The first trading week of March marked a change in tone from the general bullishness we saw in February. Between the cold winter weather and the deflationary environment, this week’s economic reports didn’t inspire much confidence. (That is, not at first glance.)
Reviewing the big headlines, we know that January construction spending fell 1.1%, January personal spending fell 0.2%, jobless claims rose and January factory goods orders fell 0.2%. So, its small wonder that investors were more nervous at the start of March, and that the benchmark indices oscillated a bit.
Interestingly enough, I actually expect March to be the “calm before the storm.” Of the more positive headlines, here are two acquisition announcements to give investors a view of growth and prosperity:
Actavis Breaks Records With Mega-Bond Deal
Actavis plc (NYSE:ACT) made headlines after issuing $21 billion in debt, the second-largest corporate bond offering ever.
The 10-year Actavis bond was priced to yield over 3.84%, well above the 10-year Treasury. So, ACT was snapped up quickly by yield-hungry investors. Actavis ended up receiving $90 billion in orders. Proceeds of this sale went toward the $66 billion acquisition of Allergan, Inc. (NYSE:AGN).
Actavis officially acquired Allergan for $70.5 billion. So, those who held AGN shares should have received $129.22 in cash and 0.3683 ACT shares per AGN share.
As a refresher, the merger has created one of the world’s top ten pharmaceutical companies by sales. In 2015, the combined company is expected to bring in more than $23 billion in revenue, which represents 76% annual sales growth. Later this year, Actavis plans to adopt the Allergan name.
With ACT stock trading at under 15 times forecasted earnings, I see plenty of upside potential here. So, please continue to buy ACT.
NXP Semiconductors Fuels Merger Mania
Shares of NXP Semiconductors NV (NASDAQ:NXPI) popped after it announced plans to acquire competitor Freescale Semiconductor Ltd (NYSE:FSL) for $11.8 billion.
Based in Austin, Texas, Freescale manufactures chips that are used in everything from cars to home appliances to wearables to medical diagnostic devices. FSL is a smaller rival of NXP Semiconductors, which also makes chips that power many of the same kinds of connected devices.
The combined company is expected to bring in $10 billion in annual sales. For fiscal year 2014, NXPI had brought in $5.647 billion in revenue. NXP Semiconductors expects to achieve $200 million in cost savings in the first year after the merger, and eventually $500 million in annual cost savings.
Both NXPI and FSL expect the deal to close during the second half of 2015. NXP will fund the transaction through a combination of cash, new debt and 115 million of its shares. Freescale shareholders will end up owning about a third of the combined company.
The acquisition is an exciting move for NXP Semiconductors. So, NXPI shares have rallied well above our buy price. I recommend that you hold off on buying additional NXPI shares at this time.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
