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Wednesday, December 9, 1998
"Fear and greed will ruin your investment returns." -- David and Tom Gardner, The Motley Fool Investment Guide
Zeneca and Astra Unite
Britain's Zeneca Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZEN)") else Response.Write("(NYSE: ZEN)") end if %> and Sweden's Astra AB <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: A)") else Response.Write("(NYSE: A)") end if %> officially announced that they will merge in a stock swap worth $34.6 billion that will create the world's fourth largest drug company. Each Astra share will be traded for 0.5045 of a Zeneca share, which represents a 12% premium over the closing price of Astra's Class A shares yesterday and a 16% premium over the close of its Class B shares. Zeneca shareholders will own 53.5% of the combined company, which will take the name AstraZeneca and have its headquarters in London and its research operations in Sweden.
Zeneca and Astra expect to achieve $1.1 billion a year in pre-tax cost savings three years after the merger has been completed. The new company will take a charge of $1.2 billion to restructure and eliminate roughly 6,000 jobs worldwide. Last year, Astra and Zeneca had combined pro forma revenues of $15.9 billion -- $11.9 billion of which came from drug sales -- with pro forma net earnings of $2.436 billion. The merger also will accelerate payments to the world's biggest drug maker Merck <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MRK)") else Response.Write("(NYSE: MRK)") end if %>, which has a jointly owned partnership with Astra called Astra Merck Inc. Astra runs the 50-50 joint venture, which markets most of its products in the U.S. Astra has the option of buying out Merck as soon as 2008.
AstraZeneca will be headed by Zeneca CEO-to-be Tom McKillop, a 54-year-old former research executive. Percy Barnevik, a well-known Swedish industrialist who is chairman of Astra's biggest shareholder, Investor AB, will be chairman. The two companies' current CEOs, Haakan Mogren for Astra and Sir David Barnes for Zeneca, will share the title of executive deputy chairman. The 14-member board of directors will be evenly split between the two drug makers.
The merger brings together Astra's ulcer pill Prilosec (a.k.a. Losec), the hottest-selling drug worldwide, and Zeneca's stable of cancer medication, which makes up a third of the company's drug sales, plus Zeneca's flagship heart medicine Zestril. The downside is that the two firms' best-selling drugs, Prilosec and Zestril, will both see their U.S. patents expire in 2001.
News to Go
Boeing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> won a $1.4 billion order for 50 Boeing 717-200s, with rights to purchase 50 more, from Trans World Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %>, though TWA also decided to buy 75 planes -- 50 A318s and 25 A320s -- with the option to buy an additional 75 aircraft, from rival Airbus Industrie. Boeing also received an order worth $335 million for two 747-400 freighters from Luxembourg-based Cargolux Airlines.
Two proposed telecommunications mergers could be in jeopardy as they face scrutiny by the government's antitrust hawks, according to The Wall Street Journal. Federal Communications Commission officials have serious reservations regarding the planned Baby Bell mergers between SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> and Ameritech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %> and between Bell Atlantic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> and GTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTE)") else Response.Write("(NYSE: GTE)") end if %>.
Data networking company 3Com Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> and Germany's largest electronics and engineering firm, Siemens AG, are holding a joint press conference at 10:30 a.m. Pacific time (1:30 p.m. Eastern) to announce a $100 million joint venture to develop products for computer-based office phones. The partnership will allow 3Com to better compete against rival Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> in this growing area while still remaining independent.
Women's clothing designer and manufacturer St. John Knits <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJK)") else Response.Write("(NYSE: SJK)") end if %> announced it has received an offer from company founder, Chairman, and CEO Bob Gray and his family to buy shares they don't already own for $28 a share in cash -- a 28% premium over the company's closing price yesterday of $21 15/16. Gray said that rather than pushing for annual revenue growth at a historic rate of 25%, "it is in the company's best long-term interest to slow the growth rate to about 10 percent per year and focus on doing what we do best -- delivering the highest quality merchandise and service to our loyal customers. I believe we can best accomplish this objective as a private company."
Franchising and direct marketing powerhouse Cendant Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> said analysts' earnings expectations (excluding one-time items) for the fourth quarter and next year are "reasonable." The company is also considering selling its interactive businesses. It added that it has repurchased about $100 million in stock out of its previously announced buyback target of $1 billion.
Montvale, N.J.-based Great Atlantic & Pacific Tea Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAP)") else Response.Write("(NYSE: GAP)") end if %>, better known as A&P, said that due to heavy competition, it will close or sell 127 of its 907 stores and take a charge of up to $160 million. The grocery store chain plans to invest some $1.5 billion in the next three years to open 175 to 200 superstores in order to shift to a more competitive large-store format.
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