Replies to post #3346 on The Rising Influence of Rising Affluence

[DewDiligence]

The impetus for the PKI-CALP acquisition (#msg-66915400) announced
yesterday is largely the growth of laboratory services in emerging markets.
PKI is one of my top-20 LTBH picks (#msg-66381289).

http://www.boston.com/business/healthcare/articles/2011/09/09/perkinelmer_to_buy_caliper_for_600_million/

›PerkinElmer to Acquire Caliper

By Robert Weisman
September 9, 2011

PerkinElmer Inc. yesterday said it has agreed to buy Caliper Life Sciences Inc. for about $600 million in a deal joining two Massachusetts companies that sell imaging and diagnostic products and services to biomedical and environmental science labs worldwide.

The transaction, which must be approved by Caliper shareholders and federal regulators, would be the largest in more than a decade for Waltham-based PerkinElmer. The company has made seven smaller acquisitions this year as the global life sciences sector consolidates.

Unlike many takeovers, where a company buys a competitor to gain market share and then slashes jobs, both parties in this deal say the combined companies’ work force is likely to expand in Massachusetts. Caliper, based in Hopkinton, sells a suite of molecular imaging and detection technologies that complement PerkinElmer’s products and services.

“Our customers will benefit from dealing with one company with broader capabilities,’’ PerkinElmer chief executive Robert F. Friel said in an interview, noting that his company hopes to supply a larger product line to labs opening up in developing countries.

“If you look at what’s happening in life sciences globally, you’re seeing many companies outsourcing to China and India,’’ Friel said. “It takes a lot of infrastructure to keep pace with the customer.’’

Caliper, for which PerkinElmer will pay $10.50 a share, will give the Waltham buyer a leadership position in the emerging market for genomic research tools, said Peter Lawson, a life sciences and diagnostics analyst for investment bank Mizuho Securities USA in New York. PerkinElmer has previously snapped up bioinformatics companies in that sector, allowing it to sell sophisticated software that helps researchers identify potential drugs.

“This better positions them in genomics research,’’ Lawson said. “It’s a high-end innovation area that requires a lot of capital.’’ PerkinElmer has skillfully built its roster of technology, software, and services that support genomics researchers pushing the frontier of personalized medicines, he said.

The purchase price represents a 42 percent premium over Caliper’s closing price of $7.39 on Wednesday. Caliper’s shares jumped $3.04, or 41.1 percent, yesterday to $10.43 on the Nasdaq Stock Market. Shares of PerkinElmer closed down 5.9 percent at $20.75, a loss of $1.30 on the New York Stock Exchange.

PerkinElmer said it plans to retain Caliper chief executive Kevin Hrusovsky and his management team as well as most of Caliper’s employees. The company has 464 workers worldwide, including about 250 in Massachusetts. PerkinElmer employs about 6,500 people globally, including 500 in its home state. While some Caliper administrative jobs may be eliminated, PerkinElmer could move other work to Hopkinton and expects to grow the operation there, Friel said.

The name Caliper is likely to live on as a brand on research products such as microfluidic chips, which Hrusovsky describes as “kind of like shrinking an entire laboratory onto a chip the size of a quarter,’’ though the company will be absorbed into PerkinElmer.

PerkinElmer and Caliper have competed with Waltham-based Thermo Fisher Scientific Inc., Waters Corp. of Milford, and other companies in the United States and abroad in the diagnostic, laboratory, and analytical equipment market.

Hrusovsky described Caliper as a research and science-oriented company that found it difficult to tap global markets on its own.

“PerkinElmer has infrastructure and 10 times as many salespeople around the world as we have,’’ he said. “This deal basically takes the best-kept secret, Caliper, and allows us to tell our story worldwide by combining with PerkinElmer.’’

Both firms take their names from other businesses once based out of state. Caliper was the name of a California company that acquired Hopkinton-based Zymark Corp. in a 2003 “reverse merger’’ that moved the acquiring company’s headquarters to Massachusetts. PerkinElmer, the name of an old-line Connecticut company, was among the assets acquired in 1999 by a Wellesley company then known as EG&G.‹

[DewDiligence]

APD authorizes new $1M buyback plan following completion of old one:

http://finance.yahoo.com/news/Air-Products-Announces-prnews-531296168.html?x=0&.v=1

[DewDiligence]

A byproduct of fraudulent reverse mergers by Chinese companies…

http://online.barrons.com/article/SB50001424052748704429004576600932739440342.html

›U.S. and China Play Chicken Over Accounting

OCTOBER 1, 2011
By JIM MCTAGUE

Experts are warning that a regulatory showdown between the U.S. Securities and Exchange Commission and China's Ministry of Finance could spiral out of control with consequences reminiscent of Dr. Strangelove and the Doomsday Device. The dispute centers on access to audit reports for Longtop Financial Technologies, a dodgy electronics firm that was kicked off the New York Stock Exchange in August. But the issues go deeper than that.

The worst-case outcome is that Chinese companies could be completely shut out of U.S. capital markets, including a couple of hundred that are already listed on the Nasdaq OMX and the NYSE. Future accounting data on American multinationals operating in China could also be deemed untrustworthy.

"It's really a Cuban missile crisis that we are looking at right now," says Paul Gillis, an expert in trans-national accounting who spends most of his time in China. Gillis frequently advises the SEC and the Public Company Accounting Oversight Board, which audits the auditors of public companies and brokerage firms.

The SEC and the Justice Department are investigating possible investor fraud by Longtop. On May 27, the SEC subpoenaed Deloitte Touche Tohmatsu Ltd. for documents held by its China-based member firm, D&T Shanghai. So far Deloitte Touche has declined to comply. It's now up to a U.S. magistrate to determine if the subpoena is valid and, if so, what the consequences are for the firm.

DTTL spokeswoman Lauren Mistretta told Barron's in an email that "Chinese law prohibits Deloitte China from providing the requested documents directly to a foreign regulator and violations can result in severe sanctions, including criminal penalties. We would further note that this issue affects all accounting firms in China, not simply the DTTL member firm."

The SEC and the Accounting Oversight Board have tried for years to get Chinese companies and auditors to open up. But the Chinese government has dragged its feet, arguing that it's [sic] domestic regulators are competent to do the job. China, it bears noting, is the only large emerging market that hasn't reached an accommodation with the SEC and the PCAOB.

Chinese companies have been listing on our exchanges for years because it's cheap and easy and because they have inadequate capital markets at home, where equity ownership is a fairly recent phenomenon. Many companies have come in through the back door, using reverse mergers to avoid the scrutiny that comes with a traditional initial public offering. More than 100 class action suits, alleging fraud, have been filed against U.S.-listed Chinese firms from the second half of 2010 to present.

That's just the beginning. The SEC is considering proposals from the Nasdaq and the NYSE to tighten up the reverse-merger loophole. But because of a powerful reverse-merger industry here in the U.S., the problem will not be eliminated completely. The bottom line is that when you invest in a communist country that is paranoid about the free flow of information required for transparent markets, you are investing blindly.

"It's a high-risk environment," says Gillis, who is on the board of a Chinese company that took the IPO route in the U.S. But, he adds, "there are some incredible deals because you have companies growing at 30% annually trading at single-digit multiples." [Thanks, but no thanks. I’d rather exploit The Global Demographic Tailwind by owning shares of multinational firms that do business in China and other emerging markets (#msg-66381289).]

The SEC subpoena may derail efforts, such as they are, at resolution between U.S. and Chinese regulators. "If I was a betting person, I'd say the Chinese will tell the SEC to take a hike," says Lynn Turner, a partner at Glass, Lewis & Co., a proxy advisory firm—and the former chief accountant for the SEC. U.S. regulators could further escalate the dispute by pulling D&T Shanghai's permit to work with listed companies, including U.S. multinationals.

And if the Chinese continue to deny the SEC access to Chinese auditors, the regulator could go down the list of listed Chinese companies, pulling their registrations one by one, dooming all Chinese reverse-merger listings. Gillis doesn't think U.S. regulators will exercise this nuclear option, but he's unsure.

U.S. regulators have displayed remarkable forbearance in dealing with foreign nations, especially China, says Joseph Carcello, an accounting expert at the University of Tennessee. Though the SEC bent over backwards, there was no meaningful movement in negotiations with China, he says. So the SEC suddenly pivoted, in part due to pressure from Congress to crackdown on Chinese stock-market fraud.

"The SEC still has an obligation to protect U.S. investors and uphold our securities laws," Carcello says.

James Doty, chairman of the Public Company Accounting Oversight Board, is confident a protocol can be reached with the Chinese. Their companies need access to our capital, he says, and China does not want to be a global financial outlier. Doty predicts one or two joint inspections of China-based auditors by the PCAOB and China in 2012. But this is what you would expect him to say. A Chinese delegation expected in Washington, D.C., this month to meet with Doty has yet to RSVP. If they fail to show, owners of Chinese stocks ought to think twice about hanging on to them.‹

[DewDiligence]

My Top Picks for Long-Term Buy & Hold (updated)

Since the previous version of this list one year ago, I dropped six names
(APD, CUB, CVX, PG, NVS, XOM) and added two (IBM, RDS-A/B), so
it’s now a ‘Top-16’ list instead of top-20. Below are two or three sample
posts for each name. (Some sample posts are old but still a good read.)

 
 Biotech/healthcare 
 ABT      #msg-78211782  #msg-75216470  #msg-50473238 
 AGN      #msg-78091233  #msg-77485261  #msg-64097718     
 MNTA     #msg-78447531  #msg-70212854  #msg-78242442  
 PFE      #msg-77289456  #msg-78087124  #msg-39315651 
 PKI      #msg-78211878  #msg-66945279  
   
 Natural resources 
 CLB      #msg-77718792  #msg-71616019 
 CLF      #msg-73268848  #msg-77906720  #msg-58708254 
 HES      #msg-78327155  #msg-78327528  #msg-75235512 
 PCL      #msg-73427089  #msg-60240622  #msg-43004163 
 RDS-A/B  #msg-71742179  #msg-73601511  #msg-74155911 
 VALE     #msg-73341305  #msg-77035338 
  
 Agriculture and food  
 DE       #msg-78435398  #msg-73669688  #msg-60344244 
 HNZ      #msg-75956453  #msg-63662457 
 MON      #msg-61383009  #msg-60259277  #msg-41324910 
    
 Technology/miscellaneous 
 IBM      #msg-67607838  #msg-72839729 
 MMM      #msg-60356285  #msg-54817296 

Feedback welcome.