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maltatoday, WEDNESDAY, 29 JULY 2015 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Teva to purchase Allergan's generic drugs unit for $40.5 billion Teva Pharmaceutical Industries, the world's largest generic drug maker, agreed on Monday to buy Allergan's generics unit for $40.5 billion in cash and stock in a deal that will turn the Israeli company into one of the world's largest pharmaceutical fi rms. The deal, the largest in Israel's corporate history and one of the latest in a wave of consolidation in the drug industry, will see Allergan receive $33.75 billion in cash and Teva shares valued at $6.75 billion, giving it a 10% stake in Teva. The deal will give Teva increased scale in the competitive generic- drug market and allow it to pursue further cost reductions that could help it cope with the end of a wave of large patent expirations. Allergen – formerly Actavis – established itself in Malta in 1975 and employs around 750 workers in its two plants in Bulebel and Hal Far. Its plants in Malta produce around four billion capsules every year. Teva shares rose 12% to $69.35 in midday trading, while Allergan shares added 7.3% to $330.6. "What we are doing here will enable Teva to be one of the winners of the ever-changing pharmaceutical industry," Teva chief executive Erez Vigodman said in an interview. The deal prompted Teva to drop its $40 billion bid for Mylan, which had hit a snag when the company set up a Dutch foundation that bought temporary control of half the company in an attempt to block the takeover. Teva said that it now plans to review its options with respect to the approximately 4.6% of Mylan stock that it owns. Following the deal announcement, Mylan shares fell nearly 14% to $57.03. The deal will provide Allergan with cash to repay its debt and allow it to focus its attention on lucrative brand-name drugs. "If you look at what we've been doing, it's always been about moving up the value chain, moving up the margin, innovation chain of pharmaceuticals," Allergan CEO Brent Saunders told CNBC. "This really just moved that up further." In March, the company once known as Actavis bought Allergen and took on the acquiree's name, and the deal left Allergan with roughly $42 billion in debt. Saunders said that the proceeds from the Teva acquisition should account for $36 billion after tax, leaving the company with essentially no net debt, when factoring in the free cash flow it generates. "When you think about it, we weren't going to be a consolidator of the generic business," Saunders said. "We've always said that. We weren't going to be a buyer of future generics. We were going to be a buyer of brands. "Teva is a natural consolidator. This is their legacy. They're very good at it. They have global scale." Money Market Report for the week ending July 24, 2015 ECB Monetary Operations On Monday, July 20, the European Central Bank (ECB) announced its weekly main refinancing operation (MRO). The auction was conducted on Tuesday, July 21, and attracted bids from euro area eligible counterparties of €75.15 billion, €0.39 billion lower than the bid amount of the previous week. The amount was allotted in full at a fixed rate equivalent to the prevailing MRO rate of 0.05%, in accordance with current ECB policy. On Wednesday, July 22, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $0.36 billion, which was allotted in full at a fixed rate of 0.63%. Domestic Treasury Bill Market In the domestic primary market for Treasury bills, the Treasury invited tenders for 90-day bills maturing on October 22, 2015. Bids of €58.00 million were submitted, with the Treasury accepting €16.00 million. Since €13.00 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €3.00 million, to stand at €250.55 million. The yield from the 90-day bill auction was -0.036%, down by 0.6 basis point from bids with a similar tenor issued on July 17, 2015, representing a bid price of 100.0090 per 100 nominal. During the week under review, there was no trading on the Malta Stock Exchange. Yesterday the Treasury invited tenders for 28-day and 90-day bills maturing on August 28 and October 29, 2015, respectively. Despite a relatively good earn- ings season so far, the persist- ent drop in commodity prices, in particular oil markets, is having an impact on worldwide equity markets. Brent (-2.11%) joined WTI (-0.68%) in re-entering a bear market, having slumped 20% from the June 10th high of $67.00, declining to a four- month low in the process. The turbulence in China certainly isn't helping matters while export data showing Southern Iraq output rising to an all-time high added to the weakness. Meanwhile Gold (-0.47%) did its best to wipe out the bulk of Friday's gains while Silver (-0.78%) and Platinum (-0.53%) also moved lower. Copper (-1.43%) added to the broad-based weakness, extending its record lows while Aluminum (-0.21%) also declined. Volkswagen AG surpasses Toyota as biggest automaker Volkswagen has overtaken Toyota in terms of deliveries in the first half of this year, putting the company on track to capture the worldwide sales crown three years ahead of its target. Toyota has announced that it sold 5.02 million vehicles in the first six months of the year, marginally behind the 5.04 million that Volkswagen had already reported. Overall, sales declined 1.5 per cent for Toyota and 0.5 per cent for Volkswagen. The main driving force behind Volkswagen's comparatively superior performance was the increasing car demand in Europe, which accelerated to the fastest pace in five years. The biggest challenge to Volkswagen's objective is the slowdown in China, which is the company's biggest market. The current volatile stock market and slump in demand is expected to impact performance as consumers may be swayed to opt for cheap SUV models by local Chinese brands. General Motors Co., the third- biggest automaker by global sales, said earlier this month that its worldwide deliveries fell 1.2 per cent in the first half to 4.86 million vehicles. BP second quarter profit slides BP Plc said second-quarter profit tumbled 64 per cent as crude prices slumped. Adjusted profit dropped to $1.3 billion from $3.6 billion a year earlier. Chief Executive Officer Bob Dudley is bracing Europe's third-biggest oil producer for a longer period of low prices by slashing spending, reviewing projects and selling assets. In the past year the price of oil has declined around 50 per cent, thus impacting the profitability of oil companies and forcing them to reduce investment in high-cost projects. Royal Dutch Shell Plc, Total SA, Exxon Mobil Corp. and Chevron Corp. are all scheduled to report second quarter earnings this week; any surprises to the downside could create downward pressure on broader markets as oil company valuations drop. European economic data surprises European data flow have given us reason to be buoyant following a better German IFO survey reading. The 108.0 reading (vs. 107.2 expected) was up 0.5pts from an upwardly revised June print, signalling an easing of concerns around Greece, while both the current assessment (113.9 vs. 112.9 expected) and expectations (102.4 vs. 101.8 expected) surveys also came in above market. That helped support a strong day for the euro, which finished +0.95% against the dollar, now trading at USD1.1061/ EUR. Taking a look at yesterday's calendar, the morning's dataflow was centred on the UK where we got the Q2 GDP reading while over in Italy consumer and business confidence readings were expected. Over in the US yesterday afternoon the two-day FOMC meeting began while data wise we get the flash composite and services PMI's for July, S&P/ Case Shiller house price index and consumer confidence. It's a busy day for earnings with 40 S&P 500 companies due to report, including Gilead Sciences, Ford and Pfizer. This article was issued by Simon Psaila, Treasury Officer at Calamatta Cuschieri. For more information visit, www.cc.com. mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing in this newspaper. YOUR FIRST CLICK OF THE DAY www.maltatoday.com.mt Market commentary: Chinese stocks and oil tumble, VW surpasses Toyota