Stocks Finish in Black; M&A Eyed

Morningstar

U.S. Market
Stocks ended higher with several potential mergers and corporate buyouts making headlines.

No major economic data was scheduled for release Monday, but reports that Russian president Vladimir Putin ordered troops to return to their home bases offered a temporary calming tone to the markets amid the high tension in Ukraine. The troops were conducting military drills. Putin also requested Ukrainian troops to withdraw from the eastern portion of the country.

The Dow ended 0.1% higher. The S&P 500 gained 0.4%, and the Nasdaq rose 0.9%.

Stocks on the Move
Late Sunday, AT&T (T) announced it will acquire DirecTV (DTV) in a stock-and-cash transaction worth $67.1 billion, which also assumes DirecTV's debt. Morningstar analysts previously estimated these synergies would total around $1 billion annually, though AT&T pegs the savings at $1.6 billion annually, three years after closing. That said, the analysts don't believe this move makes strategic or financial sense for AT&T, and they would decrease their fair value estimate for the firm and increase the estimate for DirecTV. They also expect the reduction in competition in markets serving around one fourth of the U.S. population will receive significant regulatory scrutiny. AT&T shares lost 1%, and DirecTV shares fell 1.8%.

The price war between Pfizer (PFE) and AstraZeneca (AZN) continues as the latter firm rejected Pfizer's increased buyout offer of $92 per share. Given that Morningstar analysts believe this is probably the final offer for Astra, and Pfizer indicated that it will not make a hostile bid, they think the odds of the acquisition occurring have fallen well below 50%. Although Astra has until May 26 to engage with Pfizer, the analysts believe its disagreement on valuation is likely to derail the merger. Pfizer shares gained 0.6%, but Astra shares plummeted 12%.

Deutsche Bank (DB) announced Monday that it plans to issue up to EUR 8 billion of additional equity capital, more than double the EUR 3 billion Morningstar analysts expected. EUR 1.75 billion has already been placed at EUR 29.20 per share with Paramount Holdings, the investment fund of Qatar's royal family, and the bank plans to sell up to 300 million additional shares through a rights offering in early June. Shares lost 1.2%.

Campbell Soup (CPB) was lapping a particularly strong year-ago period during which sales were up 4%, including 14% growth in U.S. soup, but this year's fiscal third quarter was still quite lackluster. Sales edged up just 1%, and U.S. soup sales were flat with last year. Management attributed a portion of the weakness to increased promotional spending that failed to boost sales. Shares fell 2.3%.

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