Bayer Buyout Rumors Materialize Again

Includes: BAYRY, NVS
by: Roy Mehta

Bayer, Germany’s largest drug manufacturer, saw its shares boosted about 3% Tuesday session on renewed rumors that Novartis was looking to launch an offer for the company. On August 15th, the same rumor caused Bayer stock to jump 5%. Bayer is a conglomerate, creating revenue on drugs, BAY 23 08 2007 Chartfarm chemicals, and upholstery and insulation materials. JP Morgan analysts estimate its breakup value at about $76.50 per share, a 33% premium to current prices. It is believed that if Novartis does successfully bid on Bayer, it will divest some of Bayer’s current operations. However, some analysts have their doubts in the validity of the rumors: “Novartis has suffered several setbacks lately and we don't believe the company is in a strong enough position to make a big acquisition now," Dresdner Kleinwort told clients in a note. Novartis has experienced some hurdles this year with its new diabetes drug Galvus being delayed, and more recently on August 11th when its painkiller drug Prexige was pulled from shelves by Australian regulators because of fears that it caused liver damage. Both Novartis and Bayer spokesmen refused to answer questions on the rumors when asked, saying their companies do not comment on market speculation.

Sources: Reuters, Bloomberg
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Stocks/ETFs to watch: BAY, NVS

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