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Allergan and Pfizer: The Largest Takeover in the Drug Industry?

Renee Blakely

Healthcare Weighed Down SPY while Johnson Matthey Lifted EWU

(Continued from Prior Part)

Sector performances

The following graph shows the performances of the component sectors of the SPDR S&P 500 ETF (SPY) on November 19. As we can see, the healthcare and the energy sector weighed down heavily on SPY. Given below are the reasons behind respective sector performances.

Allergan and Pfizer slide

Allergan (AGN) and Pfizer (PFE) slid 2.8% and 3.1%, respectively, on November 20, as the US Treasury Department planned to dissuade companies from getting into deals that would cause their headquarters to shift abroad. Generally, such moves are initiated for tax purposes.

Allergan (AGN) is an Ireland-based pharmaceuticals company. Pfizer is about to take over Allergan for $380 per share. The deal could be worth $150 billion, as well as the largest takeover deal in the healthcare sector as of now. The talks between AGN and PFE regarding the deal already boosted the healthcare sector in the past week, but investors seem skittish after the announcement of the US Treasury Department’s plans.

Energy sector

The fall in oil prices pulled back energy stocks on the day as the Energy Select Sector SPDR Fund (XLE) followed the healthcare sector with a fall of 1.3%. As a result, stocks like Southwestern Energy (SWN), Denbury Resources (DNR), and Newfield Exploration (NFX) ended in negative territory. These stocks yielded -7.2%, -6.2%, and -4.6%, respectively, on November 19.

Consumer staples

Keurig Green Mountain (GMCR), involved in packaged foods, rose 18.2% on November 19 after GMCR posted better than expected quarterly results. The company reported third quarter revenue of $1.04 billion and earnings of $0.85 per share as against estimated revenue of $1.03 billion and earnings of $0.70 per share. Also, GMCR’s peer company J.M. Smucker (SJM) rose 7.0% on the day for its quarterly profit and expectations beat. Other packaged food companies like Campbell Soup (CPB), Kraft (KRFT), and Kellogg (K) gained on the lowering of the US dollar on the day.

Let’s now take a look at the key stocks of the SPDR S&P 500 ETF (SPY) on November 19.

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