The Return of the Deal

According to the New York Times, “a flurry of deals in the last month” signal restored confidence in corporate America. The Washington Post also notes the uplifted mood on Wall Street: “In recent weeks, a pickup in mergers and acquisitions activity involving high-profile companies gave investors hope that companies are focusing again on generating growth, not simply surviving the recession.” While mergers are still off by more than 50 percent from last year, recent deals—like Xerox’s (XRX) agreement to buy outsourcer Affiliated Computer Services (ACS) yesterday—“suggest that the most senior ranks of corporate America may now have a more optimistic outlook on the economy than some people thought,” says the NYT. The paper notes that unlike the “merger-mania” of years past, recent big deals are strategic—where one company buys another, intending to make that company an integral part of its own business.

Three big drug makers announced deals yesterday that give them rights to new flu vaccines, says the Wall Street Journal. Johnson & Johnson (JNJ) bought a stake in Dutch biotech company Crucell NV (CRXL) to coordinate on vaccine development. Abbott Laboratories (ABT) confirmed its acquisition of a unit of Belgian conglomerate Solvay SA, and Merck & Co. (MRK) said it obtained marketing rights for a flu vaccine from Australia's CSL Ltd. The paper says, “The deals reflect the growing conviction among pharmaceutical executives that vaccines against a variety of maladies, long an industry stepchild, will become an increasingly important source of growth to replace aging blockbusters that are poised to lose patent protection.”

According to the Financial Times, the FDIC will discuss its call for prepayment of fees from the banking industry today. “US banks will have to advance tens of billions of dollars to the cash-strapped fund protecting depositors at the Federal Deposit Insurance Corporation under a proposal to be to be put forward by regulators on Tuesday,” the paper says. The failure of 95 lenders has depleted the FDIC, which now stands at its lowest level since the height of the savings and loan crisis in 1993.

Warner Music Group (WMG) and YouTube are close to making a deal that would bring its music videos back to the video-sharing site after a nine-month licensing dispute, says the WSJ. Warner had revoked permission for YouTube to use its videos late last year, when the two sides failed to reach a suitable agreement. Under the expected agreement, Warner would retain the right to sell ads that run next to its videos and keep a big chunk of the revenue generated. While YouTube has similarly dealt with recent disputes with content owners who want more money for their content on the site, this deal is significant because all of  Warner’s videos will remain on YouTube’site, instead of on a freestanding Web site.

Starbucks (SBUX) is planning to introduce its new instant coffee, Via, to stores across the U.S. and Canada today according to the Wall Street Journal. The popular coffee shop has struggled from its premium brand image throughout the recession, and executives hope that this more affordable product will help to change customers’ perceptions. It will also help the bottom line if the product catches on in the $21 billion global instant-coffee market. While Via will be available in Target (TGT) and Costco Wholesale (COST) stores nationwide starting today, Starbucks doesn't plan to sell it in traditional grocery stores until sometime next year. Once it lands in supermarkets, Starbucks will have to compete against industry giant Nestlé SA, maker of Nescafe Taster's Choice, which already is running attack ads knocking the new Starbucks line.

Finally, Disney (DIS) plans to unveil an “ambitious new digital service” today that it hopes “will transform how children read its storybooks,” the New York Times reports. For $79.95 a year, families can access a new subscription-based Web site to find electronic replicas of hundreds of Disney books sorted by reading level. Called DisneyDigitalBooks.com, it will include a “look and listen” section for beginning readers where books will be read aloud by an actor as well as sections for children who can read on their own. Disney’s vice president of digital media says, though, that the Web site isn’t meant to replace traditional books altogether. He told the paper, “For parents, this isn’t going to replace snuggle time with a storybook.”