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  • Publish date:'s DAILY BULLETIN

November 24, 1999

Market Data as of Close, 11/23/99:

o Dow Jones Industrial Average: 10,995.63 down 93.89, -0.85%

o Nasdaq Composite Index: 3,342.87 down 49.69, -1.46%

o S&P 500: 1,404.64 down 16.30, -1.15%

o TSC Internet: 949.29 down 24.33, -2.50%

o Russell 2000: 454.45 down 6.32, -1.37%

o 30-Year Treasury: 99 02/32 unchanged , yield 6.189%

Companies in Today's Bulletin:

Pfizer (PFE:NYSE)

American Home Products (AHP:NYSE)

Cambior (CBJ:Amex)


In Today's Bulletin:

o Biotech/Pharmaceuticals: For Sheer Acrimony, Pfizer-Warner Battle Doesn't Measure Up
o Wrong! Rear Echelon Revelations: A Little Knowledge Isn't Necessarily a Good Thing
o Evening Update: Drug Wars Intensify as Warner-Lambert Alleges Pfizer Wrongdoings
o Bond Focus: Bonds Finish Where They Began

"" on Fox News Channel

Robert Olstein, manager of the Olstein Financial Alert fund, returns for another round of "Stock Drill" this week. See how the picks from his last visit are faring and what he's got his eye on now. Plus, we'll offer up tax tips for year end investment moves and much more.

"" on Fox News Channel airs Saturdays at 10 a.m. and 6 p.m. ET and Sundays at 10 a.m. ET.

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Biotech/Pharmaceuticals: For Sheer Acrimony, Pfizer-Warner Battle Doesn't Measure Up


Jesse Eisinger

Senior Writer

11/23/99 8:00 PM ET





American Home Products


are big, important companies. And their $70 billion-plus takeover battle for



is a big deal.

But, in a key respect, they are just pikers: They just don't do top-notch hostility. So far, for unadulterated viciousness, corporate irresponsibility, egomaniacal stubbornness and clinging to perquisites, this fight can't compete with mergers past. It's more like

Barbiturates at the Gate


"It's not really ranking too high yet," says a disappointed Ron Phillips, risk arbitrager for

Weiss Peck & Greer

. "They are basically saying, 'Our merger's great; yours sucks and you suck.' It's not: 'You are criminals; you can't get it approved; we are going to use the state legislature; or screw the shareholders permanently by doing this or that." Through a complex options position, Phillips is effectively short Pfizer and long Warner and American Home.

Warner and Pfizer have managed only a few digs at each other, a collection of press releases and a clutch of "Dear Fellow Member of St. George-In-The-Fields Country Club: Let my company go" letters. The threats have been veiled with civil language. All they can muster so far is "disappointment" in one another's actions.

Pfizer on Tuesday did sue Warner, alleging it broke a standstill agreement the companies negotiated when they agreed to co-market cholesterol buster


. (The two already are tied up in court on another matter.) Warner shot back that Pfizer misstated the terms of that deal, which enjoined the companies from making unsolicited takeover bids for one another. Pfizer claims that under the terms of the standstill agreement it couldn't make a takeover offer for Warner until it knew Warner was in merger talks with another party.

Shares of Pfizer rose Tuesday, while those of American Home and Warner dropped. The action meant that for the first time since the bidding erupted on Nov. 4, Warner shares are trading below the value of one of the takeover offers, in this case Pfizer's. At the close Tuesday, Pfizer's all-stock bid was valued at $76.3 billion and American Home's at $66.7 billion. Warner-Lambert's market value, meanwhile, was $75.9 billion.

But the tactics the companies are employing so far pale in the eyes of history, despite the outre '90s touch of posting letters on the companies' respective Web sites. "It's par for the course," says Guy Wyser-Pratte, the veteran risk arbitrager who runs a firm that bears his name, of the communication between the companies. "I don't think it's terribly novel or new. If they declare a

Pac-Man defense on Pfizer -- now that is a level of nastiness that is the ultimate," he says wistfully, referring to an '80s-vintage tactic in which the target defends itself by trying to swallow the bidder. Wyser-Pratte is long Warner and has no position in Pfizer or American Home.

But alas, Warner has yet to do any such thing. American Home's spokesman, Lowell Weiner, offers financial comparisons to counter the prettified picture Pfizer displayed to Wall Street last week, but his level of vitriol is low. Warner is taking a

few shots. Pfizer didn't return calls seeking comment.

Vaarwel, Lodewijk

Bill Steere, the dry and steely chairman and CEO of the predatory Pfizer, has managed to get in a couple of witty digs. He said that integrating Warner into Pfizer would be relatively easy, "with the exception of a few guys at the top." Dutch-born Lodewijk de Vink, who just got to the top of Warner about a half a year ago, can't like that. But where are the accusations of incompetence? Fraud? Fiscal irresponsibility? Negligence?

You don't have to go way back to the '80s, which brought us the

Kohlberg Kravis Roberts


RJR Nabisco

fight and the


battle, among others, for truly cutthroat takeover struggles. Take the dogfight between




Service Corp.


back in 1996. That turned out to be a celebrity death match in the funeral industry.

Loewen spat on an offer from Service Corp. worth $45 a share. Then, Loewen proceeded to pile on debt and take over little competitors at outrageous rates, scaring Service Corp. away. According to Canada's

National Post

, when a fired Loewen executive was seen having lunch with the family that controlled Service Corp., Loewen sought a court order to prevent the executive from spilling commercial secrets. Neither Loewen nor Service Corp. returned calls seeking comment.

The struggle resulted in a lovely end when Loewen filed for bankruptcy this June.

Arbs say that was nothing compared with the short but very nasty 1998

Computer Associates


battle for

Computer Sciences


. For weeks, the two had talked about a friendly merger, but when those discussions broke down, Computer Associates launched a hostile offer. Computer Sciences put in a big poison pill, with giant balloon packages for top officers. The company sued Computer Associates, alleging it had offered Computer Sciences' CEO millions to support a merger.

Worst of all, two arbs say, there were xenophobic insinuations about Computer Associates Chairman and CEO Charles Wang and COO Sanjay Kumar. Computer Sciences "said that the merger was not in the strategic interests of the U.S. and that

the Computer Associates executives were foreigners," says one arb. "The suggestions and innuendo were horrendous." Computer Sciences successfully fought off the bid, and both miraculously continue as going concerns. Computer Sciences declined to comment; Computer Associates didn't return a call.

And then there was


: "Talk about eating your own poopie," says one investor, who in addition to being an arb is clearly the father of young children. Back in 1997,

Union Pacific Resources


offered an "outlandish premium," with some cash and stock. Despite having racked up an average annual return of 0.3% between 1985 and 1995, Pennzoil demurred. UPR upped the bid to $84 a share in cash. In the course of events, Wyser-Pratte himself got involved, suing Pennzoil charging the company's board with breaching their fiduciary duty after it sued him. Neither company returned a call seeking comment.

Eventually, the Pennzoil board turned the offer away --


a majority of the Pennzoil shareholders had voted in favor of the deal. A disastrous decision. Pennzoil, now

Pennzoil-Quaker State


, trades today at 11 and change.

Nevertheless, Wyser-Pratte is hopeful about the Big Pharma clash: "I think you will see it get nastier. There's still room."

Wrong! Rear Echelon Revelations: A Little Knowledge Isn't Necessarily a Good Thing


James J. Cramer

11/23/99 6:44 PM ET

Sometimes I think the people involved in Web businesses have an unfair advantage at this game. After all, I knew that





as a host and



as a mail-serve technology. I know our tech crew uses an



database to generate page-view reports.

But before you accuse me of having a leg up, I sold most of these stocks long ago. Maybe because I see the inherent flaws in all of them, or because one of the systems went down a bunch of times (they all do), I knew there were flies on these technologies. That jaded me. It kept me from going for the long ball in all three.

I never thought they could get to where they went, let alone where they might ultimately go. These moves are breathtaking to anybody who has been in the business longer than a couple of years. These stocks are ramping in ways most of us did not think was possible.

Remember, we are in the supply-demand phase of this kind of technology, meaning that there are still fewer stocks out there than people want. The underwriters simply haven't created enough B2B supply to sate the marketplace.

These stocks are simply symbols of where people want to be to make money. They are all hopelessly overvalued unless they execute perfectly every day of the year. But right now, valuation is an irrelevance. Investor enthusiasm, capital, and a desire to "be in" the right stocks trump any sort of notion of overvaluation.

One day there will be enough stocks and there will be enough competitors out there to make life miserable for everybody. Right now, though, there are just too few and the businesses are too strong. And a little knowledge, like the knowledge I had as a co-founder of, only hurt, did not help me.


Random musings

: Sellers finally materialized this morning. I had thought they had all disappeared. But in several instances I saw genuine institutional selling of some of the hottest stocks. This kind of selling was, frankly, new for this market. No one with any size -- typically blocks of 100,000 -- save venture capitalists, had been seen on the sell side since the October lows.

This kind of institutional selling bears watching. Selling has all of the aspects of an illness. Someone gets it, and then it gets passed on if it isn't contained. It could be because of the holiday. (I know I am taking some time off to be with my family in the next three days. ) But I will keep an eye out for this to see if it develops into something bigger.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long, and Cramer was long His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

Evening Update: Drug Wars Intensify as Warner-Lambert Alleges Pfizer Wrongdoings


Tara Murphy

Staff Reporter

11/23/99 8:31 PM ET






misstated terms of a standstill agreement between the two companies, which Pfizer alleges prevented it from launching a takeover offer for Warner-Lambert. Earlier today, Pfizer filed a complaint against Warner Lambert, charging the company infringed upon the terms of the standstill agreement, in an effort to hold off Pfizer while it pursued merger talks with

American Home Products



Orginally, Warner-Lambert set plans for a merger with American Home, a deal now worth $66.8 billion. Pfizer followed, launching an unsolicited bid -- now valued at $76.25 billion -- for Warner. Warner-Lambert said it is examining its marketing pact it has with Pfizer for the blockbuster cholesterol remedy


. Last week, Warner-Lambert threatened to end the deal, with its board convening to consider litigation against Pfizer.

Separately, a U.S. judge has given initial approval to a $3.75 billion settlement between American Home and former users of


, the controversial diet drug which has been associated with possible heart-valve damage, the company said.

In other news, insurance giant

Metropolitan Life

had plenty of business to attend to before the Thanksgiving holiday. The insurance giant filed with the

Securities and Exchange Commission

to raise up to $6.5 billion in an IPO, possibly making it the largest ever. MetLife said it plans to sell 225 million shares, or 31% of the company and it expects to price the shares between $14 to $24 a share.

From the "odd stories that never occur early in the day" file,

News Corp.


chairman Rupert Murdoch said that

General Electric




"has been offered" to

Time Warner


, for $25 billion, and some board member are supportive of the acquisition, according to



According to the report, during the program, Murdoch said he "understands" that




and GE's other cable assets have been offered to Time Warner. Time Warner said Murdoch's statement, which was made on the Fox News, was untrue, reported



After-Hours Trading


MedCare Technologies



Island ECN

. In the late afternoon, the company issued a press release touting the popularity of its RxSheets Web site, which allows physicians to request pharmaceutical samples online.






and was No. 4 on Island after releasing its fourth-quarter earnings which were in-line with analyst estimates.

Earlier this evening,

joint newsroom

reported about Novell's earning release.

In other post-close news (earnings estimates from

First Call/Thomson Financial

; earnings reported on a diluted basis unless otherwise specified):

Mergers, acquisitions and joint ventures


Federal Energy Regulatory Commission

administrative law judge gave preliminary approval for the proposed $6.6 billion merger of

American Electric Power



Central and South West


. The judge said the deal was "consistent with the public interest," providing the utilities divest some generation assets, consider rate tariffs and move transmission to a regional transmission organization.

Columbia Energy Group



Columbia Energy Services

announced its plans to sell its wholesale energy marketing operations to




Enron North America

. Although the terms were not released, Columbia Energy Services said it expects to close the deal by the end of the year.



plans to sell Texas gas stations to privately held


, in an effort to meet the federal government's provisions for an $82 billion merger with



, according to sources familiar with the agreement. Mobil and Tetco together, run 145 Mobil gas stations. The divestiture is necessary due to Exxon's larger presence in Texas. In addition, people familiar with the matter said the

Federal Trade Commission

should give the merger its stamp of authorization between next week and mid-December.



said it would still design technology that was part of an internal



program, despite Sprint freezing its implementation. Tellabs said its

AN2100 Gateway Exchange

switching technology will be completely adjusted to take on the needs of other possible clients. According to Tellabs, the new technology would be ready for testing in the first quarter of fiscal 2000.

Earnings/revenue reports and previews



posted a pro forma third-quarter loss of 80 cents a share, narrower than both the five-analyst estimate of a 82-cent loss, and the year-ago pro forma 38-cent loss.



posted fourth-quarter earnings of 63 cents a share, beating the eight-analyst estimate of 58 cents and up from the year-ago 3 cents.



posted a first-quarter loss of 12 cents a share, narrower than both the 12-analyst estimate of a 19-cent loss and the year-ago 15-cents loss. The company said it expects increasing competition as a result of



entering the personal tax market



posted fourth-quarter earnings of 21 cents a share, beating the eight-analyst estimate of 17 cents and up from the year-ago 12 cents.

Werner Enterprises


warned investors that higher fuel prices could shave 10 cents off of its fourth-quarter earnings. The 12-analyst estimate forecasts the company to post fourth-quarter earnings of 35 cents a share, up from the year-ago 33 cents.

Offerings and stock actions



said it has set an 8 million-share buyback plan. After the close, the company posted pro forma third-quarter earnings of 27 cents a share, greatly beating the eight-analyst estimate of 13 cents but down from the year-ago 42 cent-profit.

CIBC World Markets

priced a 3.75 million-share IPO for


at the top of its expected price range at $17 a share.

TV Guide


said it has set a 2-for-1 stock split of its Class A and B Common Stock, payable on Dec.17 to shareholders of record Dec. 3.


American Annuity Group


said it has tapped its president S. Craig Lindner to take on the additional role of CEO.

Bond Focus: Bonds Finish Where They Began


David A. Gaffen

Staff Reporter

11/23/99 4:38 PM ET

The bond market's mindset is already being affected by thoughts of a giant, probably overcooked bird to be served in a couple of days. After a bit of heavy activity on the 8:30 a.m. EST release of the

durable goods

report, Treasuries settled into quiet, range-bound trading.

The day's only other significant event was the Treasury's auction of $15 billion in two-year notes, most notable for the opportunity it provided dealers to reverse so-called flattening trades.

Lately the 30-year Treasury bond was down 2/32 at 99 1/32. The yield rose 1 basis point to 6.20%. The market posted gains early when the

Commerce Department

said durable goods orders fell 1.3% in October. Excluding transportation orders, which is the most volatile sector of this report, orders dropped by 2.6%.

But the uptick didn't last long, for two reasons. For one, sentiment can be described in one word since the

Federal Reserve

raised rates to 5.5% Nov. 16 -- blech.

Join the discussion


Message Boards. More importantly, the details of this report belie the drop in the headline durable goods figure. Orders for non-defense capital goods, excluding aircraft (due to volatility) declined 0.6%, but are still showing a 7% year-over-year rate of increase. Shipments of non-defense capital goods, meanwhile, jumped 3% after a 1.1% decline in September. On a year-over-year basis, the trend is still rising at 7.5%.

The shipments series is especially important because it feeds into the business equipment spending component of


. The rising trend argues that strong economic growth will continue, and that doesn't sit well with a bond market hoping that slowing growth will stay the Fed's hand in coming months.

"The key aspects of durable goods orders are still flashing signs of strength," said Tony Crescenzi, chief bond market strategist at

Miller Tabak

. "The market showed it has a better sense of the data than the

headline data portrays."

After that figure's release, though, it was lights out, unless you were getting in on the two-year auction, which sources termed well received. The bid-to-cover ratio, which measures the volume of interest vs. what was offered, was 2.46, above the one-year average of 2.15.

However, two traders said dealers used the auction to reverse recent "curve flattening" trades. A curve flattening trade involves buying a long-dated security such as the 30-year bond while selling a short-dated security, such as the two-year note.

Short rates frequently rise in anticipation of a Fed rate hike, so heading into the Nov. 16 meeting, this was a popular play. Plus, longer-dated securities react more to inflation expectations: If the Fed's perceived as being aggressive, long bonds rally. The yield spread between two-year notes and 30-year bonds had narrowed to 23 basis points this morning from 42 basis points on Oct. 22.

When dealers lock in profits, they reverse the trade by selling the 30-year bond and buying the two-year note. So while the 30-year note's yield rose by 1 basis point today, dealers bought up the new two-year note, which sold at a yield of 5.946%, and has since rallied to 5.94%, widening the spread to 26 basis points. That's a subtle shift, though, and it doesn't mean sentiment is any more positive.

The market wasn't bolstered by the weakness in the equity market, termed profit-taking. The bond market closes at 2 p.m. EST tomorrow.


Street Sightings

Jim Cramer will be appearing on Fox News Channel's "Fox & Friends" Wednesday, Nov. 24 at 7 a.m. EST.

Copyright 1999,