UnitedHealth Group (UNH) Chief Executive Dr. William McGuire is riding the wave of consolidation in health care. On July 6, Minneapolis-based United snapped up PacifiCare Health Systems (PHS) for $8.1 billion. News of the deal came less than a year after WellPoint (WLP) and Anthem merged into a health-insurance behemoth that kicked United out of its No. 1 spot in the industry.
PacifiCare will add much more than heft to United. The Cypress (Calif.) company will also expand United's reach in private Medicare insurance plans. It's no surprise that McGuire chose PacifiCare as his big play in the Medicare market. When other health insurers bailed out of Medicare a few years ago, PacifiCare hung in there. Now it stands ready to benefit from government reforms that will boost payments to private Medicare insurers.
Investors have yet to be convinced: Although PacifiCare's stock rose 5.7%, to $77.09, United's shares were mostly flat, closing at $53.50 on July 6.
When he ran the Securities & Exchange Commission from 1993 to 2001, Arthur Levitt was never shy about chiding companies or their advisers over earnings shenanigans. Since retiring, though, Levitt has kept a low profile. But he made his way back to the public stage on July 5, when American International Group (AIG) announced that Levitt has been hired to vet future nominees to the board and advise on board procedure, structure, and governance. He'll have plenty of eyes watching: AIG, which wiped away $1.3 billion of reported net income in a financial housecleaning in May, is the subject of two regulatory lawsuits and a criminal inquiry into possible wrongdoing by former executives. Having a regulatory veteran with a squeaky-clean image on hand can only help.
Hi ho, hi ho, it's off to dial we go. Walt Disney (DIS) is teaming up with Sprint (FON) to offer vanity cell phones aimed at kids and their families. Disney, which will operate the phone service using Sprint's wireless network, is likely to use ringtones, games, and other Disney-branded products and to offer a feature for parents to keep track of children. The service is Disney's latest effort to cash in on the booming cell-phone market. In December, its ESPN unit announced plans for an ESPN Mobile wireless phone with sports scores and stats on its startup screen. The ESPN phone is expected to be sold later this year, with the Disney-branded phone to follow next year.
True to CEO Larry Ellison's word, the acquisition pace at Oracle (ORCL) shows no signs of slowing. The company that gobbled up PeopleSoft and Retek for a total of nearly $11 billion in cash earlier this year announced the purchase of small, privately held ProfitLogic on July 5. Financial terms weren't disclosed, but analysts estimate the deal to be worth about $160 million. It's not a big deal, but it's important strategically. Like Retek, ProfitLogic makes software for retailers, one of the few sectors for business software that's largely untapped. Ellison & Co. are signaling that they don't plan to let rival SAP (SAP) dominate retailing the way it has many other sectors.
Chipmaker Broadcom (BRCM) is still swinging away at cellular-phone powerhouse Qualcomm (QCOM). Broadcom, which filed a patent infringement suit against Qualcomm over cell-phone technology in May, has now filed an antitrust suit against its larger rival, alleging monopolistic tactics in the cell-phone business. In the latest suit, Broadcom claims Qualcomm is squeezing out competition by making phone manufacturers sign exclusive purchasing deals for its chips. Qualcomm calls the suit a "desperate attempt to gain bargaining leverage" over patent licenses. Counters Broadcom CEO Scott McGregor: "They agreed to fair and reasonable licensing terms. They're not living up to that."
-- Wal-Mart (WMT) raised its forecast for June sales to a 4.5% gain.
-- Zions Bancorp (ZION) will expand into Texas by buying Amegy Bancorp (ABNK) for $1.76 billion.
-- Northwest Airlines (NWAC) cleaners and mechanics asked the feds to release them from stalled contract talks.
Wall Street got a little misty-eyed on July 5 after Bausch & Lomb (BOL) said that it would acquire 55% of Shandong Chia Tai Freda Pharmaceutical, China's leading ophthalmic pharma company, for $200 million. Bausch shares rose 7%, to $87.50, on the announcement.