These 2 Megamergers are Moving the Dow Today

AstraZeneca, Pfizer, AT&T, and DIRECTV are dominating headlines.

May 19, 2014 at 1:00PM
Take The Long View

The Dow Jones Industrial Average (DJINDICES:^DJI) dropped back into the red in early afternoon trading Monday, down five points as of 1 p.m. EDT. 

Dominating the headlines Monday morning was news of two megadeals, one on the ropes and one just getting started. 

Big Pharma, big dollars, and an even bigger rejection
British Big Pharma AstraZeneca on Monday rejected U.S. rival Pfizer's (NYSE:PFE) latest takeover offer. The news sent AstraZeneca's stock tumbling 12%, while Pfizer rose nearly 1%.

Pfizer was seeking access to AstraZeneca's pipeline of cutting edge-cancer drugs, among other benefits of a merger. After weeks of gyrations and negotiations, Pfizer claimed the current bid was its final offer. 

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The offer of $92.50 per share was a 15% increase from Pfizer's original offer. The sweetened offer also increased the percentage of cash in the deal from 33% to 45% after AstraZeneca executives claimed the prior offer was too stock heavy. 

With this rejection, U.K. law prohibits Pfizer from making another offer for six months, unless AstraZeneca decides to negotiate. In that case, the two companies could return to the table and work out a new proposal. In a statement released this morning, Pfizer said it does not plan to move forward in a hostile manner.

It appears that the deal may be permanently on ice.

Reshaping the telecom landscape
Dow component AT&T (NYSE:T) intends to buy satellite TV provider DIRECTV (NASDAQ:DTV) for $48.5 billion. The telecom giant was down 2% on the news, while the pay-TV company fell 1.4%.

The deal would give AT&T access to DIRECTV's 38 million subscribers in the U.S. and Latin America. Analysts applauded the move, citing the strategic advantage of immediately offering a nationwide TV service to complement the company's existing wireless network.

The deal now hinges on regulatory approval, a hurdle that investors should not overlook. In 2011, AT&T learned this lesson the hard way.

At the time, AT&T was attempting to buy rival T-Mobile for $39 billion. The deal fell through amid heavy regulatory scrutiny, leaving AT&T to pay a very rich $3 billion breakup fee to T-Mobile's then-owner Deutsche Telekom.

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This time around, AT&T negotiators ensured there would be no breakup fee, but the risk on regulatory approval still remains. Company executives have already started spinning public opinion on the matter, emphasizing the potential to challenge dominate cable providers with better pricing and service for consumers.

AT&T and DIRECTV already offer co-branded offerings in a handful U.S. markets. Consumers and investors should expect to see this model expand. The two companies believe this bundling of services is the key to both regulatory approval and long-term success as a combined entity.

Only time will tell what comes of both the AstraZeneca rejection and the DIRECTV approval. Mergers are always a risky prospect, and especially so when the existing companies are worth tens or even hundreds of billions of dollars.

That said, when industries are in upheaval and facing dramatic changes, opportunities can often be found. For smart value investors, it's all about understanding the specific company's ability to ride the big picture trends and win in the long term.

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Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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