Bank acquisitions---Greg (slow)
Focus on Wellpoint--Bob (fast)
NYSE---Deb (fast)
welcome from our bureau in the u.s. capital city of washington. i’m michael mckee. we have not seen a day like this in nearly four years with an acquisition in banking and two in the health industry. bank of america buying fleetboston for $47 billion in stock to create the nation’s second largest bank by assets. here’s greg miles with more.
>> a major deal and this stock down 10% or more in daily trading tphrout the day. bank of america has grown two acquisitions into america’s third largest bank. kenneth lewis said the $47 stock acquisition of fleetboston represents the beginning of what he calls his long-term vision to create a truly national bank. now lewis will become the c.e.o. under the deal and charles gifford, c.e.o. of fleetboston, will be the chairman if the deal is approved by regulators. the latest deal has j.p. morgan chase to become the number two bank by assets. sit kwru group remains the largest. this gives bank of america access to the six-state new england market. that will create a bank with 9.8 percent peurs of the nation’s deposits and retail branches in 29 states. bank of america and fleetboston’s credit card operations among other businesses will be consolidated. lewis says the merged business will prosper even if the economy experiences modest growth.
>> we’re expecting a moderate recovery that we see taking place. 2%, 3% kind of number going into next year. we have such momentum in the markets in which we operate that lack of anything on the session we’re going to do very well.
>> the merger will dilute bank of america’s earnings.
>> you can take the numbers which we did and take only a part of the cost savings, there will be dilution in 2004 and depreciation in 2k 005. we think that will accelerate in 2006, 2007.
>> they forecast the combined bank will have earnings of $7.10 a share in 2004. that’s proforma. that is lower than the 7 khroeupb 27 expected by analysts of thomson financial on the current bank of america. lewis says he will be busy the next few months talking about the deal with his customers and with regulators to get the deal approved. the biggest challenge may be proving to investors that this particular merger will be successful. back to you.
>> there’s an ongoing investigation into mutual fund trading. will that scuttle the merger?
>> beth executives stressed they don’t see that as an obstacle at all. mr. lewis, c.e.o. of bank of america, says he is concerned about the investigation. they have done what they could to cooperate with regulators and to find out the truth. he admitted there is uncertainty out there. back to you.
>> thanks very much, greg. greg miles. two significant acquisitions in the health care industry today. anthem agreeing to buy wellpoint health networks for $16.4 billion. bob bowdon has been studying the anthem-wellpoint story. he joins me with more on that.
>> good afternoon, mr. mckee. anthem is offering $23.80 in cash along with one anthem share for each share of wellpoint. and let’s see, in addition that values wellpoint at $101.06 which is a 20% premium over the closing price on friday. analysts say the acquisition makes sense for a couple of reasons. anthem and wellpoint are similar in businesses, both administrators of blue cross health insurance. both their product mixes and corporate cultures are similar. what is more, they do not overlap geographically with indiana-based anthem and well point focused on california. wellpoint c.e.o. described the cinergy created by the acquisition.
>> we think over time you will see acceleration of growth because the synergies we’ll achieve and greater opportunities. we’ll move some of wellpoint’s products into anthem’s region. anthem will give us some e- commerce business. the new company will be stronger and i think grow more aggressively than neither one of us could alone.
>> the acquisition was motivated in part by necessity, that failure of an employment recovery has meant employers are not insuring new workers. insurers are having a hard time growing their business. one analyst put it this way. “in a period where you’re having no enrollment growth, the opbl way you really get growth is via acquisitions.”
>> as a matter of fact, this consolidation has been going on in our industry for quite some time. and i think if you look at our track record and leonard’s as well, we have been growing same store growth, for example, in the last 12 months at anthem by 8%. that’s 895,000 new members joining us just in the last 12 months. had nothing to do with acquisition. so we think same store growth is still very good and we think acquisitions will be a part of our future as well.
>> as you might expect, we saw shares of the eye choirer, anthem, down today. down $6.21 to $71.05. downward of 8%. wellpoint up 8%. wellpoint finishing up 8.5% on the day. back to you.
>> bob bowdon. health insurance industry leader united health made a move of its own today. it is buying mid-atlantic medical for $3 billion. here’s how the transaction will work. mid-atlantic shareholders get $18 a share in cash and about 4/ 5 of a united health share for each share they own. that is $62.49 a share, a 16% premium over friday’s closing price for mid-atlantic. it is a geographic play for united health. mid-atlantic, as the name implies, operates in maryland, virginia, west virginia and pennsylvania. united health gains two million customers bringing the base to just over 20 million. more on this purchase in the next hour of the “world financial report.” let’s get you caught up on the trading numbers today down at the new york stock exchange. the dow jones industrials finishing higher by almost 26 points on the day. the volume was a little bit lighter than usual, just under 1.4 billion shares. on the s&p, a gain of about a little over two points on the day, .2%. the market focus, of course, aopbt merger and acquisition activity announced today. it is interpreted it as a good sign. deborah kostroun is on the trading floor of the new york stock exchange. she tells us why it boosted the markets today. ao mike, if you add up all the m&a activity that we talked about today, you are looking at $66.7 billion in takeovers and mergers and acquisition on the day. the market views that as positive. martha palmer sums it up well. she says the acquirers feel like they’re buying companies at attractive enough prices that they’re going to make money long term. so when you talk about another company looking inexpensive in this kind of market, obviously very positive. we haven’t heard much activity in quite some time. bank of america and fleetboston helping many of the investment banking stocks today. the s&p investment banking index higher today. also the regional banks performing well. the thought is that the larger banks are really going to have a hard time growing their business from within so the only way they’re going to make headway in 10 years is by acquisitions. american express, even though their earnings are pretty good, showing that consumers actually are using credit cards, it was the worst performer in the dow today. worst performer in the s&p 500 or close to it was health care. this on the acquisitions. helping out some of the stocks but not helping out others. health insurance a mixed bag. generally pretty good for at least some of the health care insurers. back to you.
>> deborah kostroun. with bank of america’s stock falling almost 10% today on the news, will that dissuade other banks from making acquisitions? we’ll talk to the president and fund manager of sea cliff capital when we return.
