Image: Quality Systems.
Monday didn't bring the hoped-for continuation of last week's upswing for the stock market. Investors instead focused on the new wave down in oil prices, which dropped back below the $30 per barrel level and sent energy stocks across the market plunging in response. Yet even though many market participants now think that a bear market might be imminent, some stocks managed to survive today's onslaught and post sizable gains on the day. Among them were Tyco International (TYC), Quality Systems (NXGN), and Valeant Pharmaceuticals (BHC 1.27%).
Tyco International jumped 12% on news that it will merge with Johnson Controls (JCI -0.26%) to create an industrial conglomerate focusing on building projects and technology, integrated solutions, and energy storage. Under the deal, Tyco shareholders will undergo a reverse stock split, leaving them with 95.5 shares for every 100 shares they owned prior to the merger. Johnson Controls shareholders will have the option to accept $34.88 in cash or a new Tyco share for every Johnson Controls share they own. The structure of the deal is somewhat unusual, because Tyco shareholders will only control 44% of the company after the merger is complete. By structuring the deal in this unusual way, Johnson Controls will benefit from Tyco's Irish headquarters, giving it tax-inversion benefits that will help the company's finances in the future.
Quality Systems climbed 7% after the healthcare information systems provider got an upgrade from analysts at Piper Jaffray. A long slump for the company since 2012 has made many investors wary of the stock, but new CEO Rusty Frantz has done a good job of stepping up Quality Systems' game since taking the leadership role last July. The analyst firm cited moves to find expense cuts, begin a transition to more cloud-based systems, and refocus its effort on its best core business opportunities. With a new potential for earnings growth in the next couple of years, Quality Systems could easily justify a higher stock price if it can follow through on its ambitious goals for 2016 and 2017.
Finally, Valeant Pharmaceuticals gained 5%. The pharmaceutical developer and distributor released a memorandum from CEO Michael Pearson, who has temporarily given up his position as he remains on medical leave. Pearson noted that while some "unexpected complications resulted in a longer hospital stay than anticipated," he believes that he is "on the road to recovery." Pearson chose not to specify a timeline for his return, but he praised interim CEO Howard Schiller for taking on the leadership role in his absence and dealing with what Pearson characterized as a "difficult" past few months. From today's gains, it's apparent that shareholders think that the CEO will return soon to take control of the situation that has resulted in substantial declines in its share price. Whether that happens remains to be seen, but either way, Valeant has a long way to go before it recovers the ground it has lost in the last few months of 2015.