September 29, 2005
A Thursday of M&A
Today, General Electric (NYSE: GE) announced that its health care unit is buying IDX Systems Corp. (NASDAQ: IDXC) in a deal valued at $1.2 billion. GE agreed to pay IDX shareholders $44 a share in cash, or a 25% premium over IDXC's closing price on Wednesday. In premarket trading, the shares of IDXC were up about 23 percent to $43.24, indicating a high likelihood that this deal will be completed. Also, in premarket trading, shares of GE were up 6 cents to $33.55, a 0.18% gain, indicating that analysts and investors also approve of the deal; however, with a market cap of $335.02 billion, the stock price might be up with market conditions and not because of this relatively "small" transaction for GE. (AP report can be found here) GE shareholders should be somewhat comforted by the fact that cash deals have a better history that stock swap deals. Update 11:15am EST: GE shares are trading down 28 cents, while IDXC shares are trading up 8.08, about 23% still.
Also, E-Trade Financial Corp. (NYSE: ET) announced today that it will purchase rival BrownCo from JPMorgan Chase & Co. (NYSE: JPM) for $1.6 billion in cash. This deal marks E-Trade's second major rival in the past couple months. E-Trade agreed to purchase Harris direct from BMO Financial Group for $700 million in August. The brokerage sector is in rapid consolidation because of slashing fees in an attempt to gain customers and increase trading volumes, and this marks another move by E-Trade to increase its market share against to competitors Charles Schwab (NYSE: SCH) and Ameritrade (NASDAQ: AMTD). Ameritrade had earlier refused a $5.5 billion takeover bid from E-Trade and then announced that it would purchase TD Waterhouse from Toronto-Dominion Bank for $2.9 billion. After the announcementof the E-Trade deal, in premarket trading shares of E-Trade were up 62 cents to 16.95, or an increase of 3.8%, and shares of JP Morgan, which expects to net $700 million from the sale, were up 8 cents to $34. (AP Report can be found here.) The market appears content with both sides of the deal; JP Morgan seems to be getting a fair price and E-Trade can profitably use the new assets.
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