Wyeth shares play catch-up to Pfizer bid; Exelon, NRG spar; Merck, Schering-Plough timing eyed

By Cristal Cody

Tupelo, Miss., March 17 - While Pfizer Inc. spent Tuesday in the investment-grade bond market raising $13.5 billion to fund its acquisition of Wyeth, shares of Wyeth continue to trade below the offer price.

Separately, Exelon Corp. is in for a long haul as the company's hostile takeover attempt of NRG Energy, Inc. is turning into a lengthy process, an analyst told Prospect News.

Meanwhile, an analyst said Tuesday that Merck & Co., Inc.'s $41.1 billion cash-and-stock acquisition of Schering-Plough Corp. could be held up through November by U.S. and European antitrust agencies.

Moving to Wall Street, investors staged a rally Tuesday and sent equity indexes upward.

The Dow Jones Industrial Average jumped 178.73 points, or 2.48%, to close at 7,395.70.

The broader indexes saw bigger gains.

The Standard & Poor's 500 index added 24.23 points, or 3.21%, to 778.12, and the Nasdaq Composite index gained 58.09 points, or 4.14%, to end at 1,462.11.

Pfizer concerns

Analysts have told Prospect News there is a general market concern that shareholders will not approve Pfizer's takeover of Wyeth.

Pfizer made the $68 billion cash-and-stock offer in January at a then nearly 15% premium to Wyeth's trading price.

The offer, then valued at $50.19 a share, includes $33.00 in cash and 0.985 of a share of Pfizer common stock.

Wyeth shares gained 38 cents, or 0.89%, to close Tuesday at $42.87. The stock has traded from $28.06 to $49.80 over the past year.

Pfizer's stock rose 11 cents, or 0.78%, to $14.26.

The acquisition includes funding from $22.5 billion in bank financing through a bridge loan with five investment banks - Banc of America Securities LLC, Barclays Capital Inc., Citigroup Inc., Goldman Sachs & Co. and J.P. Morgan Securities Inc.

The banks have syndicated portions of the bridge loan to 29 additional banks, Pfizer said in a filing with the Securities and Exchange Commission.

Exelon in for long haul

On Tuesday, Chicago-based Exelon filed a preliminary proxy statement with the SEC for its hostile takeover attempt of rival power producer NRG Energy of Princeton, N.J.

Exelon is seeking approval of its nominees to NRG's board and a proposal to expand the size of the board to 19 members.

NRG shareholders already have tendered 51% of shares in the offer, which expires June 26.

Exelon has offered 0.485 of an Exelon share for each share of NRG for a deal valued at about $5.58 billion.

"Given the strong majority support we have already received from NRG shareholders participating in our exchange offer, we look forward to continuing to work closely with shareholders of both companies to ensure that the Exelon-NRG combination will create the greatest value," John Rowe, Exelon chairman and CEO, said in a statement. "NRG's annual meeting is the next step in unlocking that value."

NRG's annual meeting date has not been selected but is required to take place within 13 months after the company's last meeting, which was held May 14, 2008.

Although Exelon is trying to expand NRG's board of directors, it is not trying to seek a majority control because that would trigger change-of-control clauses for NRG, Angie Storozynski, an analyst with Macquarie Research Equities, said in an interview Tuesday.

"NRG is still not willing to sit down to talk to Exelon," she said. "The only other path that Exelon has at this point if it wants to continue the transaction is to continue the proxy fight."

Exelon made the offer on Oct. 19 for a then 37% premium for NRG shareholders.

NRG's board rejected the offer and Exelon made the offer directly to shareholders on Nov. 12.

"We still think it's going to be a lengthy process," she said. "Even if Exelon succeeds in convincing NRG to sit down and negotiate, they need to go through due diligence, the financing details and also there is no certainty the expanded board is going to approve the offer."

NRG shares fell 12 cents, or 0.67%, to close Tuesday at $17.85.

Exelon's stock rose 88 cents, or 2.04%, to $44.10 in trading.

Regulatory hoops for Merck, Schering-Plough

An analyst said Tuesday that Merck's acquisition of Schering-Plough could be held up by U.S. and European antitrust approvals through November 2009.

The companies said they expect the deal to close in the fourth quarter.

"We believe that the Schering-Merck transaction is likely to involve either an extended phase 1 or a phase 2 investigation," the analyst said in a research note. "Also, the [European Commission] recently launched a sector inquiry into competition in the pharmaceuticals sector, with the initial finding that competition in the pharmaceutical sector does not work as well as it should."

A phase 2 investigation lasts 90 days and includes an extension to 105 days.

Companies usually file with the European Commission after filing for merger clearance with the U.S. Justice Department or Federal Trade Commission, the analyst said.

Whitehouse Station, N.J.-based Merck plans to acquire Schering-Plough for $10.50 a share in cash and 0.5767 of a Merck share for each Schering-Plough share.

Kenilworth, N.J.-based Schering-Plough will be the surviving company in the reverse merger but will be renamed Merck and will operate out of Merck's headquarters.

Analysts are lukewarm about the deal.

Merck shares gained 40 cents, or 1.53%, to $26.61 on Tuesday.

Schering-Plough's stock closed up 11 cents, or 0.48%, at $23.22.

Mentioned in this article:

Exelon Corp. NYSE: EXC

Merck & Co., Inc. NYSE: MRK

NRG Energy, Inc. NYSE: NRG

Pfizer Inc. NYSE: PFE

Schering-Plough Corp. NYSE: SGP

Wyeth NYSE: WYE

© 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.