RTR - Merck explores $15 billion-plus drug portfolio sale

Merck explores $15 billion-plus drug portfolio sale - sources

NEW YORK/LONDON (Reuters) - Merck & Co Inc (MRK.N) is considering selling a big portfolio of mature drugs that could fetch more than $15 billion, according to people familiar with the matter, as the U.S. drugmaker continues to streamline businesses to focus on high-growth areas.

Merck, which is also in the process of selling its $14 billion consumer healthcare unit, is working with an investment bank on the potential sale of the off-patent drugs, which could draw interest from generic drugmakers, the people said.

Merck's off-patent drugs are called "diversified brands" and many are sold in emerging markets.

The sale processes underscore efforts by large drugmakers to shed smaller divisions they view as non-core so they can better focus on their mainstay products. They have shown new willingness to consider large asset swaps with rivals to exit weaker businesses and bolster core areas where they are already top players.

Sanofi SA (SASY.PA), being advised by Evercore Partners Inc (EVR.N), is also in the market with its aging drug portfolio, which could fetch between $7 billion and $8 billion, Reuters reported on Tuesday.

Representatives for Merck declined to comment. The sources asked not to be named because the matter is not public.

Both Merck and Sanofi have an extensive line-up of older products that could be carved out, following similar moves now under way at Pfizer Inc (PFE.N) and GlaxoSmithKline Plc (GSK.L) to place older products in separate divisions.

Pfizer announced last year it planned to separate its business into three units - innovative pharmaceuticals; vaccines, oncology and consumer health; and established products. The U.S. group has not ruled out a full breakup.

GSK is starting down a similar path, and CEO Andrew Witty said on Wednesday that he would consider single products or broader divestiture of its established drugs.

>>> US Close Dow+0,28% S&P+0,30% Nasdaq+0,27%

Closing Market Summary: Stocks and Bonds Climb While Fed Tapers Again

Equity indices spent some time on either side of their respective flat lines on Wednesday, but when the dust settled, they ended with modest gains. The Dow Jones Industrial Average, S&P 500, and Nasdaq all added 0.3%, with the Dow registering a new record closing high at 16,580.84, which represented its first green close for the year.

Today's session featured another heavy dose of earnings and a full slate of economic data. Prior to the open, index futures jumped in reaction to a better-than-expected ADP Employment report, but promptly surrendered those gains when it was reported that GDP increased a puny 0.1% in the first quarter (consensus 1.0%).

The disappointing report ensured a lower start for the major averages, but they only took one more step down before forging a rebound on the back of the industrial sector (+0.5%), which drew strength from transports. The Dow Jones Transportation Average jumped 0.7%, bolstered by above-consensus earnings reported by C.H. Robinson (CHRW 58.90, +2.91).

The S&P 500 and Dow were able to reclaim their flat lines within the first hour of action, while the Nasdaq remained in the red a bit longer as biotechnology and high-beta tech names weighed.

After clawing back to unchanged, the key indices maintained narrow ranges until the Federal Open Market Committee released its latest policy statement, which called for another $10 billion reduction to monthly asset purchases, lowering the total to $45 billion.

There were few changes overall in the language the FOMC used to communicate its stance. One switch came in the opening sentence as the committee acknowledged that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. In March, the directive stated that "growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions."

What that opening sentence, and the decision to cut another $10 billion from its monthly asset purchases implied, was that the FOMC is clearly expecting pent-up demand to shine through in the second quarter and to overshadow the feeble 0.1% GDP growth rate for the first quarter.

In any event, equity indices gyrated a bit following the release, but climbed to new session highs into the close. The late-afternoon move allowed the Nasdaq to catch up to its peers, while also giving a boost to biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 230.25, +1.16) gained 0.5%, while the broader health care sector (+0.1%) underperformed amid weakness in Express Scripts (ESRX 66.58, -4.43) after the company reported disappointing quarterly results.

The post-FOMC move also lifted some of the high-beta tech names off their lows, but shares of Twitter (TWTR 38.97, -3.65) still finished at a new all-time low after reporting its quarterly results. The stock tumbled 8.6% after Twitter's disappointing user growth overshadowed its above-consensus earnings.

On the downside, the energy sector (-0.01%) ended just below its flat line, but still finished April ahead of the remaining nine groups with a gain of 5.1%.

Treasuries retreated overnight, but reversed course following this morning's GDP report. The 10-yr note advanced 12 ticks, pressuring its yield four basis points to 2.65%.

Boosted by month-end flows, trading volume was above average as 892 million shares changed hands at the NYSE floor.

Reviewing today's data:

* The ADP Employment report indicated that employment in the nonfarm private business sector rose by 220K in April, which was above the increase of 215K expected by the consensus.  * Q1 GDP increased 0.1% quarter-over-quarter, which represented the lowest quarterly increase since GDP rose by the same amount in Q4 2012. The consensus expected GDP to increase 1.0%. Many analysts over the last couple months have theorized that the softness in the first quarter is the result of extreme winter weather conditions. In our opinion, economic growth has tended to slow during the first half of the year for the past several years. The slowdown in Q1 2014 was not extraordinary and we do not expect a snap back from pent up demand to occur immediately in Q2 2014.  * Manufacturing activities in the Chicago region rebounded in April as the Chicago PMI jumped to 63.0 from 55.9 that was reported in March. That was the strongest reading since the index reached 66.6 in October. The consensus expected the PMI to increase to 56.5. The increase in the Chicago PMI was predicated on a large boom in production. The production index jumped to 70.5 in April from 61.7 in March. More importantly, a solid increase in order backlogs (54.9 from 50.4) is likely to keep upward pressure on production growth over the next few months.  * The weekly MBA Mortgage Index fell 5.9% to follow last week's decline of 3.2%. 

Tomorrow, the Challenger Job Cuts report for April will be released at 7:30 ET, while weekly initial claims, March Personal Income, PersonalSpending, and core PCE Prices will all be reported at 8:30 ET. March Construction Spending and the April ISM Index will both be released at 10:00 ET, while auto and truck makers will be reporting their April sales throughout the day.

* S&P 500 +1.9% YTD  * Dow Jones Industrial Average +0.03% YTD  * Nasdaq Composite -1.5% YTD  * Russell 2000 -2.9% YTD

>>> Serco Group Plc Reports Q1 Rev €1.2B (-0.3% organic decline); internal forec

Serco Group Plc Reports Q1 Rev €1.2B (-0.3% organic decline); internal forecasts are that revenue will be slightly (about 1%) lower than we previously thought,
- Guides FY14 Rev at £4.7-4.9bn at constant currency 
- Serco's order book was £17.1bn at 31 December 2013. Since the beginning of the financial year, our contract awards totalled £1.2bn, which is higher than the equivalent stage last year, although this figure does include the Northern Rail contract 
- Sharp declines in trading margin in the first quarter, and a weakened outlook for the first half, have led us to reassess the overall margin we are likely to achieve for the year. Factors which are reducing, or may further reduce, the profitability of the business include: new terms on our interim franchise agreement for Northern Rail; transition costs that may be incurred to close our Australian garrison support operations; greater-than-anticipated investment to achieve further improvement in the operational performance of challenging contracts such as PECS and COMPASS; delays in implementing reductions in headcount and related costs, in part caused by the requirements of our Corporate Renewal Programme; and a lower recovery on bid investment costs given fewer new contract wins than previously anticipated. Revenues are also expected to be about £50m (1%) lower than previously anticipated. 
- Based on an assessment of the risks in these forecasts, the Board now believes that Adjusted Operating Profit at constant currency in 2014 will be not less than £170m. At latest rates of exchange, currency movements would serve to reduce reported profits by around £15m. 
- Board's views appropriateness of an equity placing of up to 49,932,918 shares, representing up to 9.99% of existing issued share capital, details of which we anticipate will be announced shortly.

>>> Alibaba’s IPO may not be as big as everyone is expecting

Alibaba’s IPO may not be as big as everyone is expecting {http://qz.com/204401}
Slow and low, that is the tempo. Reuters/Aly Song
Don’t expect the e-commerce giant Alibaba’s much-ballyhooed initial public offering to be a blockbuster deal at first, at least from a pure valuation standpoint.
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The highly anticipated offering, which is expected to hit the markets any day now (sources tell us the filing of its IPO papers is days, not weeks, away), has been heralded as potentially the largest IPO in history. And while it may indeed be a big deal—with the Wall Street Journal hinting (paywall) at a whopping $20-plus-billion valuation—sources say that the Chinese technology company head by CEO Jack Ma wants to be strategic about its debut in the US markets.
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To that end, the IPO documents to be filed with the Securities and Exchange Commission could value the company at a more modest $15 billion, as a so-called placeholder in its offering paperwork, a source familiar with the company said.
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The company could still enjoy a hefty offering, that likely will eclipse Facebook’s $16-billion 2012 stock debut. But topping the $22-billion IPO record that the Agricultural Bank of China set in 2010 may be a stretch.
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Largest-ever-global-IPOs-IPO-value_chartbuilder
With skittish markets, IPOs can be a tricky business. Bankers familiar with Alibaba’s offering say that the Chinese company is keenly aware of the growing skepticism from investors toward over-hyped technology share offerings. Company officials want to manage investor expectations, a source said. That means possibly floating a deal with fewer shares and a smaller valuation at the onset. The idea will be to let investor appetite determine if the price or supply should be jacked up, one bank source said.
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Despite the record pace of IPOs lately, managing offerings over the past few weeks has become even more of a challenge than usual. That’s especially true after a tech-fueled selloff in stocks that has given investors pause. With uncertainty still swirling about whether or not this is a bubble, it’s unclear how individual offerings will be received in the market. Weibo Corp., the company known as the “Twitter of China” (and one that has Alibaba as an investor) lowered the price of its American depositary shares, offering them at $17 in its US IPO a few weeks ago.
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To be sure, Alibaba could still turn out to be the mother of all IPOs. It’s certainly viewed as a unique company, with its vast mix of businesses (including ones that resemble the digital payment platform PayPal and the online peer-to-peer retailer eBay) housed under one roof. Potential investors will be looking to the public documents that Alibaba officials will release for a picture of how those entities work within the operating company melange.
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“[Alibaba] is taking its time because it wants to make sure that investors understand what the company does,” said a person close to the deal. A spokesman representing Alibaba declined to comment on the impending offering.
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Goldman Sachs, JPMorgan Chase, and Credit Suisse, among other banks, are expected to be the underwriters handling the stock offering. They are likely to avoid filing IPO papers during public holidays recognized in Hong Kong, such as China’s Labor Day tomorrow.

>>> FOMC HOLDS FED FUNDS RATE TARGET AT 0.25%: REDUCES BOND PURCHASES BY ADDITIO

FOMC HOLDS FED FUNDS RATE TARGET AT 0.25%: REDUCES BOND PURCHASES BY ADDITIONAL $10B (FURTHER TAPER) TO $45B/MONTH (AS EXPECTED)
- Vote: 9-0 (Kocherlakota withdraws dissent; as expected)
- Growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated. Household spending appears to be rising more quickly. Business fixed investment edged down, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable. 
- Committee sees the risks to the outlook for the economy and the labor market as nearly balanced. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term. 
- The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. 
- Beginning in May, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $20 billion per month rather than $25 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $25 billion per month rather than $30 billion per month. 
- Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. 
- Reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. 

- The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.