Mergers and acquisitions are on the upswing as low interest rates, rising business and consumer confidence plus bargain prices for some assets have cash-rich companies taking advantage of the chance to expand or cut costs through synergy.
After sitting on the sidelines through much of the tepid recovery from the recent recession, big name companies like Microsoft, Barnes & Noble, Delta, to name a few have dived headlong into acquisitions, hoping to add new revenue streams by widening the ambitions of their portfolios. Today alone, five acquisitions were announced, which brought back memories to many on Wall Street of the M&A Mondays that used be routine in the booming 1990s.
In the pharmaceuticals and biotech sectors, strong growth prospects in emerging markets is a key contributor to merger momentum. Additionally, companies are seeking expansion into generic drugs, bolstering efforts to get into consumer health care and hoping to cost effectively expand research and development, according to FiercePharma newsletter.
Among the deals in these sectors:
Hologic Incorporated (Nasdaq: HOLX), a Bedford, Mass.-based maker of diagnostic, medical imaging and surgical products, said Monday it agreed to buy San Diego's Gen-Probe Incorporated (Nasdaq: GPRO) for $3.7 billion. Gen-Probe is a developer, manufacturer and producer of molecular diagnostic products used to identify disease, screen for organ recipient compatibility and aid in biomedical research.
London-based private equity firm Terra Firma Capital Partners Ltd. on Monday said it will buy Wilmslow, U.K.-based Four Seasons Health Care Ltd., Britain's largest nursing home operator. The company operates over 400 assisted care centers. Mired in debt, Four Seasons was told by Royal Bank of Scotland advisers that Terra Firma was the best possible outcome out of several bids that included U.S. health-care specialist Formation Capital and London-based private equity firm Patron Capital, according to Dow Jones Newswires. Four Seasons had £1.5 billion ($2.4 billion) in debt in 2009.
Other transactions today include:
Dallas's Energy Transfer Partners LP (NYSE: ETP)is buying U.S. refiner Sunoco Incorporated (NYSE: SUN) in a $5.3 billion cash and stock deal. The acquisition will allow ETP to diversify into heavier hydrocarbons while providing substantial value-creation opportunities for Sunoco shareholders and ETP unit-holders alike, said Sunoco CEO Brian P. MacDonald. Sunoco is seeking to divest from the refining business. Shares in Sunoco rocketed in early morning trades after the deal was announced.
Delta Air Lines Incorporated, based in Atlanta,is paying $5.3 billion for ConocoPhillips Co.'s (NYSE: COP) oil refinery in Pennsylvania. That led industry watchers to joke that a buyer from a money-losing sector is a good match for a seller in the money-losing East Coast refining business, according to Reuters. The only other bidders for the refinery would have converted the facility into a terminal.
Microsoft Corporation (Nasdaq: MSFT) is investing $300 million in New York-based Barnes & Noble Inc. (NYSE: BKS) to create a new subsidiary of the bookseller devoted to the Nook reader. Seattle-based Microsoft will hold a 17.6- percent stake in the estimated $1.7 billion business. Barnes & Noble shares leaped over $9, or over 66 percent, to $22.80 in afternoon trading on hopes the capital injection will give a boost to the Nook, the primary competitor to Amazon.com's (Nasdaq: AMZN) Kindle reader.
And one possible deal:
Wolverine Worldwide Incorporated (NYSE: WWW), based in Rockford, Mich., is the leading bidder for the Payless Shoe Source chain, owned by Topeka, Kan.-based Collective Brands Incorporated (NYSE: PSS). The casual footwear and apparel maker says it's interested in the Payless brands of shoes not the chain's stores, according to Bloomberg.