GlaxoSmithKline shares slip on $1.65 billion Reliant merger agreement; Countrywide shares sink

By Sheri Kasprzak

New York, Nov. 21 - In a lazy day for action ahead of the Thanksgiving holiday, British pharmaceutical company GlaxSmithKline plc whipped up some news with its $1.65 billion planned purchase of Reliant Pharmaceuticals Inc., a private New Jersey-based pharmaceutical name.

Reliant is focused on cardiovascular therapies.

Elsewhere, even as Countrywide Financial Corp. tried to kill off bankruptcy rumors plaguing it, shares of the mortgage lender continued to tumble on Wednesday, possibly on word that mortgage foreclosures are likely to continue - maybe to a bigger degree - in 2008.

"It's a tough time for mortgage lenders," said one sellside trader. "Countrywide is getting hit the worst because it's the largest. That doesn't mean it's alone when it comes to having its shares creamed."

Shares of Countrywide fell by 8.37%, or 86 cents, to close the day at $9.42 (NYSE: CFC). The stock fell another 7 cents after hours.

To be sure, mortgage guarantor Freddie Mac also saw its shares dive this week, and those losses continued to Wednesday. On Tuesday, Freddie Mac posted a $2 billion loss for the third quarter, the single-largest fall in its history.

Freddie Mac's stock dropped by 74 cents, or 2.77%, to close at $26 (NYSE: FRE).

Troubles with guarantors may also be impacting mortgage lenders, who are having a harder time accessing the government-sponsored enterprise market, the trader said.

Shares of other mortgage lenders were down as well on Wednesday with Thornburg Mortgage Inc. down 17 cents to end at $9.04 (NYSE: TMA), gaining 8 cents in after-hours action.

Luminent Mortgage Capital Inc.'s stock fell by 8 cents to end the day at $1.08 (NYSE: LUM).

Paulson: situation will worsen

Mortgage stocks may have been hit hard Wednesday by a statement made by Treasury secretary Henry Paulson indicating that the mortgage loan crisis will worsen in 2008.

Paulson indicated that there may be troubles next year because of several resets on adjustable-rate loans granted during the most recent housing boom.

On Wednesday, Paulson also urged the mortgage sector to make life easier for large groups of borrowers in an attempt to squelch the mortgage crisis that could continue if loans are repaired individually.

Glaxo to buy Reliant

Moving back to GlaxoSmithKline's planned purchase of private pharmaceutical company Reliant Pharmaceuticals, GlaxoSmithKline intends to pay $1.65 billion in cash for Reliant.

Shares of GlaxoSmithKline fell by 9p on Wednesday to settle at 1,160p (London: GSK). In the United States, shares of GlaxoSmithKline dropped by 34 cents to end at $47.87 but gained 17 cents after the stock market closed (NYSE: GSK).

According to a statement released Wednesday by both parties, Reliant posted net sale of $341 million for the nine months ended Sept. 30, a 62% increase over the same period of 2007.

"The addition of Lovaza [Reliant's drug to treat high triglycerides] to the GSK portfolio adds a new driver of sales growth in the U.S. business," said Chris Viehbacher, president of U.S. Pharmaceuticals for GlaxoSmithKline, in a news release.

"It represents a strong strategic fit, complementing Coreg CR, a leading treatment for heart failure and hypertension, and adds to our growing portfolio profile in the cardiovascular disease area."

"Today is a momentous day for Reliant," said Bradley T. Sheares, chief executive officer of Reliant, in a statement.

"We are very proud of the work that our employees have done to build this company, particularly the energy and perseverance of our sales teams, who have demonstrated their worth in building a formidable Lovaza franchise in less than 24 months. We see great additional potential through this acquisition for Lovaza and the patients who could benefit from it."

Danaher buys Tektronix

In other merger news, Danaher Corp. wrapped up its acquisition of Tektronix, Inc.

Danaher purchased all of the outstanding shares of Tektronix at $38 per share.

Danaher's stock fell by $2.10, or 2.54%, on Wednesday to end at $80.50 after the tender offer for Tektronix's stock closed (NYSE: DHR). Shares of Tektronix were up by 10 cents to close the day at $38.00 but slipped by 79 cent after the closing bell (NYSE: TEK).

Tektronix's stock will cease trading on the New York Stock Exchange.

The acquisition counts as a "fundamental change" under the terms of Tektronix's $345 million in 1.625% senior convertible notes due 2012. This entitles the holders to convert their notes into a cash amount based on the value of a certain number of shares to be determined by a formula set forth in the indenture.

Danaher is a Washington, D.C.-based manufacturer of medical components and instruments. Tektronix supplies test, measurement and monitoring devices.

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