Mylan to Buy Merck KGaA Unit for $6.7 B

Elena
14 May, 2007
New York City

Wall Street opened in the positive amid strength in the automotive sector, generated by news that DaimlerChrysler AG said it will sell 80.1% of struggling Chrysler to Cerberus Capital Management LP for $7.4 billion. Among blue chips, General Motors Corp. jumped 5.7%, while Ford Motor Co. gained 4.5% on reports that the Ford family is planning to sell part of its controlling stake in the company.

[R]9:45AM U.S. markets opened higher on merger activity.[/R]
Wall Street opened in the positive amid strength in the automotive sector, generated by news that DaimlerChrysler AG said it will sell 80.1% of struggling Chrysler to Cerberus Capital Management LP for $7.4 billion. Among blue-chip stocks, General Motors Corp. ((GM)) jumped 5.7%, while Ford Motor Co. ((F)) gained 4.5% on reports that the Ford family is planning to sell part of its controlling stake in the company. Again on the Dow, Johnson & Johnson ((JNJ)) rose 1%, following a court ruling that Teva Pharmaceutical ((TEVA)) infringed on a patent for Aciphex, an anti-ulcer drug co-marketed by Johnson & Johnson. Dow member Home Depot Inc. ((HD)) gained 1) ahead of earnings release on Tuesday.

In other deal news, Mylan Laboratories ((MYL)) fell 11% after it agreed to pay $6.7 billion for the generic drug-making arm of Merck KGaA. Cardinal Health ((CAH)) said it would pay $1.5 billion for Viasys Healthcare ((VAS)) in a deal representing a 35% premium to Friday's close. Dow Jones industrial average rose 48.68, or 0.37%, to 13,374.90. The Standard & Poor's 500 index was up 4.33, or 0.29%, at 1,510.18, and the Nasdaq composite index gained 6.25, or 0.24%, to 2,568.47. Bonds were little changed, as many investors stayed on the sidelines ahead of Tuesday's heavy schedule of economic data. The yield on the benchmark 10-year Treasury note was at 4.67%, slightly lower than 4.68% late Friday.


[R]9:30AM London trades lower Monday on broker downgrades in mining stocks.[/R]

The FTSE 100 in London was down 18.9 points to 6,546.8.

Advancers

Pearson gained 2%, as UBS raised its rating from neutral to buy, while Reuters firmed 0.3% amid reports that the Reuters Founders Share Company was ready to support a takeover of the company by Thomson of Canada. Reed Elsevier rose 1.5%.

Strong first-half results aided energy group Centrica 1.7% higher, while Compass Group also rose 1.7% after the caterer announced the 772 million pounds sale of Selecta, its European vending business.

William Morrison, the supermarket chain, gained 0.5% on reports that private equity group CVC was interested in making an offer for the company.

Mid-cap company Britvic gained 4.7% after it bought the soft drinks and distribution businesses of C&C Group for 249.2 million euros in cash.

Decliners

Miners retreated from some of the strong gains from last week, when the sector was buoyed by a number of bid speculation. Lonmin fell 3.8 %, Rio Tinto eased 3.3% and Xstrata lost 2.3%. Copper miner Antofagasta also fell 2.3% as copper and aluminium prices declined in London.

Future Medical slumped 34.7% as GlaxoSmithKline opted to return the development rights for its erectile dysfuncation gel MED2002.


[R]9:00AM Stock futures pointed to a steady opening.[/R]
U.S. stock market futures were indicating a steady opening on Monday, reflecting cautiousness after Friday''s big rally sparked by hopes for rate cuts. Investors were also awaiting tomorrow''s release of Consumer Price Index for April, as well as data from the National Association of Home Builders.

Merger-and-acquisition activity attracted little attention in pre-market trading. DaimlerChrysler ((DCX)) rose 3.7% after a private-equity fund agreed to buy 80.1% of its Chrysler Group for $7.4 billion. The Big Three automakers will also be in focus, with General Motors ((GM)) rising 1.9% in pre-market trading and Ford Motor Co. ((F)) gaining 3.6%. According to a report, Ford''''s founding family is planning to sell a controlling stake.

In other deal news, Mylan Laboratories ((MYL)) fell 2.2% in the pre-open after it agreed to pay $6.7 billion for the generic drug-making arm of Merck KGaA. Further in M&A action, Cardinal Health ((CAH)) said it would pay $1.5 billion, or $42.75 a share for Viasys Healthcare ((VAS)) in a deal representing 35% premium to Friday''s close. S&P 500 futures declined 1.6 points at 1,510.60 and Nasdaq 100 futures eased 0.75 of a point at 1,909.75. Dow industrial futures declined 9 points.


[R]8:45AM Asian markets close higher Monday on Japanese exporters.[/R]

Asian markets ended mostly higher Monday. The Nikkei 225 index in Tokyo closed 0.7% higher to 17,677.94. Among the main advancers in Japan, Toyota added 4.7%, Eisai surged 13% after announcing Friday that it won a patent infringement lawsuit in the U.S. over its Aciphex ulcer treatment. Sanyo Electric stated it will strengthen its product quality control and implied its solar and battery operations will be a major focus this fiscal year. Sanyo Electric ended flat in Tokyo.

Hong Kong Hang Seng ended 2.5% higher to 20,979.24, after the Chinese government announced it was allowing banks for the first time to invest in overseas stocks and structured equity products. HSBC Holdings and its 62%-owned Hang Seng Bank have issued internal memos setting a target of a 10% increase in pretax operating profit this year. HSBC rose 1.3% in Hong Kong.

Shanghai Composite Index gained 0.6% to end at 4,046.39. Australian S&P/ASX 200 closed 0.8% higher to 6,345.10, Singapore Straits Times Index gained 1.6% to 3,501.10 and Taiwan Weighted index closed nearly flat at 8,030.56. South Korean Kospi finished 0.1% to 1,605.77.


[R]8:15AM DaimlerChrysler agreed to sell 80% of Chrysler for $7.4 billion.[/R]
DaimlerChrysler AG ((DCX)) agreed to sell 80.1% of its struggling Chrysler Group to private equity firm Cerberus Capital Management LP in a deal worth $7.4 billion. The deal is a reversal of the 1998 $36 billion merger of Chrysler with Daimler-Benz AG that aimed at creating a global auto giant. The automaker said that an affiliate of Cerberus will hold the majority stake in a new Chrysler Holding LLC while DaimlerChrysler will keep a 19.9% stake. Chrysler would keep its heavy obligations for pensions and health care costs.

DaimlerChrysler CEO said that the two companies would continue to work together, reaping the mutual benefits of cooperation. The deal is expected to complete by Q3 and that it would reduce its overall profit by some $4.05 billion to $5.39 billion for 2007. As for the name of the new company, Daimler AG will replace DaimlerChrysler. The deal is subject to shareholders’ approval. The company''s stock rose more than 7% in European trading and gained 3.7% in U.S. pre-market trade.


[R]8:00AM NY-7:00PM Mumbai Sensex surges on Monday on a rally in SBI, Reliance.[/R]

The Sensex Index closed on Monday 169.70 points, or 1.23%, higher at 13,965.86.

The market-breadth in the session was strong with three advancers for every two decliners. For 1,641 stocks that advanced, 916 declined and 85 remained unchanged. Of the 30 stocks in the Sensex, 21 advanced, while the rest declined. The turnover on BSE was Rs 4,117 crore compared to Rs 4,446.79 crore on Friday. On NSE, the turnover was Rs 8,472.51 crore compared to Rs 9,404.94 crore on Friday.

Economic news

The annual monsoon rains will arrive at Kerala a week early on May 24, but there is no guarantee farmers would benefit from their arrival ahead of schedule. The monsoon rain is crucial to the health of the nearly one trillion dollar economy of India as it determines farm output and subsequent rural demand for a range of consumer products.

The rupee reached last week nine-year peak on Monday, following gains in other Asian currencies against the dollar, with dealers trying to test the RBI resolve to curb inflation by limiting the rise of the rupee. The rupee advanced to 40.92 per dollar on Monday up 0.7% from the close on Friday.

Trading highlights

Index heavy Reliance Industries was the most-active stock with a turnover of Rs 142 crore followed by Indiabulls Real Estate and ICRA.

Advancers

SBI gained nearly 5% to close at Rs 1,206. On Saturday, May 12 2007, the largest public sector bank of India reported a 75% growth in net profit to Rs 1,493.19 crore in Q4 March 2007, from Rs 853.29 crore in the same period a year earlier. Net interest income rose 22% to Rs 4,320 crore. Net profit was up 3% to Rs 4,541.31 crore in the year ending March 2007.

Index heavy Reliance Industries moved up nearly 2% to Rs 1,621. ONGC was up 2% at Rs 907. ICICI Bank moved up 2.5% to Rs 870. Tata Steel added nearly 4% to Rs 591. The stock has gained on renewed buying at lower level on expectation of strong Q4 March 2007 results. Tata Steel reports Q4 results on May 17.

Hindustan Lever advanced 4% to Rs 192.95 buoyed by expectations of early arrival of monsoon.

Cement shares, too, got a lift from favorable reports of monsoon. Gujarat Ambuja Cements gained 4% to Rs 124.05, Grasim 2.5% to Rs 2,490 and ACC 2% to Rs 867. Cement firms derive a large portion of their revenue from rural housing.

Decliners

Dr. Reddy's slipped over 4% to Rs 655, as a U.S. court on Friday, May 11 2007, upheld a patent protecting Aciphex ulcer drug of Eisai Company. Bajaj Auto dropped 2% at Rs 2,660, and Hero Honda also declined 2% to Rs 690. Wipro lost 0.3% to Rs 544 and TCS dipped almost 3% to Rs 1,249.


[R]6:30AM European markets gain on Monday on deals involving DaimlerChrysler, Merck.[/R]

European markets are higher on Monday morning. The German DAX Xetra 30 index added 0.5% at 7,516.24, the French CAC-40 index rose less than 0.1% to 6,052.92 and the U.K. FTSE 100 index increased 0.2% at 6,578.80.

Advancers

In merger-and-acquisition news, DaimlerChrysler, the world fifth-largest carmaker, rallied or 7.8%. The Stuttgart, Germany-based automaker said private-equity firm Cerberus Capital Management LP will buy 80.1% of the U.S. Chrysler Group for 5.5 billion euros, or $7.5 billion.

Elsewhere in the sector, Porsche rose 1% and Volkswagen gained 0.4%. Over the weekend, Volkswagen recommended rejecting a takeover offer from Porsche, as many had expected.

Merck KGaA jumped 3.9% after it agreed to sell its generic drug unit to Mylan Laboratories Inc. Deals were also a focus for other sectors. Shares in U.K. catering firm Compass Group gained 1.7% after Compass agreed to sell its European vending business, Selecta, to a company managed by Allianz Capital Partners for 772.5 million pounds, or $1.5 billion.

Decliners

Rio Tinto, the world third-largest mining company, declined 2.1%, while HSBC, the region largest bank by market value, fell 0.9%.

Commodities

Crude oil for June delivery rose as much as 70 cents, or 1.1%, to $63.07 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement gained as much as 67 cents, or 1%, to $67.50 a barrel on ICE Futures exchange. Gold opened in London at $672.70, up from $671.90 late Friday. In Zurich, the bid price was $670.95, up from $668.30. Silver opened in London at $13.19, down from $13.22.

Currencies

The dollar was mixed against other major currencies in European trading Monday morning. The euro traded at $1.3539, up from $1.3535 late Friday in New York. The British pound traded at $1.9808, down from $1.9829. The dollar stood at 120.29 Japanese yen, up from 120.23 yen.