Citi rescue sparks rally; King takes Alpharma for $37 a share; J&J to buy Omrix; LandAmerica sinks

By Cristal Cody

New York, Nov. 24 - Stocks rallied Monday with news of the government's bailout of Citigroup Inc.

The Dow Jones Industrial Average rose 396.97, or 4.93%, to 8,443.39.

Broader stock indicators also gained. The Standard & Poor's 500 rose 51.78, or 6.47%, to 851.81, and the Nasdaq Composite Index rose 87.67, or 6.33% to 1,472.02.

Several businesses eager to get a head start before the Thanksgiving Day holiday also announced plans Monday to move forward on deals.

King Pharmaceuticals Inc. upped its offer for Alpharma Inc., and both boards of directors approved the transaction.

In another drug deal, Johnson & Johnson offered Monday to pay $438 million for Omrix Biopharmaceuticals Inc.

Monday was a black day, though, for LandAmerica Financial Group Inc.'s stock after Fidelity National Financial Inc. withdrew its $126 million all-stock offer late Friday.

Here we go again

Citigroup shares sprinted to the closing bell with a 57.82% increase in its stock price, closing at $5.95. Shares nearly regained the 60% in value the stock had lost in the last week on uncertainties.

The government agreed to pump $20 billion in cash into the company in a move announced late Sunday by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.

The funds will come from the $700 billon financial bailout package approved earlier this year.

The rescue plan comes with some conditions, including barring Citigroup from paying quarterly dividends of more than 1 cent a share for three years unless the government gives consent. Citigroup also must find ways to help homeowners avoid foreclosure.

Bank stocks jumped on the news of the rescue plan.

Bank of America Corp. shares closed up 27.2% to $14.59 and Morgan Stanley shares were up 33.13% to close at $13.38.

In another banking deal, Wachovia Corp. shareholders will vote Dec. 23 on the acquisition by Wells Fargo & Co.

The stock merger estimated at about $9.3 billion in value is expected to close by Dec. 31.

Wachovia shares closed at $5.29, up 28.09%. Wells Fargo stock rose 19.58% to close at $26.02.

King gets Alpharma

King Pharmaceuticals' $1.6 billion sweetened offer for Alpharma sealed the deal, with the companies announcing the boards' unanimous approval on Monday.

King said it will pay $37 a share in cash for Alpharma's outstanding class A common stock, a 54% premium on the closing stock price on Aug. 21, the last day of trading before King made its first offer.

Bridgewater, N.J.-based Alpharma had rejected King's initial $1.4 billion or $33 a share offer.

"The transformation of Alpharma over the past two years has created tremendous shareholder value, and we have consistently said that we will act in the best interest of shareholders," Dean Mitchell, Alpharma's president and chief executive officer, said in a statement.

Bristol, Tenn.-based King extended the tender offer that was scheduled to expire on Friday until Dec. 19.

King estimates that 73% of the outstanding shares had been tendered as of Friday.

The merger should close by the end of the year.

Scott Henry, a pharmaceutical analyst with Roth Capital Partners, said the deal appears pretty solid, though it could still need regulatory approval from the Federal Trade Commission.

"As long as nothing crazy comes between now and then, we think it's a done deal," he said.

Jack Howarth, Alpharma vice president of investor relations, would not confirm Monday whether the companies are still awaiting FTC approval, deferring the answer until regulatory documents are filed.

Alpharma shares closed Monday up 8.03% to $36.19 and near its yearly high of $38.14.

King shares rose 7.89% to close at $9.30 in trading.

J&J moves in on Omrix

In another drug deal, Johnson & Johnson said Monday it will pay $438 million for Omrix Biopharmaceuticals.

New York-based Omrix's shares jumped 16.97% to $24.75 on the bid.

Johnson & Johnson offered $25 per share in cash for the stock, an 18% premium over Omrix's closing stock price on Friday.

"At first blush, it appears JNJ acquires OMRI, including existing and pipeline products at a bargain," Vivian Cervantes, an analyst with Rodman & Renshaw LLC, said in an investors research note. "However, given current macro conditions, we believe [the] transaction valuation is at respectable levels and at the top end of the range of medical device take-out multiples."

The deal is scheduled to close at the end of the year. The closing is conditioned on Israeli antitrust clearance and other customary closing conditions, according to the companies.

Both companies' boards of directors have approved the deal. Omrix's founder and chief executive, Robert Taub, also agreed to tender the 16% of outstanding shares he controls.

"Omrix and Ethicon have enjoyed a solid partnership for the past five years," Taub said in a statement. "Omrix' Israeli-based manufacturing and research & development expertise will be strengthened by the long-term stability and integration that this merger will create."

Under the deal's terms, Omrix will operate as a stand-alone company through Johnson & Johnson's Ethicon surgical product unit.

Johnson & Johnson spokesman Bill Price said the tender offer was planned to officially start later Monday after the company filed the necessary legal documents.

Cervantes expects the transaction to close on target.

"From a risk standpoint, there really isn't much," she said. "We think this is a done deal."

Management members from both companies are in Israel to talk to employees and provide a seamless transaction, Cervantes said.

"Taub will likely relinquish his position, while president and COO Nissim Mashiach will stay on to run operations," she said.

Omrix shares advanced 17.16% to close at $24.79 on more than seven times the average trading volume.

Johnson & Johnson shares closed at $59.11, up 1.3%.

Drug developer Eli Lilly & Co. also completed its $6 billion acquisition of ImClone Systems Inc. on Monday.

More than 95% of ImClone shares were tendered at $70 a share in cash on Friday.

On Monday, Eli Lilly completed the short-form merger and converted all remaining shares of ImClone into the right to receive the $70 in cash.

Anchors away on LandAmerica

Shares of title insurer LandAmerica Financial Group sank Monday after Fidelity National Financial withdrew its takeover bid.

LandAmerica shares fell 88.25% to close at 51 cents Monday - nearly unimaginable compared to the company's yearly high of $53.23.

"We are disappointed with Fidelity's decision; however, our attention remains focused on strengthening LandAmerica's business and exploring strategic alternatives during these incredibly difficult economic times," chief executive Theodore Chandler said in a statement.

Fidelity National of Jacksonville, Fla., had said it would acquire Glen Allen, Va.-based LandAmerica earlier this month.

Under the terms, Fidelity had sole discretion to terminate the merger on or before Nov. 21.

Fidelity shares caught the upswing and rose 12.99% to close at $8.35 Monday.

Mentioned in this article:

Alpharma Inc. NYSE: AL

Bank of America Corp. NYSE: BAC

Citigroup Inc. NYSE: C

Fidelity National Financial Inc. NYSE: FNF

Johnson & Johnson NYSE: JNJ

King Pharmaceuticals Inc. NYSE: KG

LandAmerica Financial Group Inc. NYSE: LFG

Morgan Stanley NYSE: MS

Omrix Biopharmaceuticals Inc. Nasdaq: OMRI

Wachovia Corp. NYSE: WB

Wells Fargo & Co. NYSE:WFC

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