Global M&A Activity Falls 32% in First Quarter

Global merger activity slowed in the first quarter 2009, dropping 32% to total $561.1 billion, according to Dealogic.

The drop might not come as a surprise, as the economic turmoil drags on and credit markets remain solidly frozen. The number of deals were down 29% to 7,554 for the quarter.

Targeted M&A activity in the U.S. fell 42% to $216.4 billion for the quarter -- and even then, it could have been lower if it hadn't been helped by the U.S. government's bailout program. The finance industry led the pack with $132.4 billion -- getting a sizable boost from the government’s $25 billion cash injection in Citigroup (C).

Health care M&A activity accounted for 23% of the global total bringing in $128.1 billion.

A key contributor was Pfizer’s (PFE)deal to acquire the drugmaker Wyeth for $68 billion. The New York-based company issued more than $13 billion in debt to help fund the purchase. The deal valued Wyeth shares at $50.19 each and Pfizer agreed to pay $33 in cash and 0.985 share in Pfizer stock for each Wyeth share.

Activity in Europe paints an even bleaker picture, with volume down 42%, totaling $181.6 billion, from 314.3 billion in the same quarter a year before.

“When the economy starts to rebound, activity will be the first thing to pick up,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

According to Pado, once capacity utilization hits about 90%, merger activity will pick up -- and it's just around 70% right now.

“Capacity utilization over 90% means you have to expand and acquisition is a lot cheaper than growing organically.”

Initial public offerings are also experiencing a drought with only two successful offering in the past eight months. Mead Johnson (MJN) spun off parent company Bristol Myers Squibb (BMY) after raising more than $700 million. Grand Canyon Education (LOPE) made its public debut in November, the first such offering since August.

Credit markets, the backbone of M&A activity have remained relatively solid, making it harder to complete deals. Companies, even those with high credit ratings, are having a hard time securing credit and finding buyers for their debt to muster up cash.

Pado also pointed to the stock’s low valuation as putting pressure on merger activity, saying when markets go down companies don’t like to use stock as capital to purchase.

"When you are using your stock in a mergers for capital and its been cut down 50% and you feel your company is worth more than that you won’t want to use that,” he said.


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Market Winners & Losers: JDS Uniphase, Apollo Group

April couldn’t the fool the start of Q2 as the markets rebounded from early losses to finish the day up 1.7% on average.

Here are Wednesday’s winners and losers:

Winners

JDS Uniphase Corp. (JDSU)
JDSU named a new president to its Communications Test & Measurement division and shares gained on the news. The stock finished the day up 15.4%, or 50 cents, closing at $3.75 a share.

Huntington Bancshares Inc. (HBAN)
After reworking more than $600 million subprime cash from mortgage lender Franklin Credit Management,the stock moved up 15%. Shares ended the session at $1.91, up 25 cents on the day.

Wyndham Worldwide Corp. (WYN)
Whyndham Worldwide’s vacation exchange company RCI celebrated its 35th anniversary Wednesday and shares responded by jumping 13.1%, or 55 cents, to close at $4.75 a share.

Textron Inc. (TXT)
The conglomerate continued its move to the upside, gaining 12.4%, after reaffirming its full-year cash outlook. TXT closed at $6.45, up 71 cents on the day.

Sprint Nextel Corp. (S)
News that many consumers will be able to integrate their cable and internet with sprint phone service helped boost Sprint shares by 11.2%. The stock finished the day at $3.97, a gain of 40 cents.

Losers

Apollo Group Inc. (APOL)
A warning about a surge in bad debt expenses sent the stock plunging 15.2% on Wednesday. Shares ended the day at $66.46 a piece, down $11.87 on the day.

Celgene Corp. (CELG)
Shares of the biotech company fell 13.4% as it offered a disappointing earnings outlook. CELG closed at $38.47, a loss of $5.93 on the day.

Fidelity National Information Services Inc. (FIS)
Apparently the news that FIS was buying Metavante Technologies did not sit well investors. FIS shares lost 7.3%, or $1.32, on Wednesday to close at $16.88.

Moody’s Corp. (MCO)
The ratings agency got hit hard on Wednesday, with shares losing 6%, or $1.38, to close at $21.54 a piece.

Lennar Corp. (LEN)
The home builder continued its downward trend, falling another 5.3% on Wednesday. Shares ended the session at $7.11, a loss of 40 cents on the day.


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Market Winners & Losers: Apollo Group, Lincoln National

The autos took a turn for the worst on Monday, and the markets responded accordingly. The major indices fell 3.2% while the dollar moved stronger to start the week.

Here are Monday’s winners and losers:

Winners

Fifth Third Bancorp (FITB)
News that the regional is selling its majority stake in its payment-processing unit sent the stock up 5.5%, or 13 cents, to end the day at $2.48 a share.

Apollo Group Inc. (APOL)
The stock dropped sharply after opening, only to rally 3% later ahead of its earnings release on Tuesday. Shares ended the day at $78.94 a piece, a gain of $2.29 on the day.

Allergan Inc. (AGN)
Continued rumors of a possible buyout by GlaxoSmithKline sent the stock up another 2.9%. The stock ended the session at $48.36, up $1.35 on the day.

Gilead Sciences Inc. (GILD)
Another biotech that made money Monday, Gilead saw its shares surge 2.8%, or $1.25, to $48.36 as a hypertension drug moved further into clinical testing.

Abbot Laboratories (ABT)
With a new drug-coated stent on the way, shares of Abbot moving the stock up 2.8%. It ended Monday at $47.89 a gain of $1.29.

Losers

Lincoln National Corp. (LNC)
A downgrade by Credit Suisse and its withdrawal from an FDIC-backed loan program helped sink the stock 38.2% to start the week. Shares closed at $6.41, a loss of $3.96 on the day.

Manitowoc Co. (MTW)
The crane manufacturer’s gloomy earnings outlook sent shares spiraling 33.4% lower on Monday. MTW shares ended at $3.07, a loss of $1.54 on the day.

General Motors Corp. (GM)
The automaker got a less-than-courteous offer from the government to shape up or ship out, moving shares 25.4% to the downside. The stock closed at $2.70, a loss of 92 cents on the day.

Principal Financial Group Inc. (PFG)
Following sector trends, the stock finished down sharply, losing 22.5%. PFG last traded at $7.89, a loss of $2.32 on the day.

Capital One Financial (COF)
Another stock following sector trends, COF dropped 20.2% on Monday, closing at $11.35 – a loss of $2.88 a share.


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Auto-Fueled Plunge: Dow Dives 254

In its worst selloff in nearly a month, the Dow plunged more than 250 points on Monday as the markets gave back a chunk of last week's huge gains amid fears about the future of the U.S. auto and banking industries.

Today’s Markets

The Dow Jones Industrial Average slid 254.16 points, or 3.27%, to 7522.02, the S&P 500 lost 28.41 points, or 3.48%, to 787.53 and the Nasdaq Composite sank 43.40 points, or 2.81%, to 1501.80. The consumer-friendly FOX 50 fell 19.88 points, or 3.25%, to 592.53.

"People are looking at the distinct possibility that one or both [auto makers] will cease to exist,” said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. “That’s enough to spook the markets."

In addition to uncertainty concerning General Motors (GM) and ChryslerLLC, the markets were under heavy pressure from banking stocks like Citigroup (C), which plunged on concerns about the need for more government aid.

Monday represented the Dow's worst one-day slide since March 5.All but two of the Dow's 30 components landed in the red, led by double-digit dives from GM, Bank of America (BAC), American Express (AXP) and Alcoa (AA). On the other hand, Johnson & Johnson (JNJ) and IBM (IBM)ended marginally higher.

The ugly start to the week comes after the Dow surged nearly 500 points last week, capping its first three-week win streak since May.Amid new government rescues and rare signs of hope for the economy, the beaten-down Dow soared 17.34% over that span, its best three-week gain since Sept. 1982.

"You had a very significant rally over a very short period of time. That rally met a point of resistance," said Sparks, pointing to the S&P's 80-day moving average. "We were overbought to some degree."

On the upside, trading volume was relatively low, indicating a potential lack of conviction. Also, the markets ended off their worst levels of the day, though still deeply in the red.Traders will now be watching to see how much, if any, of the markets' recent gains will be preserved.

"If we can get a pullback but a higher low, it would set us up nicely for future months," said Frank Davis, director of sales and trading at LEKSecurities.

Auto Fears Mount

Shares of General Motorslost one-quarter of their value after the U.S. said GM and Chrysler's restructuring plans do not go far enough to make the auto makers viable. The government is giving GM 60 days to reach new concessions with the union and bondholders and also pushed out GM CEORickWagoner, who will be replaced by Fritz Henderson, GM's chief operating officer.

"The government is taking a more heavy-handed approach. The market never sees that to be good," said Davis.

The White House said it is prepared to withhold any additional aid if Chrysler is unable to finalize a partnership with Italian auto maker Fiat by April 30.Chrysler said Monday it reached an agreement on a framework for a global alliance with Fiat that has the blessing of the U.S.

Bankruptcy on the Horizon?

GM said Monday afternoon it will take whatever steps are necessary to successfully restructure the company, including a court-supervised process. The White House's leading plan would use bankruptcy filings to essentially split GM and Chrysler into their "good" and "bad" components, The Wall Street Journal reported Monday afternoon.

But there was growing skepticism on Wall Street about the ability of the auto makers to quickly reorganize and about potential ripple effects stemming from bankruptcy filings.

“This will be devastating in the short term; to many lives, to the stock market, to our economic performance. But in the long term, our country will benefit from more productive and innovative companies which no doubt will spring up to take the place of GM, Ford and Chrysler,” Dan Greenhaus, equity analyst at Miller Tabak, wrote in a note.

Banks, Energy Add to Gloom

Meanwhile, financial stocks tumbled 8.6% as a sector and banks like PNCFinancial (PNC) , Citigroup (C) and Bank of America (BAC) fell even harder after Treasury Secretary Timothy Geithner said on ABC's "This Week" that some banks are going to need "large amounts" of additional government aid to stay afloat.

Energy stocks were under almost as much as pressure as names like Valero (VLO) and ConocoPhilips (COP) tanked after crude oil plunged below $50 per barrel. Slammed by a stronger dollar, crude oil fell $3.97 per barrel, or 7.58%, to settle at $48.41 -- the lowest settle since March 18. Gold was also under pressure, sinking $7.70 per ounce, or 0.83%, to $915.50.

Fears about the length and depth of the 16-month recession were also evident as shares of basic material companies like BHPBilliton (BHP) and U.S. Steel (X) plunged.

At the same time, the start of earnings season looms large over Wall Street as expectations are for many companies to report steep drops in profit due to the recession.

Corporate Movers

Lincoln National (LNC) lost more than one-third of its market value after the life insurer voluntarily withdrew its bid to receive U.S. aid. Lincoln also reached a reinsurance deal with a Goldman Sachs (GS) unit in an effort to boost its capital.

Fifth Third Bancorp (FITB) avoided the financial selloff as the bank reached a deal to sell 51% of its payment processing unit to private equity firm Advent International for $561 million. Fifth Third will spin off the business into a joint venture worth $2.35 billion and give the unit $1.25 billion in loans.

General Growth Properties (GGP), the second-largest U.S. mall owner, failed to reach support for a nine-month reprieve from bondholders, raising fears of a bankruptcy filing. The company said it remains in talks with some bondholders.

Eli Lilly (LLY) CEO John Lechleiter told The Wall Street Journal he is still “hungry” following the drug maker’s buyout of ImClone and is eyeing a takeover worth $5 billion to $15 billion. However, Lechleiter ruled out a megadeal like Pfizer’s (PFE) $68 billion takeover of Wyeth (WYE).

Abbott Laboratories (ABT) held preliminary talks with Wyeth(WYE) in mid-December about a possible deal but decided not to pursue a buyout due to pricing and other concerns, the Journal reported.

Sara Lee (SLE) said it may sell its international household and personal care business after receiving some interest from potential bidders. The company didn’t say who might be interested.

Global Markets

European stocks tanked, suffering their worst one-day losses in several weeks. London's FTSE 100 dropped 3.49% to 3762.91, Germany's DAXslid 5.1% to 3989.23 and Paris' CAC40 fell 4.27% to 2719.34.

In Asia, Tokyo's Nikkei 225 plunged 4.53% to 8236.08, Hong Kong's Hang Seng tumbled 4.7% to 13456.33 and China's Shanghai Composite fell 0.7% to 2358.04.


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Banks Begin Repaying TARP Money

Several small regional banks said Tuesday they have paid back federal rescue funds given to them by the government.

IberiaBank (IBKC) of Lafayette, La., said it has paid back $90 million; Old National Bancorp (ONB) of Evansville, Ind., said it has paid back $100 million; Signature Bank of New York (SBNY) said it has paid back $120 million; and Bank of Marin Bancorp (BMRC) of Novato, Calif., said it has paid back $28 million.

All of the banks said they repaid their rescue loans buy redeeming all of the preferred shares of stock they sold to the Treasury Department in December as part of the Troubled Asset Relief Program, and the Treasury Department confirmed that to FOXBusiness.

The announcements are the first instances of banks paying back TARP money.

Russell A. Colombo, chief executive officer of Bank of Marin, said in a statement it was in the “best interests of our customers, shareholders and employees” to pay back the money due to operating restrictions placed on his bank for participating in TARP.

Colombo said that by participating in TARP, his bank “did our part to help stimulate the local economy during a volatile time for the financial markets.”

IberiaBank Chief Executive Daryl G. Byrd said in a statement: “We are pleased to be among the first financial institutions to pay back the Treasury’s TARP investment. We believe we were uniquely positioned as the only financial institution to have consummated a Qualified Equity Offering subsequent to the TARP transaction, and thereby retired half of the original TARP warrant shares. We appreciate the consideration and cooperation of the Treasury’s representatives who completed the redemption of our preferred stock in an efficient manner.”

IberiaBank said it expects to incur a $2.2 million charge in the first quarter in the form of an accelerated deemed dividend to account for the difference between the amount at which the preferred stock sale was initially recorded and its redemption price.

“Repurchasing our preferred stock will enable us to continue to fulfill our mission of serving as a community partner with integrity,” said Old National Bancorp Chief Executive Bob Jones in a statement.

Signature Bank President and CEO Joseph DiPaolo said that terms imposed on TARP-funded banks “adversely affected our business model and it became apparent that we should return these funds to the Treasury. The return of these funds allows us to continue to execute our business model, which includes the successful recruitment and retention of highly talented banking professionals throughout the metropolitan New York area.”

--Rich Edson contributed to this article.


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We're Headed in the Wrong Direction

Missed Monday's Cavuto ? Catch "The Deal" right here on FOXBusiness.com

We come in peace to serve man.

...on a plate.

Which left stocks just on the floor.

Here's the deal:

Let's make a deal. And that's an order.

The government showing its heavy hand by giving the back hand to one of corporate America’s heaviest hitters.

Rick Wagoner out, because you botched it.

And Chrysler and Fiat. Do it. Or you might regret it.

You see where this is going?

Something's going. In a word, us.

I'm not saying capitalism didn't let us down.

I am saying the government not letting capitalism do its thing is going to let us down more.

Because a government big enough to fire executives, is a government big enough to eventually fire us.

Setting our pay. Setting our benefits. Setting our very lives.

Because it is not a stretch to assume a president using the excuse of taxpayer dollars at stake, takes that same excuse to argue intervention in companies for whom taxpayer dollars "could" be at stake.

What if drug prices get too high? That's hitting taxpayers. Fix 'em "for" taxpayers?

Gas prices get too high? That's hitting taxpayers. Forcibly lower them "for" taxpayers?

It's a slippery slope justifying Chavezian intervention for necessary intervention.

Because a government big enough to give you everything you want, truly is big enough to take away everything you have.

Arguing throughout that it's about looking after your interests.

And saying not a word that it "owns" your interests.

And owns something else.

You.


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Final Score: Regulators Need to See Their Impact on Business First-Hand

A few years back I was editing a business column for The Wall Street Journal , and I received an article written by George McGovern -- yes, the same former senator who ran for president under one of the most liberal platforms of all time.

Only, this George McGovern had changed -- a lot.

It seems that after he got out of politics, he invested some money in a small hotel in Connecticut, and as a small business owner he was getting killed by too many rules and regulations. Eventually, his business went bankrupt, partly because of the very regulations and laws that he helped design. It was only then that he began to repent for what he had done.

Here’s what he wrote:

“I wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day.”

Mr. McGovern came to realize that too many regulators and lawmakers have no idea how their rules and regulations will affect real business people in the real world. In fact, he suggested that each new regulation be given the following stress test:

"Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape? It is a simple concern that is nonetheless often ignored by legislators."

As I watch a guy like Treasury Secretary Timothy Geithner -- someone who’s never run a business of his own -- propose all kinds of new rules and regulations to elected officials who’ve never run businesses of their own, I wonder if they’ve even considered applying Mr. McGovern’s stress test to their regs.

As George McGovern discovered, when you have to survive on slim margins in the real world, it has a way of radically changing your perception.


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