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Pfizer buys Pharmacia for $60 billion

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Drug giant Pfizer (NYSE:PFE) $32.00 said today that it is buying Pharmacia (NYSE:PHA) $32.59 in an all stock deal valued at $60 billion. The proposed merger will have shareholders of Pharmacia (PHA) receiving 1.4 shares of Pfizer (PFE) after Pfizer spins off its 84% stake in Monsanto (NYSE:MON) $13.76.

The combined company would have an estimated $48 billion in revenue and as much as $7 billion for research and development.

Shares of Pfizer (PFE), the largest drugmaker in the world fell 9.93% to $3.20 in overnight trading, while shares of Pharmacia (PHA) jumped 23.81% to $40.35.

Pfizer's chairman and chief executive Hank McKinnell said, "Our industry is changing rapidly. Remarkable advances in the scientific understanding of the origins of disease will sharply increase drug discovery target, but it is increasingly costly to fund the high-risk and long-term research" as reasons for the merger.

Drug industry analysts say today's merger deal between Pfizer and Pharmacia will have others in the sector presenting themselves as merger candidates. NCB brokers in Ireland think Bristol-Myers (NYSE:BMY) $22.70 and Wyeth (NYSE:WYE) $38.50 are vulnerable to takeover, after both company's stock prices have plummeted in recent months.

Deutsche Bank in London said Schering Plough (NYSE:SGP) $22.38 and Novartis (NYSE:NVS) $40.72 are likely to rise on speculation of being acquired.

Flat to lower open likely

The broader markets here in the U.S. are looking to open flat as we approach the opening bell. Stock futures have been bouncing around the unchanged levels this morning as S&P futures are currently unchanged at 917.30, while NASDAQ futures edge up 0.50 at 1,001.50 and Dow futures are higher by 7 points at 8,655.

Fair value for the S&P 500 today is $1.00. That price will not change during the day. HL Camp & Company has their computers set for program buying at $2.02 and set for program selling at $-1.32. Fair value for the NASDAQ-100 today is $3.50.

Euro reaches parity with the U.S. Dollar

The euro was trading above $1 for the first time since February 2000 in a move currecy analysts attributed to continued concerns over weakness in the U.S. stock markets.

Paul Bednarczyk, currency analyst at 4Cast in London said, "It's is dollar weakness. People are getting out of U.S. assets and putting the funds into other entities."

While there was no one event pushing the euro to par versus the dollar, analysts said that the market is beginning to grow concerned Federal Reserve Chairman, Alan Greenspan may be more cautious over U.S. growth that the market expected.

Paul Mackel, strategist at Dresdner Bank in London said, "There are concerns that the Fed could move back to an easing bias. We don't think so, but if Greenspan is a little more pessimistic than people are anticipating, that could fuel nervousness in the equity markets and also in the dollar."

Gold stocks could find morning bidders

In the U.S., December Gold futures (gc02z) rose $2.30 to $320.50, which is just barely above a trying-to-round 50-day MA at $320.04. This should give gold stocks a bid at the open as this futures contract looks to have some near-term upside to downward trend on its bar chart at $325.

Jeff Bailey
Senior Market Technician
Option Investor

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