DoJ approves Sierra Health, UnitedHealth; airlines face more opposition; exchanges extend talks

By Aaron Hochman-Zimmerman

New York, Feb. 26 - As the market was enjoying its second straight day of sunshine, the Department of Justice approved the $2.6 billion merger between Sierra Health Services, Inc. and UnitedHealth Group and the companies then closed the deal.

Also in pharmaceuticals, Galderma Pharma SA announced its plans to buy CollaGenex Pharmaceuticals Inc.

Meanwhile, exchanges Nymex Holdings Inc. and CME Group Inc. will continue talks until March 15.

Delta Air Lines and Northwest Airlines saw the merger of two of their detractors. The International Association of Machinists and Aerospace Workers and the Coalition for an Airline Passengers' Bill of Rights jointly announced their opposition for the proposed consolidation.

Still International Business Machines Corp.'s $15 billion share buyback carried the headlines even as the monoline insurers seem to have taken a big step away from the edge of the cliff.

"It looks like they've made a lot of progress," said Paul Martin, chief investment officer of Martin Capital Advisors about the embattled insurers.

According to reports, "the banks are stepping up to do what needs to be done," he said, adding: "That's a huge positive."

The rally caused by an improving monoline situation should have been bigger, he said, but "it may take a while to sink in."

The Dow Jones Industrial Average ended better by 114.70 or 0.91% at 12,684.92, while the Nasdaq Composite Index added 17.51 or 0.75% to finish at 2,344.99.

The S&P 500 added 9.49 or 0.69% to close at 1,381.29.

Machinists union, passenger advocates oppose merger

The International Association of Machinists and Aerospace Workers has joined up with the Coalition for an Airline Passengers' Bill of Rights to oppose the merger between Delta Air Lines (NYSE: DAL) and Northwest Airlines (NYSE: NWA), according to the IAM website.

Delta shares slid by $0.24 or 1.49% to $15.91, while Northwest stock added $0.15 or 0.95% to finish at $16.01.

"Airline employees and airline passengers have every right to be concerned about the negative impact of airline consolidation," said IAM's transportation general vice president Robert Roach, in a union press release.

"These are the two groups essential to an airline's success, yet they are the ones who are hurt the most in mergers. Airlines must work with employees and cater to passengers if they expect to succeed," he said.

The airlines were undeterred, "they're still trying to consolidate," Martin said.

"It's ultimately where they have to go ... there's just way too much competition out there in the airline business," he said.

"It's just not necessarily a good thing for consumers," he added.

Sierra Health, UnitedHealth close

Sierra Health (NYSE: SIE) which ended Monday at $42.06, announced it received Justice Department approval for its $2.6 billion or $43.50 per share merger with UnitedHealth Group (NYSE: UNH) and the two companies then wrapped the transaction.

UnitedHealth stock tacked on $0.95 or 1.98% to end at $48.93 although the approval of the deal was contingent upon its divestment from SecureHorizons Medicare Advantage HMO plans in Clark and Nye counties, according to a press release.

Humana Inc. (NYSE: HUM) will assume coverage for those customers.

Humana stock added $1.22 or 1.76% to close at $70.37.

"Joining our two organizations will be good for Nevada's health care consumers, good for the many dedicated professionals who provide their care and good for the employees of Sierra," said Jonathon Bunker, president and chief operating officer of Sierra, in the release.

"With greater resources and advanced technology, we can now build upon our legacy by providing more options for our members and expanded access to the largest national network of hospitals, physicians and other care providers." he said.

UnitedHealth and Sierra Health also agreed with Nevada's attorney general to provide a $15 million charitable donation over the next five years, the release said.

The merger was already accounted for in UnitedHealth's 2008 financial outlook, the company said.

"UnitedHealth Group continues to project full year revenue of approximately $83 billion and earnings in the range of $3.95 to $4.00 per share," the release said.

Clear Channel pressing courts

Clear Channel Communications (NYSE: CCU) stock jumped by $1.66 or 5.16% to $33.80 as it filed a timeline for its suit against Providence Equity Partners with the Delaware Chancery Court, a market source said.

Providence requested the court not expedite the trial in which Clear Channel hopes to force Providence's Newport Television to complete the purchase of 56 television stations.

Clear Channel lowered the price of the package of stations to $1.1 billion from $1.2 billion.

Once the sale is complete, Clear Channel expects to be acquired by Thomas H. Lee Partners and Bain Capital for $19.5 billion.

However, Wachovia has shown hesitancy to finance the deal for the 56 stations and it may be just as hesitant towards the buyout, a market source said.

NYMEX, CME extend talks

Shares of the New York Mercantile Exchange (NYSE: NMX) fell by $1.63 or 1.57% to end the session at $102.17 as its talks with prospective buyer CME Group (NYSE: CME) were extended until March 15.

CME Group stock lost $1.72 or 0.32% as it ended at $529.28.

Holders of NYMEX shares would receive $36 per share plus 0.1323 of a share of the new exchange.

Talks were scheduled to end this week.

The merger between the two would create a $40 billion futures trading market.

The deal may be announced in March, a source said.

Everyone expects this to go through, another market source said.

"I don't see an issue with further consolidation myself," said Martin.

Although, "There are arguments on both sides," he said.

Galderma buys CollaGenex in pharma deal

Shares of CollaGenex Pharmaceuticals (NASDAQ: CGPI) gained $3.53 or 27.58% to close at $16.33 as it announced it has entered into an agreement to be acquired by a division of Galderma Pharma.

The $420 million cash tender offer represents $16.60 per share, according to a press release.

After the tender offer, the transaction will be completed by a merger in which the holders of the outstanding shares of CollaGenex stock not tendered in the offer will receive the same cash price per share paid in the tender offer, the release said.

The boards of directors of both CollaGenex and Galderma unanimously approved the deal.

"The immediate implication for the U.S. market is very positive," said Albert Draaijer, president of Galderma's U.S. operations.

"CollaGenex's oral rosacea therapy will be an important complement to Galderma's topical products, providing improved options to treat a condition affecting more than 14 million Americans," he said.

SXC Health to buy National Medical Health

SXC Health Solutions Corp. (Nasdaq: SXCI) shares sunk by $1.64 or 10.28% to $14.31 as it announced it will acquire National Medical Health Card Systems Inc. (Nasdaq: NMHC).

NMHC shares added $0.70 or 7.11% to end the session at $10.55.

The $143 million or $11 per share transaction will be completed with 70% cash and 30% stock of SXC, a press release said.

"NMHC's base of 300 customers and 2.3 million lives under management, coupled with its established mail-order and specialty pharmacy operations, expands the capabilities of our full-service PBM [pharmacy benefits management] offering and is complementary to our traditional software license and ASP [application service provider] business," said Gordon Glenn, SXC's chairman and chief executive officer.

"In addition, NMHC has valuable relationships with industry consultants and provides us with a customer base that has critical mass with third-party administrators, managed Medicaid, state governments and Taft-Hartley organizations," he said.

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