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Speaker 1: Broadcasting live to New York, Bloomberg to Washington, d C,

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Speaker 1: Bloomberg nine one to Boston, Bluemberg Well Mine to San Francisco,

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Speaker 1: Blomberg nine sixty to the country, sis XM Channel one

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Speaker 1: nineteen and around the globe the Bloomberg Radio Plus appen

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Speaker 1: Bouberg dot com. This is Bloomberg Surveillance. Good morning. I'm

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Speaker 1: John Socker, along with David Gorey and Michael McKee. The

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Speaker 1: Opening Bell Report this morning being brought to you by

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Speaker 1: c g M, a employee Chartered Global Management Accountant, or

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Speaker 1: empower your finance team with a c g M A program.

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Speaker 1: Learn more at c g M. A dot org slash

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Speaker 1: radio off to a lower start on Wall Street with

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Speaker 1: a major indices on this we'll call it Merger Thursday.

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Speaker 1: Among companies moving on corporate news, a comcast of course,

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Speaker 1: offering forty one dollars a share for DreamWorks DreamWorks and

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Speaker 1: moving higher. Also Facebook jumping about eleven percent of reporting

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Speaker 1: sales and off it that Blue Past Analysts estimates businesses

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Speaker 1: spent more in video ads on its main mobile app.

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Speaker 1: Also St. Jude Medical surging about Abbot Labs agreeing to

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Speaker 1: buy it at a deal that values the maker of

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Speaker 1: the heart devices at about twenty five billion dollars abbot heres.

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Speaker 1: They are lower as a result. Right now we have

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Speaker 1: SMP down five points, the down Jones Industrial l Average

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Speaker 1: seventy two points lower. That's down four tents of percent.

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Speaker 1: The Nasday Composite Index in the early going right now

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Speaker 1: that is down six points. That's down about ten of

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Speaker 1: a percent. And that's an updates on the markets at

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Speaker 1: the opening, Bill, Michael David, Thank you very much, John Tucker.

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Speaker 1: A lot of news this morning. Here's my favorite story

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Speaker 1: of the morning. Uh. It has nothing to do with

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Speaker 1: Wall Street. It has to do with the presidential campaign.

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Speaker 1: John Bayner, This is amazing at Stanford speech right, Yeah,

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Speaker 1: I in Stanford. The Stanford Daily reporting that John Bayner

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Speaker 1: went out to the to the college there and said

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Speaker 1: that he would vote for Donald Trump in the general election,

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Speaker 1: but he would not vote for Ted Cruz, whom he

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Speaker 1: called lucifer in the flesh and said, I've never worked

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Speaker 1: with a more miserable son of you know what in

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Speaker 1: my life. The political theme gets weirder and weirder. But

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Speaker 1: it has been an extraordinarily busy morning in terms of deals.

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Speaker 1: DreamWorks just the latest one. We started uh the morning

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Speaker 1: off with Abbott Labs buying St. Jude Medical. We've got

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Speaker 1: Abvy buying the stem Centrics, which is privately held cancer

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Speaker 1: research company. So, um, the medical healthcare area continues to

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Speaker 1: just explode. B T I G. Said Dan Leone follows

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Speaker 1: all of this. So what are we to make a

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Speaker 1: coincidence these two deals come out today, I presume. But uh,

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Speaker 1: there's certainly, um, no no sign that consolidation in healthcare

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Speaker 1: is slowing down. Consolidation remains a key theme I think

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Speaker 1: across the healthcare space. Uh. You know, some of that's

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Speaker 1: from the commentary from the political spectrum and regulators. You know,

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Speaker 1: pricing is still a key theme across medtech and and therapeutic.

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Speaker 1: So this really comes as no surprise. And we do

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Speaker 1: think this is going to be an ongoing team for

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Speaker 1: the next twelve months at least. Do you think this

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Speaker 1: face is uh, this this mergual face much in the

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Speaker 1: way of regulatory hurdles? Uh? Interestingly, Uh, the size would

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Speaker 1: make you think so, but the actual product overlap is

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Speaker 1: fairly minimal. UM. And you know, if you think about

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Speaker 1: the total aggregate post deal revenue rate of you know,

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Speaker 1: somewhere around twenty eight billion. Our analysis would suggest there's

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Speaker 1: probably max of only one point five billion and product

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Speaker 1: category overlap, so we don't think so, and do feel

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Speaker 1: confident that I think you could get this deal done

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Speaker 1: by the fourth quarter of sixteen. The interesting thing about

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Speaker 1: it is if they came out right up front and

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Speaker 1: said it's going to cost us money for a couple

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Speaker 1: of years, and then you looked at before we really

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Speaker 1: see accretion um our shareholders going to be happy with that.

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Speaker 1: I think it's actually about in line where UH estimates

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Speaker 1: had been. So if you if you rewind to August fifteen,

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Speaker 1: there had been a rumor floated in media that these

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Speaker 1: two companies were looking to get together, which was subsequently

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Speaker 1: denied by by both parties. However, a number of US

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Speaker 1: went through the analysis and back then we were looking

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Speaker 1: for around three hundred million and apax synergy. They actually

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Speaker 1: came in a little bit above that today at three

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Speaker 1: seventy five with around a hundred twenty five and revenue synergies.

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Speaker 1: So it looks about in line. Obviously, the equity component

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Speaker 1: um and and the premium dial back. The first year

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Speaker 1: synergy a little bit too, slightly below ten percent, but

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Speaker 1: um still about in line with what what people were thinking. Uh.

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Speaker 1: And more importantly, UH, this this removes kind of an

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Speaker 1: albatross um around the around Abbot um. You know, there

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Speaker 1: there have been concerns on the vascular business, which is

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Speaker 1: which has really failed to grow and was expected to

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Speaker 1: be down this year. How to diversify some of the

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Speaker 1: issues there and and thank you definitely brings those solutions

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Speaker 1: to the table. We're talking with our reporter Michelle Cortez

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Speaker 1: a little while back about this deal and what's motivated it.

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Speaker 1: And something she brought up is this push from hospitals

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Speaker 1: for for lower prices. How how big a push is

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Speaker 1: that on medical device companies right now? Uh, there's been

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Speaker 1: a push for for a while now, so this has

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Speaker 1: been an ongoing team and scale is really the way

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Speaker 1: to defend against that. And that's why you've seen with

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Speaker 1: Metronic and Convinian. So this kind of continues to carry

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Speaker 1: in the same theme of bigger is better. The folks

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Speaker 1: that Abbot were also involved in an effort to snap

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Speaker 1: up a lier uh and that for while looked to

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Speaker 1: be kind of off the block. And I know people

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Speaker 1: looked at the uh St Jude deal and said, Um, well,

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Speaker 1: maybe they're giving up, And yet they come out on

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Speaker 1: the call and say we're we've got the financing for

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Speaker 1: earlier and we're gonna try and go ahead with it. Yeah.

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Speaker 1: I think the market is still trying to pass through

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Speaker 1: some of the mixed signals Abbott has been sending lately.

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Speaker 1: So in the first Core call, the CEO Miles White,

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Speaker 1: was very vague about the the commitment of Abbott to

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Speaker 1: the Weird deal. And then today, as you said, there

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Speaker 1: was an explicit uh point made in the press release

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Speaker 1: saying they had financing contemplated for for both deals and

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Speaker 1: could remain investment grade. However, when we discussed a leer

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Speaker 1: on the call at eight o'clock again, the CEO kind

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Speaker 1: of backed away from making any firm commitment to the

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Speaker 1: Weird deal. So, um, if you know the history, they're

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Speaker 1: they're they're having some accounting issues and have a D

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Speaker 1: O D and instigation open right now. Um so, uh,

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Speaker 1: you know, we're trying to read through the tea leaves here,

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Speaker 1: but um, it does seem like Abbott saying a message

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Speaker 1: of you know, get get your stuff organized or we

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Speaker 1: have we have other things to do. What does this

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Speaker 1: deal say to you the way that it's structured, the

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Speaker 1: way that it's set up, about where things are headed

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Speaker 1: in the medical device industry. You're looking at more mergers

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Speaker 1: coming down the line. There's been a lot of consolidation

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Speaker 1: to date. UH that that does not preclude more from happening.

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Speaker 1: But we think this is uh maybe one of of

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Speaker 1: the last remaining mega mergers really expected. Uh. You know

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Speaker 1: the other ones out there that have been hypothesized in

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Speaker 1: the media have been uh Edwards. UM. And obviously you

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Speaker 1: can't ignore the fact that Johnson and Johnson has around

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Speaker 1: thirty five billion in cash right now. UH. We've also

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Speaker 1: seen Sonopie going to market today to try and buy

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Speaker 1: a company, have each chin to buy a company. UM.

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Speaker 1: This is not over, no. Uh. The therapeutic side is

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Speaker 1: going to remain a very hot area for for a while. Uh.

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Speaker 1: There's a lot of the big guys are trying to reconcile.

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Speaker 1: UH some some legacy product lines have slowed down. Pricing pressures,

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Speaker 1: discussions uh in the US media and political landscape about

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Speaker 1: how how they run their businesses so uh and in

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Speaker 1: multiples in the in the smaller end of the biotech

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Speaker 1: space and spec PHARMACTACE have come down a lot, making

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Speaker 1: those assets more attractive. So we think this tame is

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Speaker 1: is going to continue as well, and really quick here

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Speaker 1: on the way out. Any indication of when the steel

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Speaker 1: is going to close the anything about that on the

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Speaker 1: call uh St Jude for St. Judan Abbit is expected

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Speaker 1: to close at the end of the fourth quarter, and

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Speaker 1: although no update was given, the prior indication was that

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Speaker 1: a were and Abbot would close that end of the

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Speaker 1: year as well. All right, that's Stan Leon, He's an

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Speaker 1: analyst with bt IG, joining us here to talk about

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Speaker 1: one of many big deal stories we've gotten this morning.

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Speaker 1: That's Abbott agreeing to buy St. Jude Medical for twenty

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Speaker 1: five billion dollars. Working up here on Bloomberg Surveillance, I'm

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Speaker 1: David GIRRW with Michael McKee wor coming up after the break.

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Speaker 1: This hour of Surveillance is brought to by Westchester Subar up.

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Speaker 1: Is it Westchester subar dot com. Here's Michael bar with

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Speaker 1: the latest World of national headlines. Mike, David, thank you

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Speaker 1: very much. Democrats on Capitol Hill are warning there could

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Speaker 1: be a major Zeka virus outbreak in the US if

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Speaker 1: Congress does not move soon on a funding measure. Democratic

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Speaker 1: Senator Barbara mcculski is calling on Congress to allocate one

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Speaker 1: point nine billion dollars to zeke A prevention and research

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Speaker 1: at the White House requested. The mosquitoes are already here.

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Speaker 1: You can't go defence to keep them out, and the

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Speaker 1: mosquitoes won't pay for it. However, House Speaker Paul Ryan's

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Speaker 1: as Republicans are being cautious with the money. The administration

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Speaker 1: has a bit of a track record of of overrequesting

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Speaker 1: what they need. Um, don't forget one thing. It is

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Speaker 1: money in the pipeline right now. We take this very seriously.

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Speaker 1: Former House Speaker John Banner reportedly had some strong words

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Speaker 1: concerning Republican presidential candidate Ted Cruz. According to the Stanford Daily,

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Speaker 1: bintercalled the Texas senator quote now Lucifer in the flesh,

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Speaker 1: you know how Republican also says he has never worked

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Speaker 1: with a more miserable fill in the blank in my life.

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Speaker 1: Bener also says he preferred Donald Trump. It's looking more

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Speaker 1: like a British Airways jet did not strike a drone

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Speaker 1: while landing at London seats Row Airport earlier this month.

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Speaker 1: The government at first expected a drone, but no longer

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Speaker 1: believes that global news twenty four hours a day, powered

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Speaker 1: by our twenty four hundred journalists and more than a

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Speaker 1: hundred fifty bureaus from around the world. Now, Mike Labar,

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Speaker 1: Mike David, thank you, Michael Well. It has been an

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Speaker 1: incredible day of news headlines. We've still got twenty minutes

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Speaker 1: to go left in Bloomberg Surveillance. Can we get one

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Speaker 1: or more additional mergers, takeovers or corporate news headlines? Stay

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Speaker 1: tuned to Bloomberg Radio. Coming up on Bloomberg's Surveillance. We

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Speaker 1: continue to look at all of the news from central

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Speaker 1: banks that fed yesterday. Bank of Japan news breaking overnight

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Speaker 1: that policy was going to change that markedly. Mush will

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Speaker 1: talk f X with the head of g TN f

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Speaker 1: X at Standard Chartered. Coming up,