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If the bulls take a break today, we could see this market drift toward moderate support at 840. Choppy downside action would not be a big surprise after Friday's ramp ... but a break of 840 and only weak support at 836 keep this market from trading back to strong support at 829.50. Traders should be a little concerned if we can't hold the 829.50 ... but not panicked. Moderate support at 825.50 and 822 should help the bulls on any break of 829.50.

5. Wellpoint Raises Cash -- Perhaps for More M&A

David Sterman
4/13/2009 7:17 AM EDT

Wellpoint's(WLP Quote) decision to sell its pharmacy benefits management unit (PBM) is not a surprise, because the Financial Times already reported last month that the company was looking for a buyer. The PBM ranked fourth in the industry and lacked the critical mass to offer the same rebate levels as the industry leaders.

Back in early March, Credit Suisse assumed the unit would fetch $3 billion (although that analysis did not anticipate the future tax benefits portion of this deal). The analysts noted that the Wellpoint unit generates $375 million in EBITDA, and there could be an additional $150 million in synergies.

Medco Health(MHS Quote) was presumed to be the other bidder for the unit, and the stiff price may preclude any rival bid. The deal is unlikely to create antitrust concerns, as the combined entity is still smaller than Medco.

The transaction appears to be for a mixture of cash and up to $1.4 billion in stock. The deal would provide Wellpoint further ammo for its own M&A, or perhaps buybacks. For Express Scripts, this is a big cash commitment, and the company will need to explain how it will line up financing on the 9 a.m. CDT conference call. Wellpoint will hold its call an hour earlier at 9 a.m. EST. Wellpoint's use of proceeds discussion could give a hint as to the next M&A activity for the firm.

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