<BREAKFAST WITH THE FOOL>
Monday, October 19, 1998
"If I were to wish for anything, I should not wish for wealth and power, but for the passionate sense of the potential, for the eye which, ever young and ardent, sees the possible." -- Soren Kierkegaard
Heading to the Chapel -- Again
Unable to tie the knot with another drug wholesaler back in August, McKesson Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCK)") else Response.Write("(NYSE: MCK)") end if %> is headed to the chapel again, this time with the nation's largest healthcare software maker, HBO & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %>. The $14.46 billion acquisition will make McKesson, already the biggest healthcare supplies distributor, a new type of one-stop shop for healthcare services. The combined company will be called McKesson HBOC.
HBOC shareholders will receive 0.37 of a McKesson share for each HBOC share. That values HBOC at around $32.81 per share, an 11% premium to HBOC's closing price of $29 9/16 ($29.5625) Friday. The companies expect to exchange vows by the first quarter of next year and anticipate that the deal will immediately contribute to earnings. They've identified pre-tax synergies totaling more than $75 million in the first full year after the merger and more than $150 million by the end of the third year.
The acquisition announcement comes just two months after McKesson and Cardinal Health <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAH)") else Response.Write("(NYSE: CAH)") end if %> scrapped their respective acquisitions of drug wholesalers Bergen Brunswig <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBC)") else Response.Write("(NYSE: BBC)") end if %> and AmeriSource Health <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAS)") else Response.Write("(NYSE: AAS)") end if %> after a federal judge ruled in favor of the Federal Trade Commission's opposition to the mergers on grounds that they would bar smaller competitors from entering the market.
Earlier this month, Cardinal Health beat McKesson to the altar by announcing the acquisition of medical products maker and distributor Allegiance Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AEH)") else Response.Write("(NYSE: AEH)") end if %> for about $5.4 billion in stock and assumption of debt totaling $890 million. In both cases, McKesson and Cardinal Health are now going after healthcare companies that aren't their direct competitors, which should make the mergers more palatable to regulators.
News to Go
The nation's largest supermarket chain Kroger Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KR)") else Response.Write("(NYSE: KR)") end if %> has agreed to acquire Fred Meyer Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FMY)") else Response.Write("(NYSE: FMY)") end if %> in a deal valued at about $8 billion plus the assumption of $4.8 billion in debt, according to The Wall Street Journal. The merger would allow Kroger to maintain its No. 1 position among grocery store chains. It would've lost the title to Albertson's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABS)") else Response.Write("(NYSE: ABS)") end if %>, which is acquiring American Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASC)") else Response.Write("(NYSE: ASC)") end if %>.
The U.S. Air Force awarded four contracts valued at $3.03 billion to the world's largest aircraft maker Boeing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> and defense and aerospace company Lockheed Martin <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LMT)") else Response.Write("(NYSE: LMT)") end if %> to develop new rockets to launch in spacecraft. Boeing's share of the booty comes to $1.88 billion, while Lockheed is taking home $1.15 billion.
Pharmaceutical giant Warner-Lambert (NSYE: WLA) reported third quarter earnings of $0.35, up from $0.24 last year and a penny ahead of analysts' estimates.
Earnings Announcements Today:
Ascend Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> -- Q3 estimate: $0.31; last year: $0.20
Bank of New York Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BK)") else Response.Write("(NYSE: BK)") end if %> -- Q3 estimate: $0.39; last year: $0.34
Clorox Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CLX)") else Response.Write("(NYSE: CLX)") end if %> -- Q1 estimate: $0.80; last year: $0.72
GTE Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTE)") else Response.Write("(NYSE: GTE)") end if %> -- Q3 estimate: $0.84; last year: $0.79
J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> -- Q3 estimate: $0.81; last year: $1.96
McDonald's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> -- Q3 estimate: $0.69; last year: $0.63
Sybase Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYBS)") else Response.Write("(Nasdaq: SYBS)") end if %> -- Q3 estimate: breakeven; last year: loss of $0.08
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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