International, Inc agreed to acquire iNova, a private pharmaceutical group from Archer Capital, Ironbridge and other minority management shareholders. Valeant will pay iNova shareholders A$625 million upfront and up to A$75 million in potential milestone payments on certain conditions.

Global Partners to Buy Alliance Energy

Global Partners LP agreed to acquire 100% of the membership interests of Alliance Energy LLC, a gasoline distributor as well as a gasoline station and convenience store operator for an enterprise value of approximately $296 million.

Earnings Review

Tech Data Corporation ((TECD)), the distributor of technology products reported third quarter net sales rose 7% to $6.59 billion from $6.16 billion in the comparable period. Net income in the quarter increased 6% to $53.52 million or $1.26 per diluted share compared to net income of $50.46 million or $1.07 per share last year.

Tyson Foods, Inc. ((TSN)), the meat processor reported fourth-quarter sales rose 13% to $8.40 billion compared with $7.44 billion in the year earlier quarter. Net income in the quarter plunged 54.5% to $97 million or 26 cents per diluted share compared to net income of $213 million or 57 cents per share a year ago.