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M&A activity on the rise for 2011

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From January through November 2010, there were over 21,000 mergers and acquisitions (M&A) agreements worldwide, representing more than $1.9 trillion in total volume, which is a 12% increase compared to 2009 levels (Source: Bloomberg’s 2011 M&A Outlook, December 2010). As previous years have shown a downfall in M&A activity, reports suggest that this year could show an important change. Total volume for M&A is forecast to increase to $3 trillion in 2011 (Source: New York Times’M&A To Hit $3 trillion in 2011, Reports Say,” November 15, 2010).

In the healthcare industry, Novartis AG (NVS-NYSE) reached an agreement with eye care company Alcon Inc. (ACL-NYSE) in December 2010 to purchase the remaining 23% of the company for $12.9 billion, which was finalized in February 2011. The company is holding an Extraordinary General Meeting on April 8, 2011, for shareholders to vote on the merger. Novartis also entered into a definitive agreement to acquire Genoptix, Inc. in a $470 million all-cash offer in January 2011. Genoptix is a laboratory specializing in providing necessary services for oncologists and hematologists.

In the pharmaceutical industry, Pfizer Inc. (PFE-NYSE) acquired King Pharmaceuticals in February 2011, in an acquisition valued at $3.6 billion. Additionally, Johnson & Johnson (JNJ-NYSE) acquired Crucell N.V. on March 16, 2011, in the amount of $2.3 billion. Crucell is a biotechnology company that focuses on providing vaccines and antibodies. We at Crystal have previously covered Crucell, for which archived research is available on our website. As pharmaceutical companies seek new drugs to replace the medicines going off-patent over the next few years, the biotech sector may also experience a resurgence of M&A activity going forward.

In the midst of this deal-making activity, Merck (MRK-NYSE) and sanofi-aventis SA (SNY-NYSE) just announced that they would not be combining their animal health businesses, as originally intended, due to the complexity of the transaction. The joint venture would have combined Merial, the animal health business of sanofi-aventis, with Intervet/Schering-Plough, Merck’s animal health unit. For further information on worldwide animal health activities, please consult our research on Bioniche Life Sciences Inc. (BNC-TSX; BNC-ASX). Established in 1979, Bioniche Animal Health is one of the largest Canadian-owned animal health biopharmaceutical companies, as measured by sales. For FY 2010, Bioniche Animal Health had sales of C$27 million.

Other notable M&A possibilities include AT&T Inc.’s (T-NYSE) recent announcement of its plans to acquire T-Mobile USA for $39 billion. T-Mobile is owned by Deutsche Telekom AG. Through AT&T’s acquisition of T-Mobile, the company expects to improve network quality for both companies’ customers. Also, this week, Charles Schwab & Co, Inc. announced plans to acquire optionsXpress Holding, Inc. (OXPS-NASDAQ) in an effort to capitalize on options trading.