Today's Market: Deals And News Impacting These Companies

by: Matthew Smith

The past few months have seen more and more deals getting done as it pertains to M&A activity. Most of the deals however have been for joint venture stakes and individual properties rather than entire companies, but as the bull market matures one can expect to see entire companies get taken out by larger rivals and possibly even private equity firms who try to lock in the lower rates before they lose access to these historically low interest rates.

The activist investors have been stepping up their moves in recent quarters and pushing boards to clean house or face proxy fights. Even with this trend not all companies take the threats seriously and we will look at one company today who kept a CEO which many shareholders, and arguably the market, wanted to see dismissed.

Chart of the Day:

With the U.S. dollar continuing to show signs of strengthening long-term the Nikkei continues to rebound, even when Japan's economic data and news is not the best. If the Yen is going to continue to weaken, then the Nikkei is going to continue to gain strength. We might also see the index close at the highs for the year if the momentum trade continues.

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Source: CNBC

We have no economic news today, but will see data released tomorrow that will begin a somewhat busy week.

Asian markets finished mostly higher today:

  • All Ordinaries -- down 0.80%
  • Shanghai Composite -- up 0.05%
  • Nikkei 225 -- up 2.29%
  • NZSE 50 -- UNCH
  • Seoul Composite -- up 1.01%

In Europe, markets are trading higher this morning:

  • CAC 40 -- up 0.04%
  • DAX -- up 0.36%
  • FTSE 100 -- up 0.10%
  • OSE -- down 0.55%

Biotech Names Continue Higher ...

Biotech names are once again leading the way higher in Monday morning trading with both Celgene Corporation (NASDAQ:CELG) and Gilead Sciences (NASDAQ:GILD) seeing shares rise on news. Celgene's shares are drawing interest due to Cantor Fitzgerald having raised their price target on Celgene shares to $186/share from their previous price target of $171/share. With the company's continued growth, pipeline development and pipeline expansion the analysts are seeing greater upside in the name and we would expect further upgrades and price target raises heading into the year end.

Gilead Sciences is rising after the company announced that the FDA has approved the company's $1,000 per day hepatitis C drug which requires the patient take only one pill a day. The treatment is a breakthrough on many levels, as it requires only one pill per day, is far more effective than current treatments and has a shorter treatment period. The drug, Sovaldi, could generate $1.6 billion in annual revenues for Gilead as physicians prescribe the drug to patients.

Odd Retail Move ...

One of the toughest retail segments right now is apparel and within that segment the teen retail apparel market is especially tough. The best run companies have been having issues with performance but the poorly run companies have fared far worse. One of the worst performers in the industry has been Abercrombie & Fitch (NYSE:ANF) which has seen its share price come under pressure as their teen consumer has been hit hard by the economic downturn and also looked elsewhere for fashion. Worse still is that the company's CEO has attractive negative attention from the press for his comments about Abercrombie's target audience and why the company does not sell certain sizes of clothing.

After recovering along with the rest of the retail sector after the 'Great Recession' Abercrombie & Fitch has seen a rough two years. Each time investors think that the downturn has ended it turns out to be a head fake. What investors want right now is new leadership, specifically a new CEO.

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Source: Yahoo Finance

The fact that the CEO's life partner, who is not an employee of the company, was supposedly running meetings and acting in a management role also had many wondering what was going on at the company. This has led many investors to want an end to Michael Jeffries' tenure as CEO, with Engaged Capital asking in recent days that the company look at replacing him. The board apparently ignored this request, as well as the strong move in the share price as a result of the letter being released to the public, which sent shares sharply higher thus signaling that Abercrombie's shareholders were all for a change at the top. This is a bad move and hopefully since the deal was only extended by one year will not subject shareholders to further pain.

Blockbuster Consolidation Continues ...

It is not a huge 'Merger Monday' today, but there are enough deals out there to get excited about. One we found quite interesting was Disney's (NYSE:DIS) deal to purchase the future distribution rights to any new films in the 'Indiana Jones' franchise from Viacom's (NASDAQ:VIAB) Paramount Pictures. Viacom's Paramount Pictures will retain the distribution rights to the previous four films. This would seem to pave the way for future films to be made and on a more regular basis as the latest installment set the foundation for either a reboot in the franchise or the continued use of the new characters who could continue the advancement of the current storyline. This is just the latest deal for Disney which has brought big franchises under its umbrella with the Pixar and Marvel acquisitions paving the way and the deal with Lucas Films to obtain the Star Wars franchise and also brought Indiana Jones into the fold. This deal cements Disney's control over the Indiana Jones franchise as it allows the studio to not only make the movie but also control its marketing and DVD sales, something which is quite important to Disney.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.