This year’s frenzy of mergers and acquisitions couldn’t be slowed by the long weekend, as a range of companies announced nearly $12 billion in M&A Tuesday morning.
Meanwhile, on the international stage, the healthcare sector was once again in the M&A mix. Canada’s Concordia Healthcare Corp. (CXRX) pulled off a $3.5 billion deal for U.K.-based Amdipharm Mercury, a privately held drug manufacturer.
And those were just the deals where at least one party had a listing on a major U.S. exchange.
If the bull market is indeed coming to an end, it won’t be due to a dearth of M&A. Global deal activity topped $3 trillion as of Aug. 11, according to Dealogic. That’s the fastest pace of M&A activity since 2007.
Mergers and acquisitions often benefits Wall Street investment bankers more than retail shareholders, but it’s good news for the broader stock market nonetheless. Indeed, the market loves M&A. It reduces the total number of publicly traded shares and indicates that companies have confidence in the economy.
M&A Moves Farther Afield
As for Tuesday’s deals, they represented a greater mix of players, as only one of them involved companies in the healthcare sector. If that signals an expansion of M&A activity in some of the less frenzied sectors, so much the better.
In the biggest Tuesday deal, Blackstone Group picked up an impressive portfolio of high-end real estate. Strategic Hotels and Resorts’ holdings include Four Seasons hotels and resorts in Silicon Valley and the Fairmont and Intercontinental hotels in Chicago. BEE also owns the JW Marriott Essex House Hotel, which has a prime location on Central Park South in Manhattan.
Shares of BEE stock have been marching higher since July, when a media report first broke the news that the real estate investment trust was up for sale.
As a result, a good chunk of the acquisition premium was already baked into the BEE stock price, which is why BX was able to pick up BEE for just $14.25 a share. (It was trading at $13.60 before Labor Day weekend.)
That looks like a nice out for Strategic Hotels and Resorts shareholders. After all, real estate investment trusts are under pressure because of an imminent rate hike by the Federal Reserve.
Consolidation continued in the media sector with MEG’s acquisition of MDP, but don’t be surprised if Media General jettisons a big chunk of Meredith Corp.’s assets. As a diversified media company, MDP owns TV stations and publishes national magazines. Indeed, it includes some of the biggest titles in the business, including Better Homes and Gardens, Parents and Martha Stewart Living.
MEG, however, is an operator of TV stations only. It seems unlikely that the company will want to hold on to the publishing side of MDP when that entire industry is in decline. Just look at what Time Warner (TWX) did with Time Inc. (TIME) or the split between 21st Century Fox (FOXA) and News Corp. (NWS).
As for CXRX, one pharmaceutical company buying another is hardly news in this M&A environment. Consolidation is running rampant through the industry, partly as a response to the M&A among pharmacy benefits managers.
But that didn’t keep the market from slamming the deal. Shares of Concordia Healthcare stock fell as much as 11% soon after the opening bell.
True, the latest M&A activity is small beer compared with some of the mammoth deals we’ve seen recently, but they’re still important for market psychology.
The market is getting close to the home stretch of 2015, and it needs all the help it can get if it’s going to finish in the black.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.