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I was preparing to write this morning when, as part of my normal routine, I checked the World Index Chart on ADVFN. Nikkei up. That’s good. FTSE up. That’s good. Dow straight up! What?
It started with the opening bell. By 10:00 am EDT, the Dow Jones Industrial Average (^DJI) had already gained 250.00 points this morning. Thirty minutes later the index was receding mildly, but was still at 17,972.00. I had to find out what happened.
A study in cause and effect
Over the years I have learned that the law of cause and effect is not as cut and dried as we have been led to believe. If we ask what caused the sudden, sharp increase in the Dow this morning, there is not a single cause. There are, at minimum, four causes, which I am about to share. These four were obvious leading causes, but there are others as well. These four are most important as they relate to specific investment opportunities.
Horizon Pharma ( NASDAQ:HZNP) issued a joint announcement with Hyperion Therapeutics (NASDAQ:HPTX) revealing that Horizon will acquire all outstanding Hyperion shares at $46.00 per share. The $1.1 billion offer has been unanimously approved by the boards of both companies represents a 35% premium on the volume-weighted average price of Hyperion shares for the last 60 days. HZNP shares are up 14.58% to $24.99.
According to Horizon president and CEO Timothy P. Walbert, “The Hyperion acquisition will expand and diversify our product portfolio by adding two complementary orphan disease products, RAVICTI and BUPHENYL, and leverage as well as expand the existing infrastructure of our orphan disease business.” He indicated that the deal will add $100 million to the company’s adjusted EBITDA in 2016.
United Health Group (NYSE:UNH) likewise announced that it will be acquiring all outstanding shares of Catamaran Corporation (TSX:CCT) for $61.20 per share. UNH will use new indebtedness to acquire Catamaran for $12.78 billion. Shares of UNH, the largest health service group in the USA are up 2.62% to $121.11, whilst Catamaran shares jumped by more than 25% to $76.15, although not affecting the Dow, giving the TSE a boost.
Late this morning, Tripp Levy PLLC, a New York legal firm focusing on shareholder rights, said that the deal should be valued at $66.00 per share and that it will launch an investigation into the matter.
Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) rose more than 3.00% to $63.86 on news that it will acquire Auspex Pharaceuticals Inc (NASDAQ:ASPX) for $3.2 billion or $101.00 per share, a premium of 42% on Friday’s closing price. In a bit of a sticky-wicket situation, ASPX shares rose 41.73% to $100.50. Another law firm, Rigrodsky & Long, is launching an investigation into this deal on behalf of shareholders. The deal is set to close in mid-2015.
Fujifilm Holdings Corp. (TSE:4901) announced that it has agreed to acquire all outstanding and issued shares of Cellular Dynamics International (NASDAQ:ICEL), a biotech firm., for $16.50 per share, or $307 million, in a cash transaction. Cellular will operate as a subsidiary of Fujifilm Holdings. There is a high level of synergy available with respect to the technological advances of both companies, especially with regard to the use of Fuji’s cellular scaffolding for use with Cellular’s regenerative medical developments.
ICEL share price increased by 105.5% to $16.48. Yet another law firm announced that it will investigate this acquisition as the share price rose to approximate the proposed offering.
A quick double check indicates that the collective increases are holding strong and that the DJIA is still up 268.29 points approaching noon EST.
Image courtesy of cooldesign at FreeDigitalPhotos.net
