Two would-be suitors — Bristol-Myers and Walgreen — walked away from attractive targets this and avoided potentially costly bidding wars at a time of difficult deal financing and daily hits to the financial markets.
Although Bristol-Myers and Walgreen walked away from their respective deals for different reasons, the decision to bow out marks a sign of caution by even strategic buyers in the nervous economy.
Bristol-Myers on Monday walked away from its offer to acquire the 83-percent of ImClone Systems it did not already own after Eli Lilly and Co trumped its bid with a $6.5 billion deal. Bristol-Myers decided against counter-bidding and instead cashed in its 17-percent stake in ImClone for about $1 billion.
Meanwhile, Walgreen on Wednesday withdrew its $75 per share cash offer to acquire Longs Drug Stores, avoiding a bidding war with Longs’s existing merger partner CVS Caremark.
Walgreen said it decided to walk away due to the recent deterioration in the economy, Longs’s refusal to hold merger talks, and the uncertainty of leaving its bid in limbo for an extended period of time.
At a time when arbitrage spreads on deals that already have committed financing continue to remain wide, perhaps avoiding costly bidding wars and bowing out is a smart move?
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Here’s part of the problem. The fear in the market is being driven by a number of problems. One that I feel is overlooked is the media. The stock/business channels are maintaining listenership ratings by keeping the fear levels of their listeners to record levels. Yes-there are other reasons-but what percentage of the decline is attributal to 24/7-seeing if your money is safe. Any professionl trader would play this game and exacerb ate the declines. We need to restore calm in the markets and in the expectations of our people. Cures?-Some would be as a result of our semi-nationalization of the banking system. We set the mortgage rates-maximiize growth of new construction-less unemployment-a tax credit for new purchases-including homes-perhaps cars. Cross quarantees between the banks. Yes purchase preferred shares-we need to start the reconstruction today!
- Posted by Greg MansleyThere is another Greg Mansley listed in Reuters- Something about Zog- I did not post that listing. I do not want that to detract from the intent of my comment. We stand at a seminal moment that will affect the next 5-10 years in the lives of the readers.The problems we face are serious- I believe there are straightforward solutions-they involve setting mortgage rates and investment tax credits for the purchase of homes. It is time for a new national capital project and it is only waiting for us to decide to move ahead and start.
- Posted by Greg Mansley