China extends review of Pfizer deal; British life insurer in combo talks; CIT shares soar

By Cristal Cody

Tupelo, Miss., July 17 - Pfizer Inc. said Friday that China is taking a closer look at its $68 billion acquisition of Wyeth, but the antitrust review should not delay the deal's closing, an analyst told Prospect News.

In potential deals, British life insurer Friends Provident Group plc opened the door for another bid from Resolution Ltd. on Friday. A market analyst said Resolution is likely to sweeten its current $2.7 billion stock offer.

Also on Friday, CIT Group Inc. shares jumped more than 100% in trading on speculation it will secure funding through current discussions with lenders.

Meanwhile, Wall Street ended the week slightly mixed on Friday after strong gains earlier in the week.

The Dow Jones Industrial Average inched up 32.12 points, or 0.37%, to close at 8,743.94.

The Standard & Poor's 500 index lost 0.36 of a point, or 0.04%, to 940.38, while the Nasdaq Composite index rose 1.58 points, or 0.08%, to 1,886.61.

China looks closer

Pfizer said in a statement Friday that the European Commission approved the deal with Wyeth, based on a commitment by Pfizer to divest some animal health assets in the European Union.

However, Pfizer added that China's Ministry of Commerce has extended its regulatory review beyond the initial 30-day period.

Jon Lecroy, an analyst with Natixis Bleichroeder, told Prospect News on Friday that regulators should not delay the deal much.

"China's not a huge market for them, so I wouldn't expect them to delay anything," he said. "It's a very, very tiny portion of either company's businesses, so I would expect it to go through with or without that."

The merger also requires regulatory approvals in the United States, Canada and South Africa and must receive Wyeth shareholder approval.

"We continue to work cooperatively with the regulatory agencies to obtain the requisite approvals, and continue to expect the transaction to close at the end of the third quarter or during the fourth quarter of 2009," Amy Schulman, senior vice president and general counsel of Pfizer, said in the statement.

New York-based Pfizer made the cash-and-stock offer of $33.00 in cash and 0.985 of a share of Pfizer stock for Madison, N.J.-based Wyeth in January.

Pfizer and Wyeth expect the transaction to close by the fourth quarter.

Wyeth's stock lost 20 cents, or 0.43%, to close at $45.97 on Friday, while Pfizer shares fell 11 cents, or 0.73%, to $14.96.

UK insurer in talks

Friends Provident on Monday rejected a $2.7 billion stock offer from Resolution.

On Friday, Friends' board sent a letter to Resolution with a proposed deal structure - with Dorking, England-based Friends as the holding company.

"Our board has thought long and hard about Resolution's proposal," Adrian Montague, chairman of Friends, said in a statement. "We recognize the shareholder value which consolidation could bring."

Under Resolution's proposal, Friends' investors would receive 0.8 of a share of Resolution for every share of Friends.

Guernsey-based Resolution said in a statement on Friday that it welcomed Friends' endorsement of the merger benefits and its "willingness to engage in discussions."

Resolution is expected to increase its bid, Emiliano Leggieri, an analyst with Pali International Ltd., said in a research note on Friday.

"We regard Resolution's approach to FriendsProv as an opening shot, and we would attach a high probability to Resolution coming back with a revised offer," he said. "We have the feeling that Resolution is in a strong position and may not need a large sweetener to get the deal done."

Friends Provident shares lost 0.69% to 71.50p on Friday.

Resolution's stock gained 4.24% to $92.25p.

CIT saga continues

CIT shares rose as much as 103.00% before the stock closed up 29 cents, or 70.73%, to 70 cents Friday on speculation the company will secure lending or find a buyer before a bankruptcy filing is necessary.

The New York lender said Thursday it is evaluating alternatives to improve liquidity and is in discussions with potential lenders to secure short-term financing.

On Wednesday, the company learned the government would not provide short-term aid.

The 101-year-old firm is a major lender to small and medium-sized businesses and has a widespread presence in several industries such as apparel and sports as well as mom-and-pop businesses.

"CIT does play an important role in lending to small businesses," Sameer Gokhale, an analyst with Keefe, Bruyette & Woods, Inc., told Prospect News earlier this week. "They lend to middle market companies which traditionally are ignored by larger banks."

If CIT is "able to shrink their portfolio, they may be able to make through the first quarter of 2010 - potentially." Gokhale said. "There's still a lot of uncertainties."

Mentioned in this article:

CIT Group Inc. NYSE: CIT

Friends Provident Group plc London: FP

Pfizer Inc. NYSE: PFE

Resolution Ltd. London: RSL

Wyeth NYSE: WYE

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