While you were sleeping: Pfizer, Allergan terminate deal

Thursday 7th April 2016

Shares of Pfizer and Allergan led gains in health care stocks on both sides of the Atlantic as their abandoned merger plans, following new US tax rules, spurred fresh bets on new merger and acquisition activity in the sector.

Wall Street gave up some of its earlier gains after minutes of the March Federal Reserve meeting showed US policy makers discussed an interest rate increase for their April meeting. Chair Janet Yellen last week said the Fed would proceed cautiously when it came to rate hikes.

Federal Open Market Committee members “expressed a range of views about the likelihood that incoming information would make an adjustment appropriate at the time of their next meeting,” minutes from the March meeting showed.

“Several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate,” according to the minutes.

“In contrast, some other participants indicated that an increase in the target range at the Committee's next meeting might well be warranted if the incoming economic data remained consistent with their expectations for moderate growth in output, further strengthening of the labour market, and inflation rising to 2 percent over the medium term,” the minutes showed.

Wall Street rose, even as it pared some of its earlier gains. In 2.41pm New York trading, the Dow Jones Industrial Average added 0.1 percent, while the Nasdaq Composite Index climbed 0.9 percent. In 2.26pm trading, the Standard & Poor’s 500 Index gained 0.6 percent.

“Clearly there’s some disagreement within the Fed but that being said, Janet Yellen couldn’t have been more clear with her comments last week with her reticence and dovishness,” Steve Chiavarone, a portfolio manager with Federated Investors in New York, told Bloomberg.

Gains in shares of Pfizer and those of Merck, up 5.1 percent and 2.5 percent respectively, led the advance in the Dow.

Shares of New York-based Pfizer rallied after it and Dublin-based Allergan said they agreed to terminate their plans for a US$160 billion merger because of new US tax rules aimed at curbing international corporate deals to take advantage of lower overseas tax rates.

“We plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016, consistent with our original timeframe for the decision prior to the announcement of the potential Allergan transaction,” Ian Read, Pfizer’s CEO, said in a statement. “As always, we remain committed to enhancing shareholder value.”

Shares of Allergan traded 3.3 percent higher in New York at 2.11pm.

Shares of Monsanto fell 0.3 percent in afternoon trading. The world’s largest seed company, thwarted in its repeated attempts to buy Switzerland’s Syngenta, said it is rethinking its growth strategy. St Louis-based Monsanto also posted disappointing quarterly results.

"We no longer see large-scale M&A as a likely opportunity," Monsanto CEO Grant told investors on a conference call.

In Europe, the Stoxx 600 Index finished the session with a 0.8 percent gain from the previous close.

Germany’s DAX Index rose 0.6 percent, France’s CAC 40 Index increased 0.8 percent, while the UK’s FTSE 100 Index rallied 1.2 percent.

Shares of Glencore closed 1.2 percent lower in London after the miner and commodities trader said it has agreed to sell a 40 percent stake in its agricultural business to Canada Pension Plan Investment board, the country's largest pension fund, for US$2.5 billion in cash.

The deal, which is part of Glencore’s efforts to reduce its debt, is expected to close in the second half of this year, subject to regulatory approval, and values the equity of Glencore’s agricultural business at US$6.25 billion, Glencore said in a statement.

(BusinessDesk)

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