Wednesday, February 1, 2023
HomeMarketMerger Monday Is Back. But It Comes With a Warning.

Merger Monday Is Back. But It Comes With a Warning.

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M&A activity can typically be expected to soften in an economic downturn but the flurry of deals emerging Monday doesn’t necessarily signal that the health of corporate America is improving.

Amgen agreed to buy Horizon Therapeutics in a deal valued at $27.8 billion, the company said early Monday. Amgen was the last company standing in the auction for the rare disease drugmaker, after French pharma giant Sanofi withdrew Sunday. Johnson & Johnson pulled out of the process earlier this month.

For Sanofi, the price got too high to create value. Amgen will be getting Horizon at a slight premium even to its recent peak valuation of $27 billion last year.

Coupa Software however, could be snapped up at a cheaper price. The cloud company’s stock has fallen 60% in 2022 amid a broader slump for the tech sector. Private-equity firm Thoma Bravo is in advanced talks to buy Coupa, according to a Bloomberg report.

Over in Europe, biotechnology companies Novozymes and Chr. Hansen agreed to merge Monday–the biggest ever deal between two Danish companies.

But deals are also being re-evaluated in the current climate. Rivian Automotive has paused its joint venture to build electric vans with Mercedes-Benz in Europe, both companies said Monday.

The EV maker’s CEO R.J. Scaringe said it would return to exploring opportunities with Mercedes-Benz “at a more appropriate time.”

For all the deals that are going ahead, many more may be kicked down the road.

Callum Keown

*** Join Barron’s senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn today at noon when they discuss the outlook for financial markets, industry sectors, and individual stocks. Sign up here.

***

Microsoft to Buy Stake in London Stock Exchange Group

Microsoft will buy a stake of about 4% in London Stock Exchange Group as part of a 10-year strategic partnership, the U.K. company said Monday.

What’s Next: The fact Microsoft has taken a stake in LSEG shows how seriously it is taking the partnership. The agreement appears to benefit both companies, if they can get it right–with its stake Microsoft has extra incentive to make it work.

Callum Keown

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Central Banks Set to Make Their Next Rate Moves

Central banks in the U.S. and Europe will move on interest rates this week, with expectations for half-percentage point increases from the Federal Reserve, the European Central Bank, the Bank of England, and the Swiss National Bank. All will be announcing their decisions amid a big week for fresh inflation data.

  • On Tuesday, the U.S. consumer price index is expected to show inflation slowed over the month and year ending in November, though core inflation, which excludes food and field prices, is expected to remain the same as October’s 0.3% gain.

  • The U.K.’s monthly inflation reading on Wednesday is expected to show it slowed to 10.9% for the year ending in November, from 11.1% in October. Later in the day, U.S. Fed Chairman Jerome Powell will hold a press conference after releasing the decision on rates.

  • European central banks are also raising rates. The Swiss National Bank is expected to raise its rate by a half-percentage point to 1%, while the Bank of England is expected to move to 3.50% and the ECB to 2.50%, according to FactSet.

  • Also on Thursday, the Census Bureau will release retail sales data for November. The expectation is for consumer spending to be flat from October, while sales excluding autos are seen gaining 0.3%. Both figures rose 1.3% in October.

What’s Next: Investors expect interest rates in the U.S. to peak in May at around 5%. The so-called dot plot of projections by Fed officials will show where they expect rates, inflation, unemployment and economic output will be for the next few years and long-term.

Liz Moyer

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Twitter Restarts Paid Blue Subscription Today After Pause

Twitter’s blue subscription tier starts today, with web users paying $8 a month and Apple iOS subscribers paying $11 a month for the blue check mark and other features. Twitter said it would replace “official” labels on the platform with gold check marks for businesses and gray for government and certain other official accounts.

What’s Next: Fauci is retiring this month as the White House’s chief medical officer and has said he would fully cooperate with House Republicans, who have vowed to investigate the Covid-19 pandemic and the government’s response to it when they take majority control of the chamber in the next Congress.

Liz Moyer

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NASA’s Orion Test Flight Clears Way for 2024 Mission

NASA’s Orion spacecraft splashed down to Earth on Sunday, 50 years after the last crewed lunar mission, Apollo 17, landed on the moon. The successful $4 billion test flight clears the way for Orion’s next flight in 2024, when it will orbit the moon with four astronauts aboard.

  • The uncrewed Orion re-entered the atmosphere at Mach 32, or 32 times the speed of sound, withstanding temperatures of up to 5,000 degrees Fahrenheit, and landed in the Pacific Ocean west of Mexico’s Baja California. Inside were three test dummies wearing vibration sensors and radiation monitors.

  • During its 1.4 million-mile trip, Orion entered a wide orbit around the moon, getting as close as 80 miles to the lunar surface, and photographed the crescent Earth from space. Orion stayed in space longer than any spacecraft designed for astronauts has without docking at the International Space Station.

  • Artemis, NASA’s multiyear program to return astronauts to the moon, has worked with
    Lockheed Martin,
    which developed the Orion spacecraft, the private rocket company SpaceX,
    Northrop Grumman,
    and others to develop vehicles and components.

  • NASA on Friday awarded
    Boeing
    a contract valued at about $3.2 billion to keep making components of future Space Launch System rockets for two future Artemis flights to the moon and rockets for future missions, The Wall Street Journal reported.

What’s Next: NASA is planning a two-person lunar landing for 2025. Two U.S. companies are launching lunar landings next year.

Janet H. Cho

***

Health Officials Advise on Mask Wearing Amid Virus Surge

Health officials in New York are advising people to wear masks again in public indoor spaces as Covid-19 cases surge. The number of U.S. cases increased 50% for the week ended Dec. 7, from the previous week, according to the Centers for Disease Control and Prevention data, and are up 67.7% over the past two weeks.

  • CDC director Dr. Rochelle Walensky said flu and respiratory syncytial virus (RSV) cases are higher than normal and Covid-19 cases and hospitalizations are rising, and urged mask-wearing. Los Angeles officials are also grappling with a surge in cases that could bring back mask rules.

  • In China, a surge in cases has prompted officials to set up more intensive care facilities and to shore up hospital facilities, the Associated Press reported. A recent lifting of restrictions spurred worries amid inadequate healthcare resources and lower vaccination rates among the elderly.

  • China has eased restrictions on transport workers as part of relaxing its zero-Covid policy, the Financial Times reported. China’s cabinet said long-haul truckers no longer have to enter long quarantines and undergo constant PCR testing, which is expected to improve cargo flow.

  • China also cut the number of days that aircrew have to spend in Hong Kong, to three from seven, before flying to the mainland, the FT reported, citing
    Cathay Pacific.
    Last week, Beijing ended mandatory testing in many areas, the AP reported.

What’s Next: The Centers for Disease Control and Prevention is working on new “pan-respiratory” benchmarks to measure the spread of Covid-19, the flu, and RSV, meaning the prevalence of all three viruses could factor into any future official mask recommendations, CBS reported.

Janet H. Cho

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MarketWatch Wants to Hear From You

When should you use “buy now, pay” later in lieu of a credit card? What are the pros and cons of each method of payment? MarketWatch asks the experts to weigh in.

A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Callum Keown


Credit: marketwatch.com

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