Pfizer, Allergan Shares Pop After Buyout Rumor
Two of the world's biggest pharmaceutical giants -- Allergan PLC (NYSE: AGN) and Pfizer Inc. (NYSE: PFE) -- are trending after a rumor hit newswires that the two could combine after Allergan sells its Generics division.
The rumor, attributed to information shared on a Mizuho roadshow, initially broke near 11:00 a.m. ET. Pfizer shares rose above the $33.60 level, while Allergan followed a similar trading pattern.
According to Benzinga Pro, the hypothetical deal may be easier for Pfizer to finance once Allergan sells its $40.5 billion generic drug business to Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA). The current market capitalization of Allergan is just over $107 billion.
In an interview with Benzinga, a Pfizer spokesperson declined to comment on speculation regarding potential talks with Allergan.
M&A Market Booming
Last month, a report from JMP Securities revealed August was a record month for M&A announcements. Total activity for the month rose past $350 billion, 20 percent above August 2014. Analyst Devin Ryan said equity market declines "increases the probability" of an M&A "market disruption" – but one month alone "generally has little impact."
According to Ryan, it's too early to tell when the M&A boom will end. "[W]e think the current upcycle remains intact as of now, but are watching equity markets particularly closely, as we believe performance in September is critical to whether the direction of M&A continues to move forward or begins to roll over," he wrote at the time.
Ryan added that there's three things indicating a M&A market top:
1. "Steep" declines in equity markets.
2. A recession.
3. "Significant" deterioration in the credit markets.
Point No. 1? Check. The S&P 500 is down 2 percent on the year after a drastic selloff in late August.
Point No. 2? It's too early to tell, though worth noting Societe Generale’s Albert Edwards recently wrote a U.S. recession could be sooner than many think.
Point No. 3? Look no further than Carl Icahn's mega-thesis on various bubbles in the credit market.
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