With the stock market rallying on Thursday, the list of gainers was large led by a number of companies making news on M&A announcements.
SFN Group (SFN) climbed 51% after it announced it would be acquired for $14/share. The company entered into a definitive agreement to be acquired by Randstad (RAND) for $14 per common share through a cash tender offer, which values the company's equity at approximately $770 million. This represents a premium of 53% over SFN Group's closing share price on July 19 and a 49% premium over SFN Group's volume weighted average closing share price over the 30 days ended July 19. The transaction has been unanimously approved by the board of directors of SFN Group. The transaction is not subject to a financing contingency and will be financed through borrowings under Randstad's existing credit lines. The transaction is expected to close late in the third quarter of 2011.
Datalink (DTLK) rose 13% after the company released strong Q2 earnings and Q3 guidance. Revenues for the quarter ended June 30 increased 26% to $89.5 million compared to $70.9 million for the prior-year period. The analyst forecast was for $82.7 million. Non-GAAP net earnings for the Q2 were $3.3 million, or $0.19 per diluted share vs. the analyst forecast of $0.11. The company also said that, based on the company’s backlog and sales pipeline, it expects revenues to be between $85 million and $90 million for Q3 and expect Q3 net earnings to be between $0.15 and $0.19 per diluted share on a non-GAAP basis. The analysts forecast for Q3 is EPS of $0.12 on revenues of $81.2 million. The Q3 guidance represents a 23% to 30% increase in revenues and a 36% to 72% increase in non-GAAP net earnings per share over the same period last year.
MedcoHealth Solutions (MHS) closed 14% higher after Express Scripts (ESRX) agreed to acquire the company. Under the agreement, Medco shareholders will receive $71.36 per share in cash and stock, or $29.1 billion, based on yesterday's closing price. Medco shareholders will receive $28.80 in cash and 0.81 shares for each Medco share they own upon closing of the transaction. The agreement has been unanimously approved by the boards of directors of both companies.
The merger will combine the expertise of two complementary pharmacy benefit managers (PBMs) to accelerate efforts to lower the cost of prescription drugs and improve the quality of care for Americans. Express Scripts and Medco believe they will be successful working through the regulatory review process. Competition in the pharmacy benefit management business is intense. Competition comes from several sources, including retail pharmacy PBMs, managed care PBMs, independent PBMs and specialized PBMs. The PBM business will continue to remain competitive after this transaction, as PBMs will continually drive for greater efficiencies to provide better service and pricing to their customers. The companies further noted that due diligence to date has identified estimated synergies of $1 billion once fully integrated, which represents approximately 1% of the combined company's costs. The transaction is expected to be slightly accretive to EPS (excluding integration and deal-related costs and charges) in the first full year after closing and moderately accretive once fully integrated.
Motorola Mobility Holdings (MMI) rallied 12% after commentary in a filing from Carl Icahn, who disclosed in a 13D that on July 20 and 21 he discussed with the company his view that the company should explore alternatives regarding its patent portfolio to enhance shareholder value. Icahn believes that the company’s patent portfolio, which is substantially larger than Nortel Networks' (NT) and includes numerous patents concerning 4G technologies, has significant value. In addition, there may be multiple ways to realize such value given the current heightened market demand for intellectual property in the mobile telecommunications industry. Icahn intends to have further discussions with the company.
Robert Half International (RHI) jumped 15% after the company reported strong Q2 results. For the quarter ended June 30, net income was $36.4 million or $0.25 per share, on revenues of $938.0 million. Net income for the prior year's second quarter was $12.2 million or $0.08 per share, on revenues of $769.1 million. The company noted that it saw broad-based, improving demand for its professional staffing services and Protiviti both in North America and abroad. Its permanent placement and technology staffing divisions were particularly strong. The pricing environment also continued to improve during the quarter, which contributed to higher gross margins.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.