Endo buyout likely to close; Rohm & Haas stock falls below Dow bid; Johnson & Johnson extends offer

By Cristal Cody

New York, Jan. 6 - Shares of Indevus Pharmaceuticals Inc. shot up $2.27, or 73.23%, to close Tuesday at $5.37 after the company agreed to a $637 million buyout by Endo Pharmaceuticals Holdings Inc.

Also on Tuesday, Dow Chemical Co. said it will take legal action against the Kuwait company that backed out of a $17.4 billion joint venture with Dow.

Meanwhile, Dow is expected to close on its $78.00-a-share acquisition of Rohm & Haas Co. this week, but investors started pulling out Tuesday over concerns that the deal has fallen through.

In other activity, Johnson & Johnson extended its $31.00-a-share cash tender offer for Mentor Corp. to Jan. 16 as it awaits regulatory clearances, and Exelon Corp.'s stock tender offer for NRG Energy Inc. expired, though the company is expected to extend the unsolicited bid.

Meanwhile Tuesday, investors rallied on Wall Street and sent the Dow Jones Industrial Average up 62.21, or 0.69%, to 9,015.10.

Broader stock indexes also made gains. The S&P 500 index rose 7.25, or 0.78%, to 934.70, while the Nasdaq Composite index jumped 24.35, or 1.5%, to 1,652.38.

Endo deal likely to close

Endo's $4.50-a-share cash offer represents a 45% premium to Indevus' stock closing price on Monday.

The deal includes an additional $267 million, or $3.00 a share, if regulatory and sales stipulations are met. Without the bonus, the deal is valued at $370 million.

Kevin DeGeeter, an analyst with Oppenheimer & Co., said it is unlikely any other buyers will top Endo's offer.

"We do think that Endo is paying a significant premium, and there's not that many companies focused on urology," he said.

Endo will gain six urology products from Indevus in the deal.

The buyout should close without a hitch.

"We don't expect it to run into any major red flags [from regulatory agencies]" because the urology industry is such a niche market, DeGeeter said. "We expect this transaction has a high likelihood of being completed."

The deal probably cannot close until mid-March at the earliest, he said.

The merger agreement includes a $20 million termination fee and a termination date of July 1.

Endo's chief executive officer, David Holveck, talked up the deal's attributes to analysts on Tuesday.

The offer represents 40% of Endo's marketable cash as of Sept. 30 and gives the company an "accelerated revenue growth," Holveck said.

Endo shares lost $3.78, or 15.7%, to close Tuesday at $20.28.

Dow takes legal action

Dow Chemical could recoup up to $2.5 billion from Petrochemical Industries Co. after it backed out of the K-Dow Petrochemicals joint venture, according to regulatory filings with the Securities and Exchange Commission.

Meanwhile, investors showed wavering faith in Dow's $78.00-a-share buyout of Rohm & Haas.

Rohm & Haas shares lost $2.28, or 3.57%, to close Tuesday at $61.54.

Dow must close on the acquisition by Saturday or the share price will increase every day the deal has not been completed.

Dow agreed to buy Rohm & Haas in July 2008.

Dow's shares gained $1.00, or 6.64%, to close Tuesday at $16.05.

Johnson & Johnson waits

Johnson & Johnson said it expects to receive final regulatory clearances for its acquisition of Mentor by Jan. 15.

As of Tuesday, though, only 1.8% of Mentor's outstanding shares have been tendered, according to Johnson & Johnson.

The $1.07 billion deal is expected to close in the first quarter of 2009.

Johnson & Johnson shares lost 36 cents, or 0.60%, to close Tuesday at $59.69.

Mentor's stock fell 1 cent, or 0.03%, to $30.91 in trading.

Exelon offer expires

Exelon's $5.8 billion hostile bid for NRG Energy is expected to be extended while Exelon awaits regulatory approval of the merger.

NRG's board has urged shareholders to not tender shares, and analysts say the offer undervalues the company.

Exelon shares rose 8 cents, or 0.14%, to close Tuesday at $57.42.

NRG shares gained $1.05, or 4.46%, to close at $24.61.

Mentioned in this article:

Dow Chemical Co. NYSE: DOW

Endo Pharmaceuticals Holdings Inc. Nasdaq: ENDP

Exelon Corp. NYSE: EXC

Indevus Pharmaceuticals Inc. Nasdaq: IDEV

Johnson & Johnson NYSE: JNJ

Mentor Corp. NYSE: MNT

NRG Energy Inc. NYSE: NRG

Rohm & Haas Co. NYSE: ROH

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