Investors settled in for a largely quiet trading session on Tuesday. With a speech expected from Federal Reserve chair Jerome Powell on Wednesday, most market participants were content to wait and see what the central banker will say about the future path of monetary policy. The Dow Jones Industrial Average (^DJI +0.75%) inched upward today, while the Nasdaq Composite (^IXIC +0.88%) and S&P 500 (^GSPC +0.77%) were lower.
|
Index |
Daily Percentage Change (Decline) |
Daily Point Change |
|---|---|---|
|
Dow |
+0.01% |
+3 |
|
S&P 500 |
(0.16%) |
(6) |
|
Nasdaq |
(0.59%) |
(66) |
Data source: Yahoo! Finance.
The quiet day on Wall Street didn't stop companies from pursuing strategic moves. Both Apollo Endosurgery (APEN +0.00%) and HSBC Holdings (HSBC +0.12%) benefited from being targets of merger-and-acquisition activity, and it's encouraging to see that buyouts are still happening even as the cost of capital rises. Read on for more details about the two deals.
Boston Scientific makes a big buy
Shares of Apollo Endosurgery jumped 68% on Tuesday. The maker of minimally-invasive medical devices for gastrointestinal and bariatric procedures agreed to a buyout bid from industry giant Boston Scientific (BSX +0.92%).
The Boston Scientific offer valued Apollo at about $615 million. Under the terms of the deal, Apollo shareholders will receive $10 per share in cash for their stock. That's well above the $6 closing price from Monday. The parties expect the transaction to reach completion at some point during the first half of 2023.
NASDAQ: APEN
Key Data Points
For its part, Boston Scientific expects to capitalize on Apollo's devices for endoluminal surgery. With devices often used to treat patients with diseases in the gastrointestinal tract or for those suffering from morbid obesity, Apollo's portfolio of products will help Boston Scientific expand its already impressive endoscopy business. Moreover, an entry into the endobariatric market should provide a new avenue for future growth.
Interestingly, Apollo shares actually closed slightly above the offering price from Boston Scientific on Tuesday, at $10.07 per share. That implies at least the possibility that Apollo shareholders are hoping that another potential buyer could start a bidding war. That's not out of the question, given that other companies in the space have also pursued opportunities in endoscopy.
HSBC gets a Royal offer
Elsewhere, shares of HSBC Holdings closed higher by 4%. The international banking company got an offer from Royal Bank of Canada (RY +2.17%) that will achieve complementary strategic purposes for both financial institutions.
RBC entered into an agreement with HSBC under which RBC will acquire HSBC's Canadian personal and commercial banking unit. Under the terms of the deal, RBC will pay 13.5 billion Canadian dollars ($10 billion) to HSBC. All of the earnings of the HSBC Canadian business generated after June 30 will also go to RBC if the deal closes successfully.
NYSE: HSBC
Key Data Points
For RBC, the purchase of HSBC Canada complements its strongest business and will potentially strengthen its market share in the Canadian banking industry. In particular, commercial clients who need assistance with international transactions will find HSBC Canada's expertise invaluable in helping them get business done.
Meanwhile, for HSBC, the divestiture addresses pressure from a major shareholder, which has suggested that HSBC's Asia-Pacific business is its most valuable asset. With all the cash it receives from the deal, HSBC would be in a much better position to pursue other strategic alternatives as well. Yet shareholders shouldn't consider the buyout a done deal just yet, as Canadian regulators have already said they will look at the purchase to assess any anti-competitive threats.
