Category Archives: Corporate finance

Pfizer’s Sales Pitch On Research: No Mention Of Groton

by Categorized: Corporate finance, Health Care, Technology Date:

If the situation weren’t so pathetic, Connecticut’s Pfizer-watchers could laugh as the company tries to snooker British politicians this week into thinking the drug behemoth’s proposed, $106 billion takeover of AstraZenica makes sense.

The Brits ought to be smarter than U.S. officials who stood idly by as Pfizer destroyed value in its $218 billion worth of acquisitions since 2000, in three deals alone — Warner-Lambert, Pharmacia and Wyeth.

Groton, formerly the global R&D headquarters for Pfizer and home to 6,000 employees, is now mainly a large development office — not mentioned as CEO Ian Read touts the company’s top research locations.  Groton still represents a very significant presence for Pfizer, perhaps 3,000, but it’s one of numerous sites the company has shrunk or shuttered after big mergers, where building demolitions and fire sales of facilities rule the day.

“We have hubs of science in La Jolla, and in the Bay Area, and in Cambridge, Massachusetts,” Read says in a newly released video designed to sell the AstraZenica deal as, in his words, “a win-win for society, a win-win for shareholders, and a win-win for stakeholders.”

It’s a win-win for top managers and investment bankers. Period.

Click here and here to watch the videos of Ian Read and Mikael Dolsten, the global R&D president.  Watch Read dance around the issue of the operations in Sandwich, England, which Pfizer gutted.

Many people oppose the merger on the grounds that Pfizer, the world’s biggest drugmaker, is getting too big.  The company, echoing the madness at similar-sized Comcast, claims it needs all that heft to develop hugely expensive, high-risk drugs.  

But unlike Comcast, which actually has gotten too big, Pfizer has declined, when you consider its takeovers. In 2001, one year after acquiring Warner-Lambert for the bubble price of $93 billion, Pfizer had sales of $32 billion. Pharmacia had sales of $19 billion and Wyeth $14 billion, for a total of $65 billion — or $87 billion in today’s dollars.

Compare that $87 billion to Pfizer’s sales over the last 12 months: $51 billion, with a market value of $186 billion, less than it paid for the three companies.

Since the end of 2001, Pfizer’s shares have delivered a total return, including dividends, of 29 percent, compared with 110 percent for the S&P 500 index, and that’s with billions of dollars in stock buybacks. Remember, a stock buyback is just a way of shrinking a company, and for Pfizer that means it’s right where it was, only without its former competitors.

And yet, in the new videos, Read and Dolsten can hardly contain themselves, talking about all the good that will come of the AstraZenica deal — yet another match made in heaven, in their options-driven world.

“A combined company will have products and science that can address in an integrated manner what the patient needs and can take on disease management and offer much more value for patients and health care providers,” Dolsten gushed.

What he’s saying is that Pfizer could make itself into a global force for coordinating pharma development, not just another firm in the business. Basically, a utility, only private, for-profit — like the cable companies, speaking of Comcast.

Well, we already have three industries that are struggling mightily with disease management, thank you very much: The U.S. government through Centers for Disease Control and other agencies; the managed-care insurance industry; and the fractured health care industry itself, with a hospital system that’s under siege.

If we’re going to let the the drug industry turn itself into a public utility, we should regulate profits and executive pay. They’ve had it both ways long enough.

Investments In Connecticut Technology Firms Jump in 2014

by Categorized: Corporate finance, Technology Date:

Three very large investment deals in the first three months of 2014 led to Connecticut’s largest quarterly tally for venture capital deals in years, $189 million.

The total in the first quarter of 2014 was more than three times larger than any quarter of the previous two years, according to the MoneyTree Report from PricewaterhouseCoopers LLP and the National Venture Capital Association.

Two of the three recent investment rounds went to New Haven-based drug development firms. Melinta Therapeutics, now in Phase 3 trials for a drug to treat gonorrhea and other infections with a single pill, received $70 million in February from a group led by Vatera Healthcare Partners, its major current equity owner.

Kolltan Pharmaceuticals, a cancer-drug developer also in New Haven, received $60 million last month from a variety of investors. Kolltan, with technology developed at Yale, is in Phase 1 trials for a revolutionary therapy.

Odyssey Logistics & Technology Corp., a shipping management firm based in Danbury, received $48 million from a group led by Goldman Sachs. 

Seven other deals for Connecticut firms totaled $12 million. Connecticut Innovations, the state’s quasi-public technology investment arm, participated or led in five of those.

The large quarter for tech investments does not necessarily mark a trend, as venture capital deals don’t follow a clear pattern from quarter to quarter. But the New York metro region, which includes Fairfield and New Haven counties, has had two straight quarters with deal levels not seen since 2001, the MoneyTree report showed.

And nationally, according to the report, which was compiled based on data from Thomson Reuters, the $9.5 billion invested in tech firms in the first quarter of 2014 was the highest since early 2001.

Many firms are moving into later stages of development and that explains the larger investments, said Bobby Franklin, President and CEO of the National Venture Capital association. But he said, “overall capital remains constrained for most venture capital firms.”

Zygo Agrees To Be Acquired By AMETEK For $364M

by Categorized: Corporate finance, Technology, Wall Street Date:

Zygo Corp., the Middlefield maker of precision optics and optical measuring equipment, said Friday it agreed to be purchased by AMETEK Inc. in a cash deal worth $364 million.

The $19.25 per share deal represents a 31 percent premium over Zygo’s Thursday close of $14.68, and a 27 percent bump from the company’s 6-month average trading price.

If the deal goes through as planned with a targeted closing in June, it would mark the end of independence for a Connecticut homegrown technology stalwart that was founded in 1970 and showed growth but was rarely a home run for investors. Zygo had $162 million in sales in 2013, with net income of $11.4 million.

The deal was valued at $280 million by the companies in a joint written statement, a reduction from the total market value due to Zygo’s $90 million in cash and lack of debt.

AMETEK, based in Berwyn., Pa., is a $3.6 billion-a-year maker of electronic instruments and electro-mechanical devices. The company, traded on the New York Stock Exchange, is a component of the Standard & Poor’s 500.

The companies did not say how the acquisition would affect Zygo’s more than 600 employees, and whether Zygo CEO Gary K. Willis would remain as an employee. In recent years the company has employed nearly 300 people at its Middlefield head office and plant; an updated number was not immediately available Friday.

Willis, who was CEO in the ’90s,  returned to run the company last October after the board ousted a 3-year CEO amid a sales slump — but the deal with AMETEK is hardly a desperation measure, as Zygo sales recovered nicely and its balance sheet is very strong.

It’s so strong, in fact, that at least six law firms announced Friday that they were investigating the deal on behalf of stockholders, saying Zygo’s board might have fetched more in an open auction of the company. Such moves are not uncommon when strong companies that have not seen sharp run-ups in the markets agree to sell themselves.

A rejection by shareholders would seem unlikely considering that Michael A. Kaufman, the Zygo chairman, whose fund controls 24 percent of the company, has agreed to vote his shares for the deal. Willis owned 111,646 shares, or less than 1 percent, as of the end of 2013.

The deal would allow AMETEK to expand its line of contact-based measurement devices to include Zygo’s opitical, non-contact line, the AMETEK CEO said in the written release.

Willis said AMETEK “shares our focus on delivering exceptional metrology and high end optics solutions to our global customers.”

The deal is nearly twice as large as an offer Zygo rejected in 2010, from a different Pennsylvania company, for $10 a share. Since then, Zygo has made three acquisitions. It now has operations in Tucson, Arizona; two locations in Californiia; Montreal; and overseas in Shanghai, Taiwan and Germany.

Zygo shares opened near the offer price on the Nasdaq exchange and by late afternoon were trading as high as $19.65, closing at $19.43 — higher than the offer, as some investors believed a better deal could emerge.

AMETEK shares were up 1.25 percent on a sharply down day for Wall Street.


Magellan Acquisition Highlights Pharmacy Management Profits

by Categorized: Corporate finance, Health Care, Insurance Date:

It really says something that the deal announced today by Magellan Health Services Inc. to buy Newport, R.I.-based CDMI LLC seems routine.

Consider the price Magellan is paying and what that tells us about the profits at CDMI, and at pharmacy management firms generally.

Avon-based Magellan will pay as much as $370 million for the pharma management firm that has health plans as clients. The base price is $205 million in cash and stock and the incentives total $165 million, based on profits and customer retention over the next three years.

With CDMI’s 2013 net revenues totaling $43 million, that’s 8.6 times sales — compared with Magellan’s own market value, at about 50 percent of sales.

And that means that if CDMI had a net profit last year of, say, 30 percent of sales, or $13 million `– a healthy figure — the full price Magellan could pay would translate to a price-to-earnings ratio of 28.6.  A net profit of 20 percent would mean Magellan is paying a whopping 43 times net earnings.

That compares with Magellan’s own value at 13 times trailing 12-month net profits, as the company earned $125 million in 2013.

So CDMI is hugely profitable and it’s not the only privately owned health management or underwriting consultancy that can make that claim. Last year the CEO of South Windsor-based Medical Risk Managers Inc., The No. 1 company among small employers for the Courant/Fox CT Top Workplace awards in 2013, said his firm was more profitable than Google — which had a 31 percent margin.

That’s a great industry for Connecticut to nurture and for companies such as Magellan and Aetna to acquire.




Tracking CEO Pay for Connecticut — An Up-And-Down Year At Top

by Categorized: Corporate finance, Wall Street, Wealth Date:

You may be angry about CEO pay in the tens of millions, or you may be proud to live in a land of opportunity — but you’re likely to react if you’re following reports of compensation from publicly traded companies, which come out this time of year as part of shareholder proxy forms.  This blog post compiles the reports for central Connecticut companies in one place.

Nolan Archibald, the $123 Million Man.

Nolan Archibald, the $123 Million Man.

Whatever you believe, it’s hard not to see many of these paydays as a national disgrace.

Check back often as I update the listing throughout proxy season, with links to stories in The Courant and other news outlets.

We’re still leading off with this one: Nolan Archibald, the former Stanley Black & Decker chairman, hauled in $123 million in 2013, one of the biggest payoffs in U.S. corporate history, and perhaps the biggest ever for a takeover ransom. The money was part of his 2010 deal to sell Black & Decker to Stanley.

Travelers’ Jay Fishman hauls in a $40 million catch but there’s plenty left over for the guys in Hartford.

Much less take-home in 2013 for Mark Bertolini at Aetna, but his promise of future stock totaled $28 million.

Thomas May of Northeast Utilities. Courant Photo

Thomas May of Northeast Utilities.
Courant Photo

NU transmits and distributes $11.8 million to CEO Thomas May in 2013, less than he earned in 2012 as his options exercises and stock vesting declined.

Recovery brings an $11.7 million package to The Hartford’s Liam McGee, with deferred compensation from 2010 coming due and higher share values for vested stock.


UTC's Louis Chênevert John Woike/The Hartford Courant

UTC’s Louis Chênevert
John Woike/The Hartford Courant

UTC’s board powered up Louis Chênevert’s 2013 package by 26 percent to $24.7 million, and it’s a good thing — since his CFO, Greg Hayes, cracked $20 million.

René Lerer, retired CEO of Magellan Health Services, navigates his way to a $17.8 million treasure including a $6 million bonus even though he was chairman throughout 2013, not CEO.

A slight decline to $8 million for George Aylward at high-flying Virtus.

At MetLife, West Hartford native and Hall High graduate Steven Kandarian brings in less than he did in 2012, $7.3 millio

Stanley CEO John F. Lundgren collected $28.6 million, a typical year for this cost-conscious, aggressive acquirer. (Same story as above by my colleague Brian Dowling.)

Cigna reported that its CEO, David Cordani, saw his total package mushroom to $17.8 million in 2013, as he has $11 million in stock vest last year.

Kaman’s Neal J. Keating sees his pay drop to $2.5 million, but he’ll really get closer to $4.9 million for 2013, when all is said and done.

Webster Bank’s Jim Smith endures a pay decline to $2.4 million, with no exercise of options of vesting of shares. Former president Jerry Plush, who resigned abruptly last fall, earned $3.2 million including a severance.

At People’s United Bank, Jack Barnes gains a $3.6 million package, an increase driven by vesting shares.

General Electric’s Jeffrey Immelt received sharply less in 2013, for a package totaling $11.3 million.

Hospitals aren’t public companies but the state compiles salary data for them, later in the year. Since hospital finances and layoffs are so much in the news, here’s last year’s story showing 18 Connecticut hospital executives pulling in at least $1 million in the prior year. We’re eager for an update.

Here is a March 15 Post by former Labor Secretary Robert Reich, the most widely read critic of U.S. CEO pay.
Chart from Reich post

Chart from Reich post

Here’s my 2013 overview for the 2012 pay year, with links to AFL-CIO’s “Executive Paywatch” database. Please note, AFL-CIO and others calculate CEO pay differently from The Courant. They count the current value of stocks and options in the year granted; we count stocks and options in the year when they are vested or exercised.

Legrand North America Hits $1 Billion in Sales

by Categorized: Corporate finance, Manufacturing Date:

Legrand North America, the West Hartford electrical and digital building systems manufacturer that includes the old Wiremold franchise, said late Friday it reached $1 billion in sales in 2013.

Worldwide sales for Limoges, France-based Legrand, a publicly traded company, were $5.9 billion last year, the company said.

When Legrand bought The Wiremold Co., which was family owned,  in 2000, the West Hartford manufacturer had $460 million in annual sales and a local staff of about 600.  Legrand moved its North American headquarters there two years later.

West Hartford employment remains over 500 people, including corporate, engineering and manufacturing, despite at least one significant layoff during the recession. Gains have come from organic growth, new products and acquisitions.

“Legrand is a company committed to innovation, and that core value has led to this remarkable milestone,” said John Selldorff, the regional CEO.



Investors Tell Morgan Stanley They’re Optimistic; More Fear In New York

by Categorized: Corporate finance, Wall Street, Wealth Date:

Investors across the nation with at least $100,000 in the markets told Morgan Stanley in a recent poll that they’re optimistic 2014 will bring gains, but those in the New York area, including Fairfield County, expressed more fear and caution.

Among about 3,000 respondents to the poll, by Morgan Stanley Wealth Management, “86 percent expect their investment portfolios to be ‘better’ or ‘the same’ at year-end, and 84 percent believe their financial well-being will be the same or better,” the company said.

The poll was taken during the fourth quarter of 2013, a bellwether year for stocks, before the declines of 2014.

Investors in the tri-state area were more concerned than those nationally about their families’ financial security, their ability to retire, having enough money for emergencies and market  volatility.  That makes sense, said Joseph Matthews, branch manager and first vice president at the Fairfield office of Morgan Stanley.

There is some familiarity bias associated with living in the tri-state area,” he said. “The people polled are more familiar with Wall Street.”

So, regardless of whether they actually anticipated the downturn that could become a full-on correction at the start of 2014, it’s less of a surprise to them, presumably.

As for types of stocks that might look good in 2014, technology firms led the way in the nation, at 79 percent, and in the tri-state area, at 72 percent, followed by energy, biotech and pharmaceuticals in slightly varying orders for the nation and the region. But other than pharmaceuticals, the sectors most prominent in the New York region, and especially in Connecticut, didn’t fare as well: finance, aerospace and insurance.

“The majority of investors nationwide said they were not knowledgeable alternative investments such as hedge funds, commodities and real estate although Tri-State region investors were more knowledgeable than other areas,” Morgan Stanley said in a written release.

The poll had a margin of error of plus or minus 3.9 percentage points in the nation and 6.7 percentage points in the region.





AT&T Selling Connecticut Business To Frontier

by Categorized: Corporate finance, Telecommunications Date:

AT&T has reached a deal to sell its wireline business in Connecticut to Frontier Communications for $2 billion in cash, ending a 15-year venture that led to thousands of job losses as the number of regular phone lines declined, technology improved and the company moved support operations elsewhere.

Stamford-based Frontier, which operates in 27 states, will take over the old Southern New England Telephone Co. business, which legally still has that name. The operations include 2,700 employees, 900,000 wireline telephone connections, 415,000 Internet connections and 180,000 U-verse video subscribers for a total of $1.25 billion in annual revenues, along with the network itself and a lease at AT&T’s New Haven offices.

Frontier will use the U-verse brand name for video services, but not for its bundled voice, video and Internet, as AT&T does. And, the Frontier president said in an interview, the acquisition will not mean higher prices or deep job cuts — although it will bring changes for customers.

The merger, announced separately by both companies, would close in late 2014 after regulators’ approval. Frontier will not cut overall employment numbers among the Connecticut employees it inherits, including 2,400 members of the Communications Workers of America, said Dan McCarthy, the Frontier president and chief operating officer. But he said that jobs will change, so some disruption will happen.

For a full version of this column, go to:,0,2065086.column



STR Takes Extraordinary Measure As Partial Meltdown Continues

by Categorized: Corporate finance, Economic Development, Energy Date:

The long, slow meltdown at STR Holdings Inc. intensified Wednesday as the solar materials maker announced it was firing four ranking executives including Barry A. Morris, the chief operating officer.

This isn’t a shakeup. No, in a federal filing, the Enfield-based company said it’s eliminating the four positions “in connection with ongoing cost-reduction measures.” Also leaving next month are the vice president for human resources, the chief technology officer and the vice president for finance.

Remaining executives, including CEO Robert S. Yorgensen, will pick up the slack, the filing said.

Robert Yorgensen in 2010, better times for STR Holdings. Michael McAndrews/The Hartford Courant

Robert Yorgensen in 2010, better times for STR Holdings.
Michael McAndrews/The Hartford Courant

While some people might take pleasure in seeing a company eliminate jobs at the top rather than just laying off rank-and-file workers, this is not a good development for anyone. Cutting four top jobs to save money is the sort of measure that happens at the most desperate firms, and STR has posted operating losses totaling $8.7 million in the first two quarters of 2013 on sharply lower sales.

STR, in fact, had the ignoble distinction of trading at a market value below the level of its cash on hand for a few weeks this summer, according to Forbes. That means the market is basically saying the firm is worth more dead than alive.  On Wednesday, shares closed at $2.26, down just 2 cents, perhaps partly due to its strong, debt-free balance sheet and the fact that Wall Street likes cost-cutting.

Morris made $440,000 in 2012, according to federal filings, including value realized from stock and stock options. The salaries of the other executives were not listed.

The near-demise of STR proves the shakiness of picking winners — by investors and by public agencies that hand out loans, grants and tax credits — even in industries that apparently can’t fail.  There is no record of any backing by the state Department of Economic and Community Development, but in 2010, STR received federal tax credits totaling $829,000 as the government attempted to build up the solar industry.

STR, which had revenues of $288 million in 2008, went public at $10 a share in November, 2009. A year later the shares hit a high of $27.68, as STR, which makes encapsulation materials for solar panels, seemed impervious to the collapse of solar panel prices caused by China’s entry into the industry.

In 2010, with 290 employees in Connecticut, STR decided to move its local plant from Somers to East Windsor, expanding its work force further. But it’s been mostly downhill from there. STR has closed the plant, relying on operations in Malaysia and Spain, and in January of this year, announced it had lost its biggest customer, First Solar.

I couldn’t find the number of employees the company now has in Connecticut — some of the decline was due to the sale of a business a couple of years ago — and a spokesman did not return calls seeking comment.

Sales in the first half of this year fell below $20 million, but as with any public company CEO, Yorgensen  put his best spin on his Aug. 7 earnings release. “Despite continued headwinds, we have begun production-scale shipments of our next-gen EVA-based encapsulants to three new customers in China,” he said in the release.

Sturm, Ruger Leads CT Firms On Forbes Best Small Companies List

by Categorized: Corporate finance, Firearms, Management, Media Date:

What do gunmaker Sturm, Ruger & Co. and Annie’s, the organic food firm with the bunny mascot, have in common? Not much, you might think, but both companies with Connecticut ties are in the top 10 of the Forbes list of best performing small public companies.

Sturm, Ruger, based in the Southport section of Fairfield, comes in at No. 5 in the ranking, which is based on sales and profit growth over the last five years.

Annie’s, at No. 10, is based in Berkeley, Cal., but was founded by Canton native Annie Withey, who still grows and sells vegetables in Hampton and consults with the company.

Three other Connecticut companies also made the Forbes list, which ranked 100 publicly traded companies that have sales under $1 billion — solidly midsize by most standards. They are SS&C Technologies of Windsor, No. 28; TransAct Technologies of Hamden, No. 57; and FactSet Research Systems of Norwalk, No. 78.

Ruger has only its headquarters in its home state and recently announced a major manufacturing expansion in North Carolina. Over the last five years Ruger has ridden the gun wave, with its sales ballooning by 24 percent a year to $595 million and a massive 54 percent a year average gain in earnings per share.

At SS&C, the maker of software and systems for the financial services sector, with more than 400 employees in Windsor, founder and CEO Bill Stone moved to Florida late last year said this month he is considering moving company headquarters elsewhere.