Stocks Jump Amid Multiple Mergers and Acquisitions

Joel Anderson |

Cigna CIA series of major mergers and acquisitions Monday helped drive the Dow Jones Industrial into positive territory.  Two major moves in the healthcare industry drove the action, with both Adolor (ADLR) and Healthspring, Inc. (HS) showing significant gains on news that their companies will be sold.

Adolor is up over 130 percent on news that the company has reached a deal to sell to Cubist Pharmaceuticals (CBST), makers of the antibiotic Cubicin, for for $190 million.  Adolor shareholders will receive $4.25 per share, prompting an overnight jump in value for Adolor's stock, previous trading around $1.92 a share.  Adolor is in the late stages of development on two new compounds, and Adolor shareholders will also receive a Contingent Payment Right of $4.50 a share if certain regulatory and commercialization benchmarks are met.

Also receiving a boost in value over news of a sale is Healthsprings, a managed care organization specializing in Medicare. The company is to be bought by CIGNA Corp. for $55 per share, representing a 37-percent premium and making it a total transaction value of $3.8 billion. The news sent Healthspring's stock up over 33 percent in value overnight.  The acquisition is intended to aid in Cigna's rapid growth in the seniors and medicare segments.

Healthcare M&A Drives Up Sector

This news affected many other stocks as well, pushing up values across the sector in anticipation of other similar purchases of smaller companies by major insurance providers.  Coventry Health Care, Inc. (CVH), Amerigroup Corp. (AGP), and WellCare (WCG) all saw their stocks jump over 7 percent, with HealthNet Inc. (HNT) gaining over 6 percent.  It wasn't all rosy news, though, as SXC Health Solutions Corp. (SXCI) took a major hit, losing nearly 20 percent of its value on news of the sale.  SXC, a pharmacy benefits manager, had been providing services for Healthspring, but Cigna has its own pharmacy benefits management division, prompting speculation that SXC would lose out.

Additional Mergers and Acquisitions on Wall Street

Oracle (ORCL) announced plans to purchase RightNow Technologies (RNOW), a cloud-based software and services company, for $43 a share, making the deal $1.5 billion in total value.  RightNow's stock has jumped nearly 20 percent as a result.  Oracle, whose business is largely based in licensing its data base and business applications software, is making a push to react to shifts in the industry towards cloud computing and social media.  Oracle, meanwhile, showed modest gains after the sale, gaining 2 percent in value.  Toy-maker Mattel (MAT), meanwhile, agreed to purchase HIT Entertainment for $680 million, giving them rights to lucrative preschool brands like Barney and Thomas & Friends.  Of course, dominating any merger/acquisition news is the impending sale of search engine Yahoo! (YHOO).  Shares in Yahoo rose just under 3 percent Monday amid rumors that Google (GOOG) may be willing to help partially finance the purchase.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GOOG Alphabet Inc. 780.60 -2.41 -0.31 818,041
HNT Health Net Inc. n/a n/a n/a 0
INNL Innocoll Holdings 6.30 -0.13 -2.02 10,475
MAT Mattel Inc. 31.26 -0.10 -0.32 2,887,401
ORCL Oracle Corporation 39.42 0.12 0.29 4,875,850
WCG Wellcare Health Plans Inc. 117.32 0.99 0.85 157,673
YHOO Yahoo! Inc. 43.69 0.32 0.73 4,461,742

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