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Canaccord Genuity on Bristol Myers, Groupon, and Tiffany


Commentary on Bristol-Myers' Amylin deal, Groupon's loss of its mastermind, and Tiffany's shiny future as an acquisition target.

The following are excerpts from Canaccord Genuity analysts' commentaries.

Bristol-Myers Squibb: If you can't beat them, join them.
Late last Friday, just as the second-quarter's clock ticked toward a close, Bristol-Myers (BMY) snuck in the one of the larger announced deals of the period: a $5.3 billion purchase of diabetes drug maker Amylin. Under the terms of the deal, Bristol-Myers will pay $31 per share for Amylin (AMLN), a premium of 10% to the company's closing price on Friday. Including Amylin's debt and a contractual payment obligation to Eli Lilly (LLY), the total value of the transaction is $7 billion.

The deal gives Bristol-Myers a robust pipeline of type-2 diabetes drugs, including Amylin's novel GLP-1 franchise that houses Byetta and Bydureon. Bristol-Myers will finance the purchase from its existing cash resources and credit facilities. Also, Bristol-Myers said it has inked a deal with AstraZeneca (AZN) to collaborate on developing Amylin's products once the buyout is completed, expanding upon an existing partnership between the two pharmaceutical makers in diabetes treatments.

Under the terms of that deal, AstraZeneca will make a $3.4 billion cash payment to Amylin, which will be a wholly-owned subsidiary of Bristol-Myers. If AstraZeneca chooses to pay another $135 million, it will be able to establish equal governance rights over key strategic and financial decisions over Amylin, Bristol said in a statement. The transactions are expected to be dilutive to Bristol-Myers' adjusted earnings in 2012 and 2013 by about $0.03 per share, and become slightly accretive in 2014.

Groupon: The mastermind effect?
Shares of Groupon (GRPN) got rocked, falling over 10%, as investors balked at news that the company's "mastermind" was taking a step back. Groupon chairman and cofounder Eric Lefkofsky, often described as the company's "mastermind," posted a long blog announcing that he is taking a reduced role with the company.

While he will remain chairman, he plans to focus on his investment firm. As highlighted by a Business Insider report, Lefkofsky wrote: "My role has always been more complicated at Groupon, as I am a co-founder as well as its first investor. Andrew has been the founder and CEO since Day One, which has permitted me to act more like a super-active investor and director than a member of the management team. So unlike our other companies, there was no CEO to recruit, so I could eventually move on as Andrew was always in that role…When Groupon was a 'young' company, Andrew and I wore a lot of different hats. Every time we hired someone new, we gave up a hat. Given the breadth of the team today, everyone's hat is planted firmly on the right head, which has allowed me to focus on doing what I do best. I look forward to continuing to work with Andrew in my ongoing role as Chairman of the Board, but in the meantime, I've immersed myself in Lightbank and am focused on growing the company and working with Brad and the rest of the Lightbank team to try to define what it should be as it matures. For me, one of the best ways to do that is to start by defining what Lightbank shouldn't be."

Like the coupons, shares of Groupon can now be picked up for a big discount! Shares are trading at about 53% of the $20 IPO price.

Tiffany & Co.: Window of opportunity.
Canaccord Genuity Specialty Retail Analyst Laura Champine has upgraded her rating on Tiffany (TIF) shares, stating that the stock's recent pullback has opened a window of opportunity into one of the best brands in luxury with significant global expansion opportunities.

Tiffany has declined ~14% since the company reduced its FY12 guidance on May 24, versus the S&P 500 index up 3%, the S&P Retail Index up 2%, and the luxury group's 5% decline. At current levels, Champine believes investors have priced in a worst-case scenario. Champine also noted that Tiffany shares now trade at a 35% discount to the luxury group versus its five-year average single-digit discount, and that Tiffany is trading below historical multiples. She believes Tiffany's valuation may once again draw the company into the acquisition spotlight.

Throughout multiple points in 2011, Tiffany's name appeared in the media as a potential takeover candidate for global luxury retail conglomerates including LVMH Moet Hennessy Louis Vuitton and Richemont. In March 2011, LVMH's acquisition of Bulgari fuelled some investors' perception that Tiffany was next in line to receive bids in the luxury space. On June 7, the London-based publication The Evening Standard reported that Richemont was considering a per-share offer of up to $130, which represented a premium of 75% over Tiffany's price at the time.

Editor's note: For more information on Canaccord Genuity, click here.
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No positions in stocks mentioned.
Canaccord Financial and its affiliated companies may have a Corporate Finance or other relationship with the companies mentioned and may trade in any of the Designated  Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage herein.
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