Thursday, September 15, 2011

Barclays Lowers Merck Target (Again!) -- Merck's NYSE Price Now Below Merger Price

For a good portion of the last 30 days, Merck's closing per share price, on the NYSE has been shy of the normalized price (November 10, 2009) at which the November 3, 2009 merger/bust-up of Schering-Plough was comsummated.

True enough, the markets have been pretty choppy this late summer, but it would defy logic to think that Merck, even with Schering-Plough's manifold problems, is worth less with Intervet, and Organon, than it is without the two.

But -- just the same -- Merck's NYSE stock price market cap [correcting edit courtesy of commenter MrSquare!] is actually now less than what it was before it bought-out/busted-up Schering-Plough. Over the longer term, common sense would suggest that such a condition would not persist. The question, though, is when -- and by how much -- will the NYSE price exceed the $33.61 price at which the merger was completed? $34? $36? "Again, I am shrugging*. . ."

Barclays, despite setting a near term target of $43 not long after the merger, and reducing that to $41 about a year ago -- has this week further reduced its upside target, to $38. Not entirely modestly, that is very close to my upside, but consistently stated -- over the last two years, of $37.

So, what has happened? Barclays (through its Blackrock transactions), has reduced its holdings of New Merck, from around 161 million shares (which was then about five percent of all the outstanding Merck shares), to just over 27 million shares (or less than one percent of all Merck shares).

Here is a bit of one of my prior pieces, on Barclay's conflicted pronouncements, and holdings (I've also updated the graphic, at right):

. . . .[When] it turns out that Barclays has dropped below the 5 percent threshhold, in its next SEC Schedule 13 filing (or in Merck's next proxy, whichever first appears), we ought to all agree that the target was upped, in part, to allow for higher exit prices, for Barclays, as it liquidated some of its outsized Merck position, on the NYSE and through off-exchange blocks. . . .

Do stay tuned -- will Merck return to its former glory, or will the world's second largest pharma concern be permanently hobbled by the antics of Fred Hassan, Carrie Cox, and their hangers-on? Only time will tell,


* A line for the forgettable Ally Sheedy/Steve Gutenberg '80s movie "Short Circuit"


MrSquare said...

But -- just the same -- Merck's market cap is actually now less than what it was before it bought-out/busted-up Schering-Plough.

MRK's market cap is much higher now; ~$100bn vs. ~$70bn pre merger ( I believe new MRK exchanged shares for all the outstanding old MRK and SGP stock, so the same $32 price is on a much larger pool of shares.

Without a merger MRK would likely be in the mid-tier of pharmas along with AstraZeneca and Novo by market cap. Of course, one can always speculate as to whether SGP was the right merger partner, but that's water under the bridge now.

Condor said...

You are correct -- I typed too hastily this morning. Will correct it now. Per share price is down, but overall market capitalization is. . . up.

Thanks for the fix-it Mr. Square!


Anonymous said...

MRK will never return to its "former glory" unless ALL the top management gets thrown out and replaced. Creativity has been six-sigma-ed out of the labs, very effectively. The current management's prevailing strategy relies on the false premise that FTE's can be mind-controlled to adhere to the prescribed paradigm termed "cookie-cutter drug development" devised by Kim et al. It goes like this, I've been told, "just do X, Y, then Z, and a drug will appear." Just like magic. To deviate from this mindless path is to forfeit one's career in MRK, especially true in MRL. MRK is not great, not sure if it ever was, but now its simply mired in greed, sadism, and outright stupidity. No one in MRK management is interested in actually making drugs anymore.