2 major deals amid credit crisis

Jill Barshay Apr 7, 2008
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2 major deals amid credit crisis

Jill Barshay Apr 7, 2008
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KAI RYSSDAL: We got the first inkling the frozen credit markets might be beginning to thaw last Tuesday. That’s when Lehman Brothers was able to sell off $4 billion of fancy new stock. No mean feat, at a time when most people on Wall Street aren’t in a trusting mood, especially with a bank that for a time there, was rumored to be as badly off as Bear Stearns.

We woke up today to a pair of promising signs. First, that Washington Mutual, one of the country’s largest and most troubled mortgage lenders, is close to nailing down $5 billion from a private equity firm. Second, and even bigger, that Switzerland’s Novartis will spend $39 billion for a majority stake in the US eye-care company Alcon.

Our New York bureau chief Jill Barshay reports.


JILL BARSHAY: The foreign funds that bought big chunks of Wall Street last year have lost a lot of money so far. Now a US private equity firm, TPG, is hoping it can do a better job in timing a market turnaround with its investment in Washington Mutual. Gregg Feinstein manages mergers and acquisitions at Houlihan Lokey.

GREGG FEINSTEIN: I think it’s a sign, certainly, that things have stabilized a little.

But Feinstein says the day’s two deals do not signify the deal machine is roaring back. He says leveraged buyouts are still dead. Feinstein says the Alcon deal is the kind of company-to-company sale that never stopped. Nestle is exiting the healthcare business, so it’s selling its stake in Alcon to another Swiss company, Novartis, that is all about healthcare. Alcon is known for its Opti-Free contact lens solution, but Chris Cooley, at FTN Midwest Securities, says Alcon really makes its money in cataracts surgeries, where it dominates the $5 billion a year market.

CHRIS COOLEY: They really have the potential to touch pretty much everyone at some point in time in their life. Most of us end up requiring either spectacles or contacts, but as we all age, over time, you know, the likelihood of the formation of a cataract obviously increases. It’s the most common surgical procedure performed in the United States.

As the US ages, that market is only going to get bigger.

In New York, I’m Jill Barshay for Marketplace.

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