Jim Cramer Blog

Sliding oil prices and a spate of M&A deals spurred investors to resume buying stocks. In doing so, they looked past the struggle that one of the nation's leading subprime lenders faces in a bid to survive. After a lackluster start to the week, buying picked up in the mid-afternoon as the major stock averages pushed sharply higher before easing somewhat in the final 30 minutes of trading. The 10-year Treasury note also attracted buyers, which cut the yield -4 basis points to 4.55%. Crude oil futures dipped near $59 a barrel.
Early in the day, the market was focused on the travails of New Century Financial (NYSE: NEW - News), which appears to be teetering on the brink of insolvency. The company disclosed in a filing with the Securities and Exchange Commission that all of its lenders have either cut financing or will cease to finance New Century's short-term borrowings. New Century said last Thursday it would no longer accept new loan applications due to liquidity problems. The company hinted it does not have the funds to meet current obligations, which may exceed $8 billion. Subscribers can read further analysis on the fallout from this latest development in today's issue.
Merger activity helped shake off the cloud created by New Century's woes. Ford Motor (NYSE: F - News) took a step toward funding its own recovery plan by announcing it has sold its Aston Martin unit to a consortium of investors for $848 million. The U.K.-based unit is best known for the exotic, pricey sports cars used in the James Bond movie series. The car now retails for between $110,000 and $270,000 each.
Schering-Plough (NYSE: SGP - News), meanwhile, announced it plans to buy the pharmaceuticals division of Akzo Nobel (Nasdaq: AKZOY - News) for $14.5 billion in cash. U.S.-traded shares of Akzo, a Dutch company, jumped 16% on the news. The deal will given Schering the Akzo Organon Biosciences unit, which makes a range of fertility, birth control, and women's health products. That addition should lessen Schering's dependence on its Vytorin and Zetia cholesterol-lowering drugs. Organon also has a treatment for schizophrenia and bipolar disorder in late-stage development, but Pfizer (NYSE: PFE - News), its partner in the development of the drug asenapine, dropped out after the treatment achieved mixed results in clinical trials.
In the health insurance sector, UnitedHealth Group (NYSE: UNH - News) agreed to buy Sierra Health Services (NYSE: SIE - News) for about $2.6 billion in cash. Sierra services about 310,000 employer-sponsored health plan members in Nevada and another 320,000 members enrolled in senior and government programs nationwide. UnitedHealth offered $43.50 a share for Sierra, or roughly a 21% premium over Friday's close. Sierra added 16% today. Separately, Express Scripts (Nasdaq: ESRX - News) ended 5% higher on the day after announcing it would not raise its bid for rival Caremark Rx (NYSE: CMX - News). Express Scripts has been battling drug-store retailer CVS (NYSE: CVS - News) to acquire Caremark. Both Caremark and CVS ended down -2%.
In the final major deal of the day, the management of discount retailer Dollar General (NYSE: DG - News) agreed to a $6.9 billion buyout bid from Kohlberg Kravis Roberts. KKR offered $22 a share, a 31% premium over Friday's close, for the operator of more than 8,200 discount stores nationwide. Dollar General jumped 26% higher on the news.
By the BullMarket.com Staff

Labels: AKZOY, CMX, CVS, DG, ESRX, F, NEW, pfe, SGP, SIE, UNH