Mylan moves up in line on Teva bid; Lam Research jumps outright; Iconix continues to trade

By Rebecca Melvin

New York, April 21 – The convertibles of Mylan NV and Teva Pharmaceutical Industries Ltd. added on an outright basis but were in line on a dollar-neutral basis on Tuesday after news that Teva has offered to buy its smaller rival for $82.00 per share, which represents a 23% premium to the company’s previous share price, or about $40 billion in cash and stock.

Both bonds “are parity or less-parity names,” so the deal wasn’t overly significant from a hedged perspective, a New York-based trader said.

Elsewhere, convertibles were pretty quiet, but traders were watching upcoming earnings news for reports that could send shares up or down.

After the market close, Yahoo! Inc. reported an earnings miss that sent its stock a little lower in after-hours trade.

Back in the regular session, Lam Research Corp.’s convertible issues were trading actively after the Fremont, Calif.-based semiconductor-equipment company reported better-than-expected earnings and a strong outlook after the market close on Monday.

There was also some trading of Jakks Pacific Inc.’s 4.875% convertibles after the Malibu, Calif.-based toy and leisure products company posted a quarterly loss but earnings that were better than expected, excluding items. The company also beat on revenue and raised forward guidance.

The Jakks bonds traded around 93 with shares up in the first half of the session. But shares trailed off later in the session and closed 1.7% lower.

Iconix Brand Group Inc.’s convertible bonds saw follow-on trading action on Tuesday with a bounce in the underlying shares and higher bond prices after word on Monday that the company’s chief operating officer was leaving the position after only one year.

Shares of the New York-based brand management company bounced back almost 5% after plunging 20% on Monday.

“We traded some ICON round $103,” a New York-based trader said of the 2.5% convertibles due 2016. Later these bonds were seen at 105, according to Trace data.

Intel Corp.’s convertibles were mentioned in trade with shares of the chip giant down about 1%.

The Intel 2.95% convertibles were off about 0.125 point, a trader said.

“It’s pretty quiet,” the trader said, but he added that there were both outright buyers and sellers in the market.

Mylan, Teva trade actively

Mylan’s 3.75% convertibles due in September traded up to 552, which was up on an outright basis by about 45 points. The Mylan bonds were seen 1.3 points less parity.

Mylan shares were up to as high as $74.90 during the session but closed at $74.07, which was up $6.03, or nearly 9%, on the day.

Teva’s 0.25% convertibles traded up about a point outright to 153.5, which was right around parity, sources said.

Shares of the Israel-based generic drugmaker were up $1.24, or 2%, to $64.53 early in the day but closed up just 87 cents, or 1.4%, at $64.16.

“The deal was rumored in the market before, and they actually did it. There’s really nothing to do from a hedged perspective,” a trader said.

Teva bonds were seen at parity. Late last week they had slipped to below parity or about 0.7 point less parity.

Lam Research in line

Lam Research’s’ 0.5% convertibles due 2016 jumped 9.5 points on an outright basis to 132, according to Trace data.

Lam’s 1.25% convertibles due 2018 gained 8 points to 140.

Lam shares rose 8% to $77.84.

The bonds were said to have gained in line with the shares.

Lam reported fiscal third-quarter profit of $206.3 million, or $1.16 per share. Excluding one-time items, the earnings came to $1.40, which was much better than estimates for $1.30 per share.

Revenue came to $1.39 billion, which was better than estimates for revenue of $1.37 billion.

For the current quarter, Lam expects earnings of $1.39 to $1.53 per share. Analysts had been expecting earnings of $1.37 per share.

Revenue is expected to be $1.41 billion to $1.51 billion for the current quarter, which is better than estimates for $1.39 billion.

Mentioned in this article:

Iconix Brand Corp. Inc. Nasdaq: ICON

Intel Corp. Nasdaq: INTC

Jakks Pacific Inc. Nasdaq: JAKK

Lam Research Corp. Nasdaq: LRCX

Mylan NV NYSE: MYL

Teva Pharmaceutical Industries Ltd. Nasdaq: TEVA

Yahoo! Inc. Nasdaq: YHOO

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