Celgene, Pharmion to merge, sending shares of Pharmion up; Quanex stock spikes on merger, spinoff

By Sheri Kasprzak

New York, Nov. 19 - Shares of Pharmion Corp. went through the roof on Monday after agreeing to be acquired by Celgene Corp. in a deal valued at $2.9 billion.

Pharmion's stock jumped by 32.14%.

"Strategically, I think it adds value [for Celgene]," said one analyst. "It should be profitable for them, not necessarily in the short term but going forward it should be a good fit."

A sellside trader said he feels the acquisition is great news for Pharmion.

"Shares are through the roof," he said Monday morning just after the market opened. It is a "great opportunity for them and a great buy for Celgene."

In other pharmaceutical news, shares of Schering-Plough Corp. were off Monday after the company sealed its merger with Organon BV.

Schering-Plough shares closed down 38 cents to settle at $29.60 (NYSE: SGP).

Also, Inverness Medical Innovations, Inc. finished its $302 million cash and stock merger with Alere Medical, Inc.

Shares of Inverness closed down 60 cents to end at $61.15 (Amex: IMA).

Inverness paid $128 million in cash and $174 million in stock for the shares of Alere.

Meanwhile, traders said activity later in the week may taper off ahead of the Thanksgiving holiday.

"Things are pretty active today but I suspect they'll wind down as the week winds down," said one sellside trader. "Wednesday should be quiet. Probably some stuff going on Tuesday, as things get done before the holiday."

Elsewhere Monday, shares of Quanex Corp. jumped after the company announced it will spin off its building products business and merge with a subsidiary of Gerdau SA.

The merger is valued at about $1.673 billion.

Shares of Quanex climbed by 32.69% on Monday on the news.

Celgene to buy Pharmion

Moving back to the particulars of Celgene's acquisition of Pharmion, Celgene will pay $72 per share for all of Pharmion's outstanding stock.

Under the terms of the transaction, Celgene will pay $25 in cash for each share and issue common shares of Celgene in an exchange ratio to be determined.

The share price represents a 46% premium to Pharmion's $49.28 closing stock price on Friday.

Shares of Pharmion climbed by $15.84, or 32.14%, to close at $65.12 (Nasdaq: PHRM).

Celgene's stock was down 90 cents to end at $64.00 (Nasdaq: CELG).

According to a statement released Monday by Celgene and Pharmion, the merger will be slightly dilutive to earnings in 2008 and should be accretive by 2009.

"The acquisition of Pharmion is an exceptional strategic fit that will expand our role as a leader in hematology and oncology," said Sol J. Barer, Celgene's chief executive officer, in a statement.

"Our combined global infrastructure will leverage the therapeutic and commercial potential of Pharmion's products, particularly Vidaza, which has both the potential to become a major global therapy. By bringing together the talents and resources of both companies, we move closer to our vision of becoming a leading hematology and oncology company in the world, expanding our industry-leading programs for safety, access and patient support."

Vidaza is a treatment for myelodysplastic syndromes.

"The combination of our two product portfolios and organizations represents the opportunity to create a leading global hematology/oncology company," said Patrick Mahaffy, CEO of Pharmion, in a news release.

Celgene is a Summit, N.J.-based biopharmaceutical company focused on treatments for cancer and inflammatory diseases. Boulder, Colo.-based Pharmion is focused on hematology and oncology products.

Quanex to spin off business, merge with Gerdau

Elsewhere, Quanex saw its shares climb after announcing plans to spin off its Building Products business into a stand-alone company called Quanex Building Products and then merge its remaining company with a subsidiary of Gerdau SA.

The news sent shares of Quanex skyrocketing, gaining $12.01 to end at $48.75 (NYSE: NX).

Under the merger terms, the Gerdau unit will pay $39.20 per share in cash for all of the outstanding shares of Quanex.

Quanex, following the spinoff, will include its Vehicular Products business, which includes its Macsteel division.

The move is a result of a strategic review the company began in May 2007.

The Building Products business consists of engineered products, which provides window and door customers with engineered products and components, and aluminum products, which supplies building and construction customers with mill-finished and painted aluminum sheets.

"We spent a considerable time evaluating strategic alternatives and have determined this is the best course of action, as the businesses will benefit from greater strategic focus and capital flexibility, offer exciting opportunities for employees and deliver compelling value for shareholders," said Raymond Jean, Quanex's CEO, in a news release.

"Shareholders will realize significant value in cash through the merger of Quanex with Gerdau and they will continue to participate in the growth prospects of Building Products through ongoing ownership in this business."

Both the spinoff and the merger are expected to be completed by the end of the first quarter of 2008.

Houston-based Quanex is a vehicular products and building products manufacturer and supplier.

Harleysville closes East Penn acquisition

Finally, Harleysville National Corp. sealed its merger with East Penn Financial Corp. for $85 million in cash and stock.

Shares of Harleysville slipped by 54 cents, or 3.84%, on Monday to close at $13.54. After the market closed, the stock gained 51 cents (Nasdaq: HNBC).

Harleysville National is the Harleysville, Pa.-based holding company for Harleysville National Bank.

Harleysville paid $13.41 per share for East Penn's stock and issued 0.8416 shares of Harleysville for every share of East Penn.

The merger will include 2.433 million in Harleysville shares and $50.7 million in cash.

Now that the merger is completed, East Penn's branches will retain the East Penn name.

"We are very excited about the opportunities this partnership brings, not only to our customers but also to our employees and communities," said Paul D. Geraghty, CEO of Harleysville, in a statement.

"Our team is pleased to offer customers expanded product, service and location options, while maintaining the same high-quality service and community commitment our bank is known for," said Brent Peter, East Penn's CEO, in a statement.

"We are pleased to be maintaining our entire team of frontline staff, which allows us to continue to provide exceptional service to our valued customers. Together with our Harleysville teammates, we look forward to building and enhancing relationships together throughout our expanded market."

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