J&J offer sends Mentor up 89.35%; Sprint Nextel, Clearwire close deal; BCE shares set new low

By Cristal Cody

New York, Dec. 1 - At least two deals moved ahead Monday as stocks fell sharply on official news of a recession.

Johnson & Johnson said Monday that it will buy Mentor Corp. for $1.07 billion in cash.

Sprint Nextel Corp. and Clearwire Corp. also closed Monday on a $14.5 billion deal to create a new company that they hope will provide the internet service of the future.

But BCE Inc.'s stock set a new low of $18.48 Monday after investors realized the $35 billion privatization deal probably has fallen apart.

Meanwhile Monday, the National Bureau of Economic Research said the U.S. recession actually began a year ago in December 2007.

In response to the news and mixed results of retail sales over the weekend, the Dow Jones Industrial Average fell 7.7% to 8,149.09. The S&P 500 index fell 8.93% to 816.21.

The Nasdaq composite index also fell 8.95% to 1,398.07.

J&J buying spree

Shares of breast implant maker Mentor gained 89.35% to close at $30.58 Monday on news of Johnson & Johnson's offer. The stock has traded from $13.33 to $40.82 over the past year.

The stock closed in on the $31 a share tender offer, a 92% premium over Mentor's closing stock price on Friday.

J&J shares fell 5.55% to close at $55.33 on Monday.

The latest acquisition is just a week after Johnson & Johnson announced intentions to acquire Omrix Biopharmaceuticals for $438 million, or $25 a share. The deal is scheduled to close at the end of the year.

Under the deal's terms, Omrix will operate as a stand-alone company through Johnson & Johnson's Ethicon surgical product unit.

Mentor also will operate as a stand-alone company through the Ethicon unit.

The Mentor deal, which has a $1.12 billion net value including debt, is expected to close in the first quarter of 2009.

Johnson & Johnson may not be finished in going after more acquisitions.

"Neither of the acquisitions we're talking about have been large for J&J, so they could continue to do this kind of transaction going forward very easily," said Jan Wald, an analyst with the Stanford Group Co.

"The prices of the stock would be attractive for strategic players," Wald said. "We'll see a lot more interest on the part of the bigger players in looking at smaller companies and leveraging the opportunities to the extent they can."

Investors down on Sprint

Shares of Sprint Nextel fell 24.37% to close at $2.11 in trading Monday, the first day of trading since Sprint and Clearwire closed on a $14.5 billion deal to create a new company to build a faster mobile internet service.

Sprint owns 51% of the new company, also called Clearwire. The company also has $3.2 billion in investments from Comcast Corp., Intel Corp., Time Warner Cable Inc., Google Inc. and Bright House Networks.

An analyst who did not want his named used said Sprint's stock plunge has more to do with concerns about actually getting the network going with a return on investments.

"It's only a small portion of the story. The stock trading is very volatile at the moment," the analyst said.

"Equity holders are very concerned about that position, but basically if you look at the debt that is out there, it doesn't look completely unmanageable," he said of the deal.

Clearwire shares rose 6.86% to close at $7.48 after opening trading at $6.60.

BCE shares set new low

Rumors that BCE Inc.'s board of directors will meet Tuesday to discuss its future if the $35 billion privatization deal does not work out are just that - rumors, BCE spokesman Mark Langton said Monday.

Plenty of rumors abound after the Canadian telecom giant said last week the buyout may not go through because of solvency questions.

BCE received a negative preliminary view from KPMG based in part on the amount of debt from the transaction and current market conditions.

The solvency approval is a condition of the deal closing.

BCE, which owns Bell Canada, was expected to be sold for C$42.75 a share to an investment group led by the Ontario Teachers Pension Plan Board and affiliates of Providence Equity Partners Inc., Madison Dearborn Partners LLC and Merrill Lynch Global Private Equity.

Some reports indicate BCE will begin efforts to force the Ontario Teachers' Pension Fund to pay a $1.2 billion merger termination fee if the deal does not close on Dec. 11.

U.S.-listed shares of BCE fell 6.62% to set a new low at $18.48 Monday. The stock had traded from $18.59 to $40.44 over the past year.

Mentioned in this article:

BCE Inc. NYSE: BCE

Clearwire Corp. Nasdaq: CLWRD

Johnson & Johnson NYSE: JNJ

Mentor Corp. NYSE: MNT

Sprint Nextel Corp. NYSE: S

© 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.