Investors watch WaMu; Icahn fights for ImClone; Longs Drug Stores readies for Walgreen hostile bid

By Aaron Hochman-Zimmerman

New York, Sept. 23 - The majority of the market and much of the world was fixated on the hard sparring between legislators and the country's financial leadership on Capitol Hill on Tuesday as both sides grappled over how far the expansive federal bailout package will go.

The investors left in the trenches had their eyes on Washington Mutual, Inc. as the hunting party drew ever nearer to the bloodied lender.

Speculation continued over when and for how much WaMu would change the name on the mailbox.

Meanwhile, rather than give the financials the entire spotlight, ImClone Systems Inc. chairman Carl Icahn made it known that he expects a better offer for the company as its share price traded through Bristol-Myers Squibb Co.'s latest bid.

Bristol-Myers raised its offer to $62.00 per share, but Icahn insisted the offer for ImClone from an unnamed "pharma-giant" is $70.00 per share.

Also, Longs Drug Stores Corp. advised its shareholders to accept CVS Caremark Corp.'s tender offer at $71.50 per share rather than wait for regulatory approval of Walgreen Co.'s $75.00-per-share offer.

Walgreen was insistent, however, that its offer was superior and showed all signs of preparing to bring a hostile bid to Longs' holders.

In the broader market, the Dow Jones Industrial Average ended below 11,000 points as it tumbled by 161.52, or 1.47%, to 10,854.17, while the Nasdaq Composite Index lost 25.65, or 1.18%, to finish at 2,153.33.

The S&P 500 sold off by 18.87, or 1.56%, to close at 1,188.22.

WaMu for sale: $1

"Hearing WaMu, next week, $1.00," a trader said was the talk on the street.

Many felt that the proposed mega-government bailout prepared WaMu's assets for sale.

The fast-growing bank maintains a 52-week high of $36.97 but now is expected to be the next bank to be sold in the great fire sale of 2008 at the price of $1.00 per share, according to one trader.

The long list of banks thought to have designs on WaMu includes JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. On Tuesday, reports surfaced that Toronto-Dominion Bank was the latest to join the hunt for WaMu.

Shares of WaMu (NYSE: WM) gave back $0.13, or 3.90%, to close the session at $3.20.

Shares of Toronto-Dominion (NYSE: TD) inched up by $0.57, or 0.94%, to finish at $61.40.

Due diligence expires for mystery bidder

ImClone's Icahn received word from Bristol-Myers' chairman and chief executive officer, James Cornelius, that the pharma-giant will raise its cash offer to $62.00 per share from $60.00.

At the new price, the offer for the approximately 84% of ImClone shares that Bristol-Myers does not already own is valued at $4.7 billion.

The offer represents a 48% premium to ImClone's share price for the three months leading up to July 30, although the offer was not high enough to escape being called "absurd" by Icahn.

The new offer came as some had expected the two-week due diligence period to expire for the $70.00-per-share offer from an unnamed bidder that Icahn announced on Sept. 10.

However, Icahn stated Tuesday that due diligence will expire on Sept. 28.

When it was announced, Bristol-Myers' original offer price of $60.00 per share was too low, said Summer Street Research Partners analyst Carol Werther.

A fair price was between $65.00 and $70.00 per share, but that was before the recent rattling of the market, she said.

"ImClone is a very valuable entity to both of those companies," she said, "The fundamentals of the company are very strong."

Still, "it was not going to be the $80.00 per share that Carl Icahn had talked about two years ago," she said.

No matter which company wins the horserace for ImClone, it looked fairly certain on Tuesday that ImClone would not remain independent.

"They're not going to be able to keep rejecting offers," she said. "One of them is going to win."

"If I were ImClone and [the other offer] was from Merck KGaA and they're paying with euros; there's not much difference," she said, assuming Merck is the mystery bidder.

ImClone jointly produces the cancer-fighting drug Erbitux with Bristol-Myers.

ImClone also has a robust research pipeline, and although many of the drugs are likely to fail, Werther said, out of all of the new treatments the company is developing "odds are that they have a blockbuster product in there."

Shares of ImClone (Nasdaq: IMCL) traded well through the published offer price as they took on $4.11, or 6.92%, to end at $63.51.

Shares of Bristol-Myers (NYSE: BMY) dropped by $0.36, or 1.75%, to close at $20.26.

Shares of Merck & Co. (NYSE: MRK) fell by $0.70, or 2.23%, to end the day at $30.75.

Longs favors CVS' tender

Longs asked shareholders to strongly consider the $71.50-per-share tender offer from CVS Caremark after Walgreen fired what may have been the last warning shot before taking a hostile bid to Longs' shareholders on Monday.

In a letter to Longs chairman, president and CEO Warren Bryant, Walgreen chairman and CEO Jeffrey Rein laid out the case for a Walgreen acquisition.

"Walgreens is not willing to accept the inherent regulatory risks in connection with an acquisition of Longs. This statement is not accurate," Rein wrote.

Walgreen committed to divesting from whatever would be necessary to complete a deal with Longs.

Rein reasserted the benefit of his company's $75.00-per-share offer compared to the $71.50-per-share competing offer from CVS.

Longs has stated that despite the higher price, the Walgreen offer does not compensate shareholders for the deal's delay, which Longs believes may be up to nine months.

"...our $75.00 proposal will return a higher value to Longs' stockholders and the fact that they will continue to receive dividend payments will mitigate the impact of the time required to obtain the required regulatory approvals," Rein wrote.

As liquidity continues to dry up across the market, "[Longs] should have no concern with our ability to finance the proposed transaction," Rein wrote.

"Walgreens is highly rated from Standard & Poor's and Moody's, has a strong balance sheet and has sufficient liquidity and access to the necessary capital required to consummate the proposed transaction."

Shares of Longs Drug Stores (NYSE: LDG) took on $1.64, or 2.20%, to close at $76.15.

Shares of CVS Caremark (NYSE: CVS) sank $1.36, or 3.88%, to $33.66.

Shares of Walgreen (NYSE: WAG) gave up $0.41, or 1.29%, to end at $31.35.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.