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Oracle 2Q Earnings Match Analyst Views

12/18/2006 16:27

SAN FRANCISCO, Dec 18, 2006 (AP Online) -- Oracle Corp.'s quarterly profit surged 21 percent as the business software maker reaped the latest returns from a two-year shopping spree that has eliminated several major rivals and shored up its product line.

The Redwood Shores-based company said Monday that it earned $967 million, or 18 cents per share, for the three months ended in November. That compared with net income of $798 million, or 15 cents per share, at the same time last year.

Revenue for Oracle's fiscal second quarter totaled $4.16 billion, a 26 percent increase from $3.29 billion at the same time last year.

If not for expenses to cover the cost of its acquisitions and employee stock options, Oracle said it would have earned 22 cents per share. That matched the average estimate among analysts surveyed by Thomson Financial.

Oracle's shares rose 23 cents to close at $17.91 on the Nasdaq Stock Market before the quarterly results were released, then added 3 cents in extended trading. The company's stock price has climbed by nearly 50 percent this year, driven by robust earnings growth.

The latest performance marked the fourth consecutive quarter in which Oracle's profit has increased by at least 20 percent, delivering on a management promise when the company began snapping up other software makers in a flurry of deals that have cost more than $20 billion so far.

Larry Ellison, Oracle's flamboyant chief executive, has pledged only to pursue deals that will help the company boost its earnings by 20 percent annually.

Oracle has been hitting its financial targets by maintaining its leadership in the database software market while boosting its sales of business applications products that help businesses, government agencies and schools automate a wide range of administrative tasks.

By MICHAEL LIEDTKE AP Business Writer

Pfizer names CEO Kindler chairman

12/18/2006 17:50

NEW YORK, Dec 19, 2006 (AFX) -- Pfizer Inc., the world's largest drug maker, late Monday said Chief Executive Jeffrey B. Kindler will succeed Hank McKinnell as chairman on Tuesday.

McKinnell will also step down from the board when he leaves the company in February. Originally, McKinnell was expected to remain chairman until February. Kindler replaced McKinnell as CEO in July.

Pfizer also upped its first-quarter dividend by 21 percent to 29 cents from 24 cents. The dividend is payable March 6 to shareholders of record on Feb. 9.

Shares of Pfizer gained 19 cents to $26.02 in after-hours electronic trading, following a gain of 19 cents to close at $25.83 on the New York Stock Exchange.

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By Staff Reporter

Sector Snap: PBMs rise on Caremark bid

12/18/2006 12:19

NEW YORK, Dec 19, 2006 (AFX) -- Shares of pharmacy benefits managers rose Monday after Express Scripts Inc. sought to outbid Caremark Rx Inc.'s chosen acquirer, fueling speculation of a bidding war and other takeovers in the sector.

Maryland Heights, Mo.-based Express Scripts launched a half-cash, half-stock bid worth $58.50 per share for Caremark. That represents a premium of about 15 percent to retail pharmacy chain CVS' $21.2 billion stock offer last month for the Nashville-based drug purchaser.

Health insurers, unions and employers hire PBMs to provide drugs under health plans. Express Scripts said acquiring Caremark will give the combined company leverage to negotiate lower prices from drug manufacturers.

Express Scripts said if the deal closes it expects the combined company to save $500 million annually, boosting earnings significantly after a year.

Shares of Caremark Rx rose $4.77, or 9.5 percent, to $55.07 in morning trading on the New York Stock Exchange. William Blair analyst John Kreger wrote that a bidding war for Caremark is likely and Bank of America analyst Scott Mushkin advised clients he thinks CVS may be willing to offer more than $60 per share.

Express Scripts' stock fell $1.17 to $67.49. Analysts cited a few drawbacks to the company's offer, including ending up in a bidding war with deep-pocketed CVS, a $25.3 billion company. Shares of CVS slipped 53 cents to $29.99.

Also, investors had speculated Express Scripts would grab additional share of the drug-middleman market while Caremark busied itself tying up with CVS. With Express Scripts now engaged in a takeover, those market share gains will now probably go to MedcoHealth Solutions Inc., Goldman Sachs analyst Christopher McFadden wrote in a note to clients.

Shares of MedcoHealth Solutions' stock rose $1.49, or 2.9 percent, to $53.55 in morning trading on the Big Board.

William Blair's Kreger said a bidding war could boost stocks across the sector as investors anticipate other deals. Elsewhere in the sector, shares of BioScrip Inc. rose 8 cents, or 2.1 percent, to $3.93, and shares of Healthextras Inc. rose 27 cents to $23.65 on the Nasdaq.

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By Staff Reporter

Biomet agrees to $10.9 billion buyout

12/18/2006 16:26

WARSAW, Ind., Dec 19, 2006 (AFX) -- Biomet Inc., a maker of hip and knee replacement products, agreed Monday to be acquired by a private equity consortium for about $10.9 billion in cash.

The buyers include Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and the Texas Pacific Group, along with one of Biomet's founders, Dane A. Miller.

Shareholders are being offered $44 per share, a 27 percent premium to Biomet's price on April 3, the trading day before news surfaced that the company was a takeover target. Biomet started looking for a buyer with the help of Morgan Stanley Inc. on April 6.

The buyers said they will use a combination of their own cash and borrowed funds from Bank of America Corp. and Goldman Sachs Group Inc. to finance the takeover.

The board of Warsaw-based Biomet voted in favor of the transaction, which is subject to shareholder approval and antitrust clearance.

The investor group said in a statement that it would work with Biomet's management and sales force to help accelerate growth and profitability.

"We will work in close partnership with Biomet's excellent management while harnessing the extensive resources of our consortium, to build on Biomet's long heritage of success," the group said.

Biomet said the transaction is expected to be complete by Oct. 31, and the company's stock will be delisted from the Nasdaq Stock Market.

Becoming a private company with the backing of equity partners will put Biomet in a stronger position, said Daniel P. Hann, interim president and chief executive of the company, which has about 6,300 employees.

"This transaction offers shareholders the ability to realize substantial value from their investments in Biomet and provides important benefits to our customers, team members and other stakeholders," Hann said in a statement.

Last week, UBS analyst Kristen M. Stewart wrote in a report that a private equity buyout wouldn't be justified at more than $43 per share.

Biomet shares fell 53 cents to $41.48 in afternoon trading on the Nasdaq.

Biomet, which was established in 1977 in Warsaw, has about 1,350 workers in Indiana. Warsaw, a city of 12,000 people some 40 miles west of Fort Wayne, also is home to orthopedics giants DePuy Orthopaedics Inc. and Zimmer Holdings Inc.

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By Staff Reporter

Delphi accepts $3.4 billion in financing

12/18/2006 17:04

DETROIT, Dec 19, 2006 (XFN) -- A group of private equity investors has offered to pay up to $3.4 billion to buy shares of Delphi Corp. and could wind up owning as much as 72 percent of the auto parts maker in a deal that creates a framework for its successful emergence from bankruptcy, Delphi said Monday.

The company -- which makes a slew of auto parts including entertainment systems, chassis, electronics and air conditioning -- also said that its board named President Rodney O'Neal to replace Chairman Robert S. "Steve" Miller as chief executive, effective Jan. 1. Miller will serve as executive chairman until the company emerges from bankruptcy. O'Neal will remain as president.

Under the financing deal, Appaloosa Management LP, Cerberus Capital Management LP and Harbinger Capital Partners Master Fund I, as well as Merrill Lynch & Co. and UBS Securities LLC, will invest a minimum of $1.4 billion and a maximum of $3.4 billion in the struggling company in exchange for common and preferred stock that will be issued in the first half of next year.

Delphi plans to dissolve its current 560 million shares and issue 135.3 million shares of new common stock. Current Delphi shareholders would divide up 3 million shares of the new stock, plus they would get rights to buy more new shares at a discount.

Of the new investors, Cerberus and Appaloosa are the largest. Appaloosa already holds 9.3 percent of Delphi's current stock, according to LionShares.com.

The new investors would buy 30 percent to 72 percent of Delphi's new stock, depending on how many current stockholders decide to exercise their option to buy the new stock, Delphi said.

Delphi, the nation's largest auto parts supplier, said the agreement was part of a plan to emerge from bankruptcy protection by the second quarter of 2007. A reorganization framework agreement, signed by Delphi, the investors and former parent General Motors Corp., was included in the deal.

The new investment will be used to fully fund Delphi's pension plan, which at the end of 2005 was underfunded by $4.1 billion, the company said.

Separately, Delphi accepted a proposal from JPMorgan Chase Bank and a group of lenders to refinance the company's existing $2 billion debtor in possession credit line and about $2.5 billion in loans.

The agreements still must be approved by a federal bankruptcy judge in New York, where a hearing is scheduled for Jan. 5. The new investors and Delphi each have the right to terminate the agreement on or before Jan. 31 if Delphi fails to reach a wage and benefit agreement with its unions and a parts supply pact with GM.

The investors also can withdraw before Feb. 28, but that deadline can be extended if both parties agree.

The willingness of "very sophisticated" investors who already have a stake in Delphi to put more money into it speaks well for the supplier's future, said Jim McTevia, a Michigan-based corporate turnaround specialist.

"It looks like Delphi is going to survive," McTevia said. "It's a vote of confidence in the company and the company's ability to get out of Chapter 11 and become a bigger player in the global market."

The move to replace Miller with O'Neal also could help relations with the United Auto Workers union, whose president frequently criticizes Miller as a symbol of corporate greed. The UAW would not comment on the change.

"Today's agreements represent significant milestones in Delphi's reorganization and another major step towards emergence from our Chapter 11 reorganization in the U.S.," Miller said in a statement.

Under the deal, Delphi will issue 135.3 million new shares sometime during the first half of next year, the company said.

Various debt-holders would get 28 million shares, or 21 percent, and GM would get 7 million shares, or 5 percent. Existing shareholders would get 3 million shares and could buy up to 57 million more at a discount, for up to 44 percent of the post-Chapter 11 company.

GM said in a statement that the deal shows continued progress by Delphi and sets up a framework for the companies to keep negotiating. GM has estimated that it is liable for $6 billion in Delphi employee benefit costs. It may take on up to $2 billion in Delphi pension obligations, according to Delphi.

"Although we are encouraged by the progress of the negotiations between GM, Delphi and the other stakeholders thus far, we recognize that there are still a number of matters to be resolved and a lot more work is yet to be completed," GM said.

Delphi, GM's former parts-making arm that was spun off as a separate company, filed for bankruptcy protection in October 2005. It had 21,600 hourly workers at the end of September, the latest figures available.

The parts supplier plans to close or sell 21 of its 29 U.S. plants and focus on operating eight U.S. plants that make electronics, safety systems, heating and air conditioning systems and some mechanical parts. The plants slated for sale or closure make steering systems, brakes, dashboards and other parts that Delphi no longer considers part of its core business.

Delphi also has asked a court for permission to void previous labor contracts. The company continues to negotiate with GM and Delphi's unions on wage reductions for many of its hourly workers and has said it prefers a negotiated settlement to a court order.

Associated Press Writers David N. Goodman in Detroit and Vinnee Tong in New York contributed to this report.

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By Staff Reporter

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