Merger Talks Between Drug Giants Collapse

Author:
Publish date:

SmithKline Beecham

(SBH) - Get Report

held merger talks that ended up not going anywhere. Investors wonder whether those talks might rev up on again with Glaxo out of the way.

Glaxo stock will take more of a hit, after rising 16.6% since the merger talks were first reported at the beginning of the month. SmithKline, probably still seen in play, won't be hit as hard, analysts said.

Others in the group may take a breather, including

Merck

(MRK) - Get Report

, which in the week through Monday's close added nearly 11 points to 130 5/8. Rumors that the company will authorize a stock split and anticipation of Monday's

Food and Drug Administration

approval of the asthma drug Singulair -- which everyone knew about months ago -- have sent the stock up.

"I'm shocked," said Riccardo. "I think people want to buy the group and they are saying, 'Let's not worry about 2000,' " when Merck starts to suffer patent expirations.

--

Jesse Eisinger

* * * * *

Michael Price's

Franklin Mutual Advisors

says

First Union Real Estate Equity & Mortgage Investments

(FUR)

isn't making the most of its cushy paired-share REIT status.

In a document filed Monday with the

Securities and Exchange Commission

the advisory unit of Price's Mutual Series funds says it expects to use its 9.3% stake in the company to support the solicitation of proxies by another large shareholder calling for sweeping changes.

Franklin stated in the filing that since its clients first became shareholders in October 1996, First Union has "failed to implement a coherent business plan and strategic direction which fully takes advantage of the issuer's unique structure." The fund advisors compared the decline of First Union's stock price during this period with the significant rise in the stock prices of similarly structured REITs

Patriot American

(PAH) - Get Report

and

Starwood

(HOT)

, which have "embarked upon aggressive asset acquisition strategies which have seen their stock prices appreciate more than 16% and 45%, respectively."

The favored tax status of paired-share REITs, which unlike regular REITs are able to both own and operate companies with shares that trade in tandem, came under scrutiny in a recent proposal by

President Clinton

that could limit their tax benefits. For an earlier report on how these REITs might fare in the event they lose some of their tax benefits, click

here.

--

Alison Pederson

* * * * *

In other post-close news (earnings estimates from

First Call

):

J.P. Morgan

(JPM) - Get Report

will cut 700 jobs, or 5% of its global workforce, according to a

CNBC

report citing

Dow Jones News Service

.

Sybase

(SYBS)

said it will lay off 600 employees, or 10% of its global workforce.

Petco Animal Supplies

(PETC)

apparently doesn't understand that because its fourth quarter ended Jan. 31, the just-concluded year was fiscal 1998 and it is now the company's fiscal 1999. But sorting through the company's mistaken references to fiscal 1998 as fiscal 1997 and so on, Petco warned that it expects fiscal 1999 earnings to be just 30% higher than the three-analyst fiscal 1998 estimate of 88 cents per share. That would mean 1999 earnings of about $1.14, missing the expectation of $1.39.

Computer Sciences

(CSC)

filed a lawsuit charging that

Computer Associates

(CA) - Get Report

engaged in "a continuing campaign of fraud and interference" in its efforts to acquire Computer Sciences. CSC last week rejected CA's unsolicited $9.8 billion bid for the company.

Nordstrom

(NOBE)

reported fourth-quarter earnings of 76 cents per share, 2 cents better than the 20-analyst consensus estimate and up from the year-ago 53 cents.

Kent Electronics

(KNT)

warned that its fourth-quarter earnings will fall short of the third quarter's 36 cents per share. That also was the 10-analyst projection for the fourth quarter, compared with 26 cents in the year-earlier fourth quarter. The company cited fallout from the Asian economic crisis.

Department 56

(DFS) - Get Report

-- isn't that where they keep that UFO? -- reported fourth-quarter earnings of 34 cents per share. That was a nickel better than the four-analyst outlook and up from the year-ago 19 cents.

Great Atlantic & Pacific Tea

(GAP)

warned that it expects to report lower-than-forecast earnings for the fourth quarter ending February. The six-analyst estimate called for earnings of 64 cents per share versus the year-ago 60 cents. A&P cited food price deflation, high promotional costs and "intense" competition.

Detection Systems

(DETC)

reported third-quarter earnings of 2 cents per share, 13 cents short of the three-analyst forecast and down from the year-ago 21 cents.

The

Justice Department

closed its antitrust review of the planned merger of

Allegheny Teledyne

(ALT) - Get Report

and

Oregon Metallurgical

(OREM)

.

Envoy

(ENVY)

said it agreed to buy three companies that operate the

ExpressBill

patient statement processing and printing services business for 3.5 million shares of its stock. The privately held companies are

XpiData

,

Professional Office Services

and the affiliated company

Automated Revenue Management

.

Sanmina

(SANM) - Get Report

agreed to acquire privately held

Pragmatech

for undisclosed terms.

WinStar Communications

(WCII)

reported a fourth-quarter loss of $2.37 per share, 23 cents better than the 13-analyst estimate but down from the year-ago loss of $1.17.

Calmat

(CZM)

reported fourth-quarter earnings of 10 cents per share, 6 cents below the three-analyst view but up from the year-ago 1 cent.

Qiagen

(QGENF)

reported fourth-quarter earnings of 17 cents per share, 2 cents better than the four-analyst outlook and up from the year-ago 11 cents.

Aftermarket Technology

(ATAC)

reported fourth-quarter earnings of 29 cents per share, a cent better than the three-analyst expectation and up from the year-ago 23 cents.

MRV Communications

(MRVC)

reported fourth-quarter earnings of 25 cents per share, a penny better than the two-analyst prediction and up from the year-ago 16 cents.

J.D. Edwards

(JDEC)

reported first-quarter earnings of 6 cents per share, a cent better than the three-analyst estimate and up from the year-ago 2 cents.

Star Telecommunications

(STRX)

reported fourth-quarter earnings of 10 cents per share, in line with the five-analyst forecast and up from the year-ago loss of 72 cents.

Advanced Digital

(ADIC)

reported first-quarter earnings of 24 cents per share, in line with the three-analyst prediction and up from the year-ago 20 cents.

Burr-Brown

(BBRC)

set a 3-for-2 stock split.

Fiserv

(FISV) - Get Report

adopted a shareholder rights plan with a 15% trigger, saying the move was not in response to any known takeover effort.

Stac

(STAC)

set a buyback of up to $10 million worth of its shares.