NEW YORK — Stock indexes closed Monday at the highest point since the U.S. debt limit showdown in August. The market was driven higher by a round of big corporate takeovers:
• Mattel has agreed to buy the company behind Thomas the Tank Engine and Bob the Builder for $680 million in cash, the toy maker’s biggest acquisition in a decade.
The owner of Barbie, Hot Wheels and Fisher Price toys announced Monday that it is buying Hit Entertainment from a consortium led by private equity firm Apax Partners.
Mattel Inc. already markets many Thomas & Friends die-cast and plastic toys under a license that extends until 2014. Global sales of those toys are more than $150 million.
Mattel said the deal will help combine its own global marketing and distribution capabilities with Hit Entertainment’s global programing and licensing expertise, said Robert A. Eckert, said Mattel CEO.
• Cigna Corp. will buy fellow health insurer HealthSpring Inc. in a $3.8 billion deal as it becomes the latest managed-care company to snap up a bigger share of the fast-growing Medicare Advantage market.
Cigna, based in Bloomfield, Conn., also said Monday it raised its earnings expectations for 2011 and moved up its third-quarter earnings report to Friday from Nov. 3.
Cigna’s acquisition is the latest in a series of deals made by health insurers to expand their Medicare Advantage businesses, which are growing at a faster rate than commercial insurance as baby boomers become eligible for them. In addition, big insurers such as Cigna have reported strong results in recent quarters, and analysts have speculated that companies would start exploring acquisitions.
• Software company Oracle Corp. said Monday that it is buying RightNow Technologies Inc. for about $1.5 billion so it can offer a broader range of software and services that help businesses manage customer service.
Oracle is offering $43 per share for the tech service company from Bozeman, Mont. That is a 19.6 percent premium over RightNow’s closing price of $35.96 on Friday.
RightNow’s board has agreed to the deal, which is subject to shareholder approval. The company says it will stay in Bozeman. Oracle, based in Redwood Shores, Calif., expects to complete the deal by late this year or early next.
• Also on Monday, the J.M. Smucker Co. bought most of Sara Lee Corp.’s North American foodservice coffee operations for about $350 million. The transaction is expected to close near the beginning of 2012.
The two companies also will establish a long-term partnership to collaborate on coffee and tea technologies. As a result of the licensing and support agreement, Sara Lee will receive a 10-year income stream totaling approximately $50 million, plus royalties, to help cover its research and development and other support expenses, according to a news release.
The corporate deals on Monday helped to lift the market. Phil Orlando, chief equity strategist at Federated Investors, noted that “This is telling us that companies think stocks are cheap, and they’re willing to spend some of the cash that’s sitting around on their balance sheets,” he said.
Even with concerns about Europe, U.S. companies are still reporting bigger profits. “Although there is a good deal of economic and political uncertainty in the world, we are not seeing it much in our business at this point,” Caterpillar Chief Executive Doug Oberhelman said.
The maker of construction equipment reported a 44 percent surge in income, more than Wall Street analysts were expecting, thanks to strong growth in exports. The company said it expected the global economy to continue recovering, albeit slowly. Caterpillar jumped 5 percent, the most of the 30 companies in the Dow.
The market for initial public offerings, or IPOs, is suffering through a drought of Texas proportions. Companies thinking of going public are deciding it’s just too risky.
The stock market lost nearly 20 percent of its value in a month this past summer. Swings of 200 points for the Dow Jones industrial average continue to be commonplace. Getting the timing wrong for a coming-out party can mean missing out on millions of dollars.
A dried-up IPO market matters because stock debuts aren’t just a chance for tech whizzes to become overnight billionaires and ring the bell at the New York Stock Exchange. Companies use the cash they raise to grow – and that means hiring people.
And when 14 million Americans are looking for work and the unemployment rate has been stuck near 9 percent for two years, the last thing the economy needs is for one engine of hiring to stall. There are 215 companies waiting to go public. The waiting list is the longest since 2001, according to Renaissance Capital, an investment advice firm.
Matthew Craft, The Associated Press
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