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Let's Make a Deal: How the Mergers-and-Acquisitions Boom Will Hurt the U.S. Economy

By , Global Investing Specialist, Money Morning -

With its $39 billion hostile bid for Canada's Potash Corp. (NYSE: POT), mining giant BHP Billiton Ltd. (NYSE ADR: BHP) capped an active August in the mergers-and-acquisitions market.

With the moribund growth prospects of the U.S. economy, there would seem to be no great urgency for companies to go on an M&A spree, yet the total value of announced buyout deals for August alone has topped $175 billion.

Cynics are reaching only one conclusion: With interest rates so low and corporations so cash-rich, it seems that company management teams would rather do anything with that cash than to give it back to shareholders via stock buybacks or boosted dividends.

And those deals signal additional trouble ahead for the U.S. economy.



To understand the problems that this rampant dealmaking figures to cause, please read on...

Investors' Hopes Riding on Surge in M&A Activity

By , Contributing Writer, Money Morning -

Global mergers and acquisitions (M&A) activity is at its highest level since late 2009, providing a glimmer of hope to investors struggling to decipher stock and bond markets roiled by a weakening U.S. economy.

Global takeovers announced so far this year have totaled $1.29 trillion, up 23% from the same time last year, according to Bloomberg News.

Last week a flurry of bleak economic news headlined by larger than expected unemployment claims spurred a 280-point drop in the Dow Jones Industrial Average.

But, investors took some solace from a flurry of M&A activity and an initial public offering (IPO) from General Motors Co., because acquisitions are seen as a sign companies are confident the economy will grow and business will improve.

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Japan's Astellas Pharma Is the Latest Company to Go Global to Dodge Patent Problems

By , Associate Editor, Money Morning -

Japan's second-largest drug maker Astellas Pharma, Inc. announced yesterday (Sunday) it would buy U.S. biotech OSI Pharmaceuticals, Inc. (Nasdaq: OSIP) for $4 billion to increase its exposure to the U.S. pharmaceuticals market and build up its struggling pipeline.

The all-cash bid is Astellas' second for the sought-after OSI after a March 1 $3.5 billion offer was rejected. Astellas will pay $57.50 per OSI share, 11% more than the first offer and 55% more than OSI's last closing price before Astellas starting bidding. OSI closed at $59.80 Friday.

OSI's money-making cancer drug Tarceva generated $1.2 billion in sales last year and is projected to bring in $7 billion in revenue through 2020. Astellas wants to build a global cancer-drug business and jointly develop more cancer drugs with OSI.

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The Airline Industry: How to Make Good Money From a Bad Business

By , Money Morning -

After years of off-and-on conversation, UAL Corp.'s United Airlines (NASDAQ: UAUA) is getting into bed with Continental Airlines Inc. (NYSE: CAL) in a merger deal valued at $3.7 billion. The merged entity, keeping the "United" name, will be the largest airline in the world. It will have close to $30 billion in combined revenue, 700 aircraft, and service to 370 destinations in 59 countries, according to BusinessWeek. Early estimates predict savings to reach $1 billion to $1.2 billion annually.

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Money Morning Mailbag: What's More Broken – Washington or Wall Street?

By , Associate Editor, Money Morning -

While policymakers will have taken up the debate over financial reform in the halls of Congress, Money Morning readers have been posting comments to our Money Morning Facebook page and writing in to our e-mail mailbag at mailbag@moneymappress.com with their thoughts on the Goldman Sachs Group Inc. (NYSE: GS) case and the relationship between Washington and Wall Street.

A week after the Securities and Exchange Commission brought fraud charges against Goldman Sachs, President Barack Obama yesterday (Thursday) blamed the financial meltdown on both Washington and Wall Street in a speech in New York and urged Wall Street giants to stop fighting reform.

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