Reuters Insider - At the Open: M&A Lifts Stocks; Behind Raytheon's Deal
13/06/2016 10:59
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Source: Thomson Reuters
Description: Reuters Investment Banking Specialist Richard Lee
says Raytheon is actually paying almost a 50
percent premium for Applied Signal Technology -- a
deal he says is based primarily on scarcity.
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Transcript (May be auto-generated)
Here's what's making news at the open. US stocks are kicking off the day higher,
looking to extend three-weeks of gains in this holiday short week. The S&P 500
is up 5% so far this month, now less than eight points away from regaining its
level before the Lehman Brothers collapse. That run has led to the typical he
said, she said among market prognosticators. Some expect the market to grind
higher into the yearend while others are saying equities are now overbought and
warn of some profit-taking. Well, a flurry of M&A activity is lending some
support to stocks today. AT&T's going to acquire wireless spectrum licenses from
Qualcomm in a deal worth about $1.9 billion.
A source also tells Reuters Sara Lee has been in talks to sell itself to
Brazilian meat producer JBS but the talks have stalled due to disagreement over
price. Talks have been on and off for a few months, the source said. And shares
of Applied Signal Technology are up about 8% early, a news that defense
contractor Raytheon reached a deal to buy it for about $490 million. Raytheon's
paying $38 a share. That's an 8.5% premium to Applied's Friday close. For more
on the deal, we're joined by Richard Lee, Reuters Investment Banking Specialist.
So Richard, you know, you're saying this deal's overbought, but you know, we're
only seeing, you know, an 8% pop. Yeah, you know if you compare against the
unaffected price from mid-October, it's actually close to the 50% premium.
But here's why I think it's overvalued here. If you look at, if you look back
there, there were three independent signaling intelligence companies. Essex was
the premium by far and it was purchased up in 2007 by Northrop Grumman. Then
earlier this year we had Argon being bought by Boeing at 17 times. Now today we
have an announcement that Applied Signal which is the weakest, widely viewed as
the weakest being bought at 16 times. So I think Raytheon is looking at his
asset more on scarcity rather than the platform or technology here. Alright,
thanks Richard. Check back in at 2:30 Eastern for more with Richard Lee on why
we'll see strong M&A activity in the first half of 2011.
Well, those hefty bonuses that usually make Christmas an especially good time
for Wall Street bankers is, they're being slashed by about to 25% compared with
2009. That's according to a Reuters poll of more than 40 bankers and senior
capital markets staff globally. While salaries have increased by as much as a
100% due to regulatory scrutiny of pay practices, bonuses still account for up
to 80% of top level employee compensation. And check back at 10 o'clock Eastern
for an update on the news that Russia may extend its ban on grain exports. I'm
Dan Burns. This is Reuters Insider