Deals: Pharma Is the Cure for M&A’s Blahs

In our M&A Roundup for the week ended March 15, Merck-Schering is followed — at a distance — by Gilead Sciences buying CV Therapeutics. Behind them...
Roy HarrisMarch 16, 2009

As expected, pharmaceuticals ruled the week in North American dealmaking, overpowered by the $43.2-billion Merck & Co. purchase of Schering-Plough Corp. And another pharma deal, between Gilead Science Inc. and CV Therapeutics Inc., sneaked in as number-two, about $42-billion behind it.

The rest of the top ten transactions, though, were an eclectic brew of natural-resources, banking, and even apparel deals, according to data provided to CFO.com by mergermarket. At the top of that “also-ran” list was St. Louis-based Arch Coal Co.’s $761-million purchase of a mining property from London’s giant Rio Tinto plc.

The 24 deals struck last week — while worth a rousing $46.84 billion — represented a slip from the 32 transaction of the prior week. Because of teh relative lack of Merck-style blockbusters, that week’s action had topped out at only $4.38 billion.

For the year-to-date, 407 deals now have been struck, for a total of $186.78 billion. Because of the relative lack of blockbusters last year, the 937 transactions of 2008 at this time were worth a mere $109.62 billion.

Merck & Co. to buy Schering-Plough Corp. for $43.20 billion

Kenilworth, N.J.-based health-care company Schering-Plough definitively agreed to combine with Whitehouse Station, N.J.-based pharmaceutical giant Merck for cash and stock carrying a premium of 33.9 percent. Both boards approved the transaction, to be structured as a reverse merger. The price per share of Schering-Plough is $10.50 and 0.5767-share of the combined company, representing a value of $23.61. The cash portion, which represents about 44 percent of the total price, will be financed with a combination of $9.8 billion from existing cash balances and $8.5 billion from committed financing to be provided by JPMorgan. The deal is expected to close in the fourth quarter.
Seller financial advisor: Goldman Sachs; Morgan Stanley
Bidder financial advisor: JPMorgan
Seller legal advisor: Shearman & Sterling (Advising Morgan Stanley); Skadden Arps Slate Meagher & Flom; Sullivan & Cromwell (Advising Goldman Sachs); Wachtell, Lipton, Rosen & Katz
Bidder legal advisor: Davis Polk & Wardwell (Advising JPMorgan); Fried Frank Harris Shriver & Jacobson

Gilead Sciences Inc. to buy CV Therapeutics Inc. for $1.31 billion

Palo Alto, Calif.-based biopharmaceutical company CV definitively agreed to be acquired by Foster City, Calif.-based Gilead. CV focuses on applying molecular cardiology to the discovery, development, and commercialization of small-molecule drugs for the treatment of cardiovascular diseases. Gilead focuses on small-molecule therapeutics in relation to life-threatening infectious diseases. Both boards approved the merger at $20 a share, a premium of 25 percent. Gilead intends to finance the transaction with cash on hand, and expects the transaction to close in the second quarter.
Seller financial advisor: Barclays Bank; Goldman Sachs
Bidder financial advisor: Bank of America Merrill Lynch
Seller legal advisor: Cravath Swaine & Moore (Advising Goldman Sachs); Latham & Watkins
Bidder legal advisor: Cooley Godward Kronish; Willkie Farr & Gallagher (Advising Bank of America Merrill Lynch)

Arch Coal Inc. to buy the Jacobs Ranch coal mine from Rio Tinto Plc for $761 million

St. Louis-based Arch, a coal producer, agreed to acquire the Jacobs Ranch mine of London-based Rio Tinto, a mining company. Arch will finance the transaction with a combination of internally generated cash flow from operations, borrowings under the company’s $800-million revolving credit facility, and possibly other debt instruments.
Seller financial advisor: Credit Suisse
Bidder financial advisor: Bank of America Merrill Lynch; Citigroup
Seller legal advisor: Not Available
Bidder legal advisor: Bryan Cave; Dewey & LeBoeuf (Advising Bank of America Merrill Lynch; Citigroup)

VF Corp. to buy a 67-percent stake in Mo Industries Holdings Inc. from Summit Partners LP for $208 million

Greensboro, N.C.-based apparel company VF, which specializes in jeans, intimate apparel, workwear, knitwear, playwear, daypacks, and swimwear, has acquired the remaining Mo Industries stake it did not already own. Privately held, Los Angeles-based Mo is an apparel manufacturer and owner of the Splendid and Ella Moss brands. The seller, Summit, is a privately held Boston-based private equity firm. The price is $161 million cash, with VF also repaying Mo Industries’ $47 million of net debt. The acquisition is funded by VF’s internal cash.
Seller financial advisor: The Sage Group
Bidder financial advisor: Internal
Seller legal advisor: Kirkland & Ellis
Bidder legal advisor: Davis Polk & Wardwell

ChinaTel Group Inc. to buy a 49-percent stake in Chinacomm Communications Co. Ltd. from Trussnet Capital Partners (HK) Ltd. for $196 million

Irving, Calif.-based outsourced services provider ChinaTel acquired the stake in Beijing-based telecommunication service provider Chinacomm from Trussnet Capital Partners, a private Hong Kong based investment holding company in a deal structured as an asset purchase agreement for 2,450,000 Chinacomm common shares at $11.70 a share.
Seller financial advisor: Not disclosed
Bidder financial advisor: Not Available
Seller legal advisor: Not disclosed
Bidder legal advisor: Horwitz, Cron & Jasper

Silver Wheaton Corp. to buy Silverstone Resources Corp. for $140 million

Vancouver, Canada-based silver miner Silverstone definitively agreed to be acquired by Vancouver-based Silver Wheaton, a silver mining investment company, in an exchange of stock valued at $1.15 a share. Both boards approved the merger, which provides a premium of 17.5 percent. Terms call for 0.185-share of Silver Wheaton common to be exchanged for each Silverstone share. The transaction is expected to close by the end of May.
Seller financial advisor: Canaccord Adams
Bidder financial advisor: Genuity Capital Markets
Seller legal advisor: Blake, Cassels & Graydon
Bidder legal advisor: Cassels Brock & Blackwell

Penn West Energy Trust to buy Reece Energy Exploration Corp. for $57 million

Reece, a Medicine Hat, Canada-based energy exploration company, definitively agreed to be acquired by Calgary, Canada-based oil-and-natural-gas-producing income trust Penn West. Terms call for each Reece share to be exchanged for 0.125-trust unit of Penn West, worth $1.39 per Reece share, amounting to a 50-percent premium. The implied equity value of the transaction is about $91 million, including $40m of debt to be assumed by Penn West. The transaction is expected to be closed in early May.
Seller financial advisor: Sayer Energy Advisors
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

Mannkind Corp. to buy Pfizer Manufacturing Frankfurt GmbH & Co. KG from Pfizer Inc. for $33 million

Valencia, Calif.-based biopharma Mannkind, which is involved in the discovery, development, and distribution of therapeutic products, agreed to acquire Frankfurt-based insulin production company Pfizer Manufacturing Frankfurt from the New York City-based pharma parent. Terms call for the acquisition to include real property rights, Pfizer Manufacturing Frankfurt’s equipment and facility, the rights to acquire additional bulk insulin inventory, related technology rights, and the entire inventory range.
Seller financial advisor: Not Available
Bidder financial advisor: Not Available
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

Barclays Capital to buy Bear Wagner Specialists LLC from JPMorgan Chase & Co. for $30 million

London-based investment banking firm Barclays, a subsidiary of Barclays Plc, agreed to acquire New York City-based trading specialist Bear Wagner from JPMorgan Chase for that estimated amount, in a deal expected to close in 2009.
Seller financial advisor: JPMorgan
Bidder financial advisor: Barclays Bank
Seller legal advisor: Not Available
Bidder legal advisor: Not Available

Great Western Bank to buy 20 Colorado branches of First Community Bank from First State Bancorp for $28 million

Privately held, Rapid City, S.D.-based Great Western Bank agreed to acquire the 20 First Community Colorado branches from Albuquerque-based First State, a services provider. The price also includes $19 million in fixed assets, $444 million in selected loans, and $477 million in deposits. First State will retain $209 million in construction, acquisition and development, and non-accrual loans until they are sold or paid off. All Certificate of Deposit Account Registry and certain other deposits were excluded from the transaction, and will stay with First State Bancorp. The transaction is expected to close in the second quarter 2009.
Seller financial advisor: Keefe Bruyette & Woods
Bidder financial advisor: Sandler O’Neill & Partners
Seller legal advisor: Skadden Arps Slate Meagher & Flom
Bidder legal advisor: Sidley Austin

source: mergermarket