Reviews unlikely to stop BJ Services buyout; Acorda sparks sale talk; Invesco deal expected

By Cristal Cody

Tupelo, Miss., Oct. 15 - The U.S. Department of Justice's plans to delve deeper into Baker Hughes Inc.'s $5.5 billion cash-and-stock acquisition of BJ Services Co. may delay the deal but should not stop it, an analyst told Prospect News on Thursday.

Also on Thursday, shares of Acorda Therapeutics, Inc. leaped 47.25% after a positive review of the company's multiple sclerosis drug by the U.S. Food and Drug Administration, which brings the treatment closer to approval and puts the company on dealmakers' lists.

In other situations, Invesco Ltd.'s stock has reached its ceiling and the company needs to do a deal quick to continue its growth, an analyst said Thursday.

Meanwhile, stocks continued to move forward a day after the Dow Jones Industrial Average hit the 10,000 mark.

The Dow closed on Thursday up 47.08 points, or 0.47%, at 10,062.94.

The Standard & Poor's 500 index rose 4.54 points, or 0.42%, to 1,096.56, and the Nasdaq Composite index edged up 1.06 points, or 0.05%, to 2,173.29.

Second look blamed on administration

Baker Hughes and BJ Services said Thursday they received a "second request" from the Department of Justice's antitrust division for additional information on the companies' merger.

Houston-based drilling company Baker Hughes said in August it will acquire Houston-based pressure pumping and pipeline services business BJ Services for $5.5 billion in cash and stock.

BJ Services' shareholders will receive $2.69 in cash and 0.40035 of a share of Baker Hughes for each BJ Services share.

The merger must be approved by shareholders of both companies.

Baker Hughes told Prospect News the deal will require approval from regulators in the United States and in other countries.

The companies said the transaction could close as soon as the end of the year.

Pierre Conner, an analyst with Capital One Southcoast, Inc., told Prospect News on Thursday that the extended review shouldn't impact the deal too much.

"It's fairly typical in the current administration to make this second request for information," he said.

The companies also are unlikely to be forced to divest any assets to complete the deal, Conner said.

BJ Services' stock added 63 cents, or 3.03%, to $21.42 on Thursday.

Shares of Baker Hughes closed up $1.46, or 3.16%, at $47.67.

Acorda next deal target?

Acorda shares soared to close up $7.91, or 47.25%, at $24.65 on Thursday. The stock has traded from $14.42 to $29.27 over the past year.

Hawthorne, N.Y.-based Acorda said late Wednesday that the FDA advisory committee voted 12 to 1 that clinical data on its drug, called fampridine, showed evidence of helping people with multiple sclerosis to walk.

The FDA is expected to complete its review of the treatment by Oct. 22, but approval could be extended into 2010 for additional studies.

Michael Yee, an analyst with RBC Capital Markets Corp., said in a research note released Thursday to Prospect News that the news could lead to FDA approval by the end of the year.

"It is our view that once approved, more patients may get [the] drug and stay on [the] drug than consensus expectations and especially more than the 35% responder rate seen in the trial," Yee said. "We would be buyers below and in the low $20s, with potential upside to $30+ on approval in the long-run."

The news caused some market observers to speculate that Acorda is the next deal target.

Yee, who rates the stock as outperform with a $30.00 price target on the drug's approval, said Acorda has a cash balance of about $315 million, or $8.35 a share.

Potential acquirers include Biogen Idec Inc., which holds international marketing rights to fampridine and will pay Acorda a 15% royalty on all sales, according to Yee.

Acorda spokesman Jeff Macdonald told Prospect News on Thursday that the company does not comment on stock price movements or rumors and speculation.

"We're just focused on moving forward with the development of fampridine," he said.

Shares of Cambridge, Mass.-based Biogen Idec lost 25 cents, or 0.50%, to close at $49.79.

Invesco reaches wall

Atlanta-based Invesco's stock fell after Pali Capital Inc. analyst Douglas Sipkin downgraded the stock to neutral from buy on Thursday.

Sipkin said in a research note that the investment management firm basically has reached his target stock price of $24.00 a share.

"Shares now trade at 20x our 2010 EPS estimate of $1.19, which is roughly in-line with the group average," Sipkin said. "We think that for shares to move materially higher in the short term, an acquisition is becoming crucial."

Invesco's stock closed down 87 cents, or 3.63%, at $23.10 on Thursday. Shares have traded from $8.35 to $24.00 over the past year.

Mentioned in this article:

Acorda Therapeutics, Inc. Nasdaq: ACOR

Baker Hughes Inc. NYSE: BHI

Biogen Idec Inc. Nasdaq: BIIB

BJ Services Co. NYSE: BJS

Invesco Ltd. NYSE: IVZ

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