CEO pay jumps for last year as stock options rise. (Reuters)

Avon (NYSE: AVP) turns down a $10 billion offer from Coty. (Reuters)

Strong U.S. economic data push Brent crude above $125. (Reuters)

Christian Brothers Investment Services, a News Corp. (NASDAQ: NWS) shareholder, wants an independent chairman. (Reuters)

Fund Third Point presses its proxy war against Yahoo! (NASDAQ: YHOO). (Reuters)

The Securities and Exchange Commission probes a Groupon (NASDAQ: GRPN) restatement of financials prior to last year’s IPO. (WSJ)

Avon becomes a target for takeover by several companies. (WSJ)

Express Scripts (NASDAQ: ESRX) and Medco (NYSE: MHS) get government approval for their merger. (WSJ)

People’s Bank of China Governor Zhou Xiaochuan says the global recession has not ended. (WSJ)

Illumina (NASDAQ: ILMN) rejects a new offer from Roche. (WSJ)

Vehicle sales rise 78% in Japan in March, compared to in the month of last year’s earthquake. (WSJ)

U.S. consumer demand helps the fortunes of U.S. factories. (WSJ)

China eases a ban on Twitter-like messages. (WSJ)

Poor manufacturing and employment data show a deepening eurozone recession. (WSJ)

Dell (NASDAQ: DELL) will buy Wyse Technology, a cloud tools company. (WSJ)

NYSE Euronext (NYSE: NYX) cuts a cost reduction plan after a failed merger with Deutsche Borse. (WSJ)

Some large investors may buy homes by the thousands. (NYT)

Several Germany towns would suffer greatly if Opel closes plants. (NYT)

Total (NYSE: TOT) says natural gas leaks in the North Sea cost it $2.5 million a day. (NYT)

The SEC wants boards of banks to be more accountable for risk. (FT)

Douglas A. McIntyre

Then there is another one from Pharmacists United for Truth and Transparency, an independent watchdog organization dedicated to exposing the role PBMs play in driving up prescription drug costs for consumers and employers. This group noted that drug costs will rise and the group denounced the deal as a license to price-gouge the consumer. Specifically, its press release cited the following: “The FTC has given the PBMs the green light to consolidate their outsized power and continue driving up the costs of prescription drugs. The decision will negatively impact plan sponsors that contract with PBMs and consumers looking for affordable medication.”

Investors who made bets on this merger are certainly happy. We are not exactly convinced that this merger’s “savings” will be passed on directly to the consumer as much as the companies have represented. We will see …

JON C. OGG

The Federal Trade Commission voted 3 to 1 to approve the deal saying its own probe showed that the prescription benefit manager market has numerous vigorous competitors which are expanding and taking away business from traditional market leaders.  The stance of the FTC is that the competitive landscape will not change and that a combined Express/Medco will not represent a monopolistic pricing power situation.

What is interesting here is that the merger has been pending for months and months for an extended review.  Both companies have a pre-merger valuation of nearly $30 billion each.

It is interesting that Express Scripts’ CEO noted that this is a good deal for the country that will lower consumer costs, improve patient health, and drive out waste in healthcare costs.  Let’s just say that we are not alone in being at least a bit skeptical on these ‘benefits’ being discussed as far as whether or not that will ultimately save the consumer.  We have received multiple emails from multiple groups calling for this merger to be blocked as anti-competitive.

Express Scripts is up 4.7% at $56.71 and Medco Health Solutions is up 2% at $71.71.

JON C. OGG

Apple, Inc. (NASDAQ: AAPL) named Bull of the Day and raised to Outperform with $654 target at Zacks.

Automatic Data Processing, Inc. (NASDAQ: ADP) Raised to Focus List at Credit Suisse.

Express Scripts, Inc. (NASDAQ: ESRX) Raised to Outperform at Macquarie.

General Growth Properties (NYSE: GGP) Started as Neutral at Citigroup.

Kraft Foods Inc. (NYSE: KFT) Cut to Hold at Jefferies.

Lululemon Athletica Inc. (NASDAQ: LULU) Raised to Outperform at Credit Suisse.

MedcoHealth Solutions Inc. (NYSE: MHS) Cut to Neutral at Macquarie.

Moody’s Corporation (NYSE: MCO) Started as Neutral at UBS.

Pandora Media, Inc. (NYSE: P) Cut to Market Perform at Raymond James; Cut to Neutral at Citigroup.

Procter & Gamble (NYSE: PG) Raised to Overweight at JPMorgan.

Verisk Analytics, Inc. (NASDAQ: VRSK) Started as Neutral at UBS.

Vermillion, Inc. (NASDAQ: VRML) Cut to Sell at Ladenberg Thalmann.

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JON C. OGG

Boeing (NYSE: BA) signs a $22.4 billion deal with Lion Air. (Reuters)

Moody’s says it might cut the AAA ratings of the UK and France. (Reuters)

The FTC continues to examine the Express Scripts (NASDAQ: ESRX) deal to merge with Medco (NYSE: MHS). (Reuters)

Chinese hackers may have compromised Nortel security for a period that lasted nearly a decade. (WSJ)

Japan’s central bank will buy more assets as its eases monetary policy. (WSJ)

Apple (NASDAQ: AAPL) tests a tablet PC with a smaller screen. (WSJ)

EU leaders still have not approved a deal with Greece. (WSJ)

McDonald’s (NYSE: MCD) presses pork suppliers to treat their pigs better. (WSJ)

AT&T (NYSE: T) and Verizon Wireless to sell a 4G version of the iPad. (WSJ)

The Federal Housing Administration will run out of reserves this year. (WSJ)

Institutional Shareholder Services attacks the dual-class stock of Facebook. (WSJ)

Hewlett-Packard (NYSE: HPQ) will begin to sell huge digital presses that cost as much as $2 million. (WSJ)

Sprint Nextel (NYSE: S) sets some bonuses that exclude the cost of the purchase of iPhones. (WSJ)

BHP Billiton (NYSE: BHP) and partners will put $4 billion into new copper mines (WSJ)

Teamsters to strike Hostess if it cuts salaries and benefits. (WSJ)

Citic Securities of China applies to underwrite U.S. stocks. (WSJ)

Increases in the purchase of small cap stocks may show investors are willing to take on more risk. (NYT)

Capital One’s (NYSE: COF) deal to buy ING Direct continues to face a slow approval process. (NYT)

Chesapeake (NYSE: CHK) to sell $12 billion in assets as natural gas prices fall. (FT)

India’s inflation hits a 26-month low. (Bloomberg)

Douglas A. McIntyre

It makes you wonder how far behind a potential blockage of the Medco Health Solutions Inc. (NYSE: MHS) and Express Scripts Inc. (NASDAQ: ESRX) merger is.  Express Scripts is the would-be acquirer and the deal has been heavily criticized by many watch groups and we have noted how wide the merger-arbitrage spread is.  The blocked AT&T Inc. (NYSE: T) acquisition of T-Mobile started (or added to) much of the blocking concerns from investors.

The FTC issued a complaint to block the hostile acquisition of the rival long-term care pharmacy provider alleging that this combination of the two largest U.S. long-term care pharmacies would harm competition and also because the merger would allow Omnicare to raise the price of drugs for Medicare Part D consumers and others.  As noted (full release):

“If Omnicare is allowed to purchase its biggest and only national competitor, it will diminish competition and raise health care costs – leaving taxpayers and patients to foot the bill,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “The Bureau will continue to be vigilant in our efforts to prevent these sorts of anticompetitive deals.”

JON C. OGG

Because we have covered this merger and because we cover financial news, we receive many emails on this topic.  While we have received little to no great emails on how the merger will benefit the public, we have received ample emails from industry watch groups and public outreach groups which have stated their opposition to this merger.  Take a look at the headline summaries from MergerInvesting.com and you can see just how much opposition there is compared to support.

The merger arbitrage spread in this deal today is right at 13% when other normal mergers carry traditional merger arbitrage spreads of 1% to 4%.  Part of the arbitrage is because Express Scripts has offered to buy Medco in cash and stock, but there is a serious degree of approval uncertainty priced in here. 

With a deal that is not expected to receive approvals until the first or second quarter (if then), it sure seems as though the merger-arb community is not overly convinced that this merger will go through.  If the deal does go through, there could be many divestitures or asset sales which are required.

One institutional broker who covers some merger-arbitrage and index-arbitrage accounts gave a bit of a funny quote here when we asked for feedback.  His answer, from one of his clients, about whether or not the merger would be allowed was simply “Give me one second, there is no easy answer.”

The Department of Justice noted as far back as September of 2011 that this merger was going to face an extended review period.  Medco holders will own about 41% of the combined interest after this merger, if it is approved.

The company with the highest degree of flux before and after this deal could be Catalyst Health Solutions, Inc (NASDAQ: CHSI) with a market cap of under $3 billion.  Much of the public (and investing public) is not even aware of it under the name Catalyst Rx.

There is one interesting merger ETF to consider in arbitrage.  It is the IQ Merger Arbitrage ETF (NYSE: MNA).  Unfortunately, it is very thin trading volume.

Keep in mind that there are no assurances that the DOJ, the FTC, nor other agencies will actually try to block this acquisition.  There are no assurances of approval either.  A chart of the spreads from Bloomberg has been shown below.

JON C. OGG

S&P’s threat of a downgrade of eurozone nations puts huge pressure on the region’s leaders. (Reuters)

An independent panel that reviewed the financial activity of Olympus suggests legal action be taken. (Reuters)

An MIT report says the U.S. power grid is vulnerable to cyber attacks. (Reuters)

BP (NYSE: BP) says high oil prices could hurt global growth. (Reuters)

Samsung announces a new flash memory chip operation in China to cost as much as $4 billion. (Reuters)

John Corzine ignored warnings about his firm’s risky trades, some of which were given to his board by management. (WSJ)

Merkel and Sarkozy will support changes in the euro area treaty that would hold nations more closely to their budgets. (WSJ)

Ford (NYSE: F) begins to search for a CEO as Alan Mulally plans to leave within two years. (WSJ)

AMR (NYSE: AMR) likely will make deep expense cuts so it can exit Chapter 11. (WSJ)

Kraft Foods (NYSE: KFT) announces who will manage the two divisions into which the company will be broken. (WSJ)

Clearwire (NASDAQ: CLWR) will try to raise $300 million. (WSJ)

California Governor Jerry Brown will try to get a tax on high-income residents to cover the costs of education. (WSJ)

Alpha Natural Resources (NYSE: ANR) will pay fines to cover a mining disaster that happened before it owned the operator of the mine involved — Massey. (WSJ)

BP says Halliburton (NYSE: HAL) destroyed evidence about the Deepwater Horizon disaster. (WSJ)

A leading Greek politician says his country’s recession will last through 2013. (WSJ)

Viacom (NYSE: VIA) expects strong ad growth in the near term. (WSJ)

ConocoPhillips (NYSE: COP) says that two agencies approved its drilling in the Alaska’s National Petroleum Reserve. (WSJ)

Eastman Kodak (NYSE: EK) changes some of its advisers as it tries to avoid Chapter 11. (WSJ)

Norway’s sovereign-wealth fund pushes to replace board members at some U.S. firms it owns. (WSJ)

Debate over whether Walmart (NYSE: WMT) will hurt local merchants in India has caused deep rifts in a government that may let large retailers own stores in the country. (NYT)

An antitrust hearing will check issues with the Express Scripts (NASDAQ: ESRX) and Medco Health Solutions (NYSE: MHS) merger. (NYT)

Edgar M. Bronfman Jr. departs as chairman of Warner Music Group (NYSE: WMG). (NYT)

Dubai may refinance $10 billion in state debt. (FT)

Douglas A. McIntyre

There was a point, not so many years ago, when Prozac did not exist, and neither did ADHD. People were depressed or distracted. There was not a lot to be done about it. Those afflicted had to live with their afflictions.

Medco Health Solutions’ (NYSE: MHS) recently released report shows that many people with mental troubles no longer have to suffer, or at least not as much as they used to. In a research report titled “America’s State of Mind,” the experts who did the work say that “more than one-in-five adult Americans took at least one medication commonly used to treat a psychiatric or behavioral disorder in 2010.” The drug companies make billions of dollars on the sales of these medicines. It is hard to say whether the treatments make most people feel better.

Medco makes a great deal of money when it treats the mentally afflicted. So do the large pharmaceutical companies and thousands of American doctors and hospitals. The MHS study’s weakness is that it fails to show whether medicines help, or perhaps to show that people who get the drugs feel better because of the attention they have received.

Douglas A. McIntyre

Apple (NASDAQ: AAPL) names Walt Disney (NYSE: DIS) CEO Robert Iger to its board. (Reuters)

Dell (NASDAQ: DELL) says sales were flat and it warns about future results. (Reuters)

Nokia (NYSE: NOK) to release a Microsoft (NASDAQ: MSFT) Windows-based tablet next year. (Reuters)

Shareholders want Eastman Kodak (NYSE: EK) to remove its poison pill. (Reuters)

More than 30,000 MF Global investors cannot get their money back. (WSJ)

The debt of Austria, France and the Netherlands comes under attack and yields rise. (WSJ)

Dissent among Merrill Lynch brokers may hurt CEO Brian Moynihan’s position with the Bank of America (NYSE: BAC) board. (WSJ)

Ford (NYSE: F) to launch a new SUV with the hope that its can be sold around the world. (WSJ)

Citigroup (NYSE: C) will cut almost 1,000 jobs. (WSJ)

Sony (NYSE: SNE) may start an internet TV service. (WSJ)

Medco’s (NYSE: MHS) Neuroscience Therapeutic Resource Center reports that the use of psychiatric drugs has spread quickly. (WSJ)

U.S. retail sales rise more than expected in October. (WSJ)

A Brazilian effort will cause the World Trade Organization to look at the yuan’s value. (WSJ)

General Motors’ (NYSE: GM) Cadillac will launch more cars to compete with BMW. (WSJ)

Walmart (NYSE: WMT) posts mediocre earnings on improved U.S. same-store sales. (WSJ)

LinkedIn (NYSE: LNKD) will try to keep confidence in its shares as major holders sell. (WSJ)

Sony, Universal and EMI will be part of the release of a new Google (NASDAQ: GOOG) music service. (WSJ)

The flow of oil from Libya increases substantially. (NYT)

Apple sells more products into the business market. (NYT)

A new Stanford study shows the size of middle-class neighborhoods is shrinking. (NYT)

Airbus and Boeing (NYSE: BA) each get about the same number of orders at the Dubai air show. (Bloomberg)

Car sales fall in Europe in October, with Fiat losing sales. (Bloomberg)

Douglas A. McIntyre