U.S. Personal Income Rises; Sunoco, Energy Transfer in $5.3 B Deal

Arthi Gupta
30 Apr, 2012
New York City

U.S. indexes gained after personal income and consumer spending rose in March. On the deal front, Energy Transfer agreed to acquire Sunoco for $5.3 billion and Hologic said it agreed to buy Gen-Probe for approximately $3.7 billion.

[R]10:00 AM New York – U.S. indexes gained after personal income and consumer spending rose in March. On the deal front, Energy Transfer agreed to acquire Sunoco for $5.3 billion and Hologic said it agreed to buy Gen-Probe for approximately $3.7 billion.[/R]

U.S. indexes traded lower on the first trading day of this week after personal income rose in March.

The European indexes traded sideways after the latest data from Spain confirmed the decline in economic activities for the second quarter in a row as construction industry slump and the latest government spending cuts lift unemployment to a record high.

Markets barely budged after the release of the GDP data from Spain and bond yields were nearly unchanged in Spain and in Italy. The latest contraction was less than estimated by the Bank of Spain last week but still investors stayed on the sidelines for most of the morning trading ahead of a holiday tomorrow.

Asian markets traded higher but markets in mainland China and in Japan were closed and the benchmark index in India advanced 1.1% on the strength in software services companies and rupee edged lower.

U.S. Personal Income Rises

U.S. personal income grew 0.4% in March compared to the 0.3% growth in February, according to data released by the U.S. Commerce Department today.

Consumer spending rose 0.3% in March following the revised growth rate of 0.9% for February.

The PCE price index, which excludes the volatile food and energy sectors, also increased 0.2% in March after rising 0.1% in February.

Energy Transfer Partners to Acquire Sunoco

Energy Transfer Partners, L.P. agreed to acquire independent oil refiner Sunoco Inc in stock and cash transaction valued at $50.13 per share or a total consideration of approximately $5.3 billion.

The estimated price is 23% premium to Friday’s closing price of Sunoco and the company has been struggling to sell its refineries in Pennsylvania as the company struggles with high operating costs and the high crude oil costs on the East Coast.

Sunoco’s refining business has lost money in the last two years and the refiner is in negotiations with Carlyle Group to form a joint venture that may control the Pennsylvania refineries.

Under the terms of the merger agreement, Sunoco shareholders can elect to receive for each common share held either $50.00 in cash, 1.0490 ETP common units or a combination of $25.00 in cash and 0.5245 ETP common units.

Hologic to Buy Gen-Probe

Hologic, Inc. will acquire all of the outstanding shares of Gen-Probe for $82.75 per share in cash, or a total enterprise value of approximately $3.7 billion. The combined company expects to realize approximately $75 million in cost synergies within three years following the close of the transaction.

The merged company will have pro forma revenues of approximately $2.4 billion and adjusted EBITDA of $822 million (excluding synergies).

Earnings Review

Alere Inc. ((ALR)), the engaged in developing capabilities in near-patient diagnosis, monitoring and health management said first quarter net revenue grew 15.2% to $671.13 million from $582.46 million in the prior-year quarter. Net loss in the quarter swung to $4.1 million or 5 cents per diluted share compared to net income of $8.09 million or 9 cents per share last year.

Humana Inc. ((HUM)), the health care company reported first quarter total revenues grew 11.2% to $10.22 billion from $9.19 billion in the prior-year quarter. Net income in the quarter declined 21.3% to $248 million or $1.49 per diluted share compared to net income of $315 million or $1.86 per share in the previous year.

Scholastic Corp. ((SCHL)), the children’s book publisher estimated earnings from continuing operations per share for the fiscal year ending May 31 to exceed $3.40 compared to the prior guidance of a range of $2.60 to $2.90.

Watson Pharmaceuticals, Inc. ((WPI)), an integrated global pharmaceutical company reported first quarter net revenues surged 74% to $1.52 billion from $876.5 million a year ago. Net income in the quarter rose 22% to $54.8 million or 43 cents a diluted share compared to net income of $45.3 million or 36 cents per share in the prior-year quarter.