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Economists’ weak smiles, Dealing for drugmakers
Business economists are slightly less gloomy about the economy than they were in April. Swiss drugmaker Roche wants to buy the rest of U.S.-based cancer-drug specialist Genentech. And McDonald’s may rue taking on Starbucks.
 

NEWS AT A GLANCE

Business economists gloomy, but less so

Economists are less pessimistic about the U.S. economy then they were in April, according to a National Association for Business Economics survey, but most expect sluggish growth in the second half of 2008. (Reuters) Ten percent of the surveyed business economists, representing a wide range of industries, expect negative GDP growth in the second half, 45 percent see growth below 1 percent, and 32 percent expect growth of 1-2 percent. (AP in CNNMoney.com) Faced with rising raw-material costs, four times as many firms plan to raise prices than cut them, and only a net 9 percent expect to increase payrolls, raising concerns about inflation and a weak job market. (Bloomberg)

Roche bids on Genentech

Swiss pharmaceutical giant Roche Holding offered $43.7 billion for the 44 percent of U.S. biotech drugmaker Genentech it doesn’t already own. The deal would create the world’s seventh largest drugmaker and give Roche Genentech’s profitable cancer drugs. The $89-a-share offer represents an 8.8 percent premium to Genentech’s closing price Friday. (MarketWatch) That’s a smaller premium than other recent pharmaceutical deals. “The weak dollar and the fact that they are not paying a huge premium make this rather attractive,” said Beatrice Kunz at Clariden Leu in Zurich. (Bloomberg) Separately, Roche reported a 2 percent drop in profit for the first half of 2008, to $5.62 billion. The results beat expectations. (Reuters)

Bank of America profit falls

Bank of America, the No. 1 U.S. retail bank, reported a 41 percent drop in quarterly profit, to $3.41 billion, but the results were better than analysts expected. The bank was hit by an increase in bad debt and $212 million in merger and restructuring charges. (Reuters) BoA concluded its bargain-priced $2.5 billion buyout of Countrywide Financial July 1. “There are clearly going to be bumps over Countrywide for the next three or six months, and that’s definitely going to have an impact,” said Cassandra Toroian at Bell Rock Capital. “Longer term, it’s a smart buy.” Four of the five major U.S. banks who have reported earnings this quarter have reported better-than-expected results, boosting the whole banking sector. (Bloomberg)

The Golden Arches vs. the green mermaid

McDonald’s reports its second-quarter earnings on Wednesday, and investors might be more interested in coffee than burgers and fries. McDonald’s hopes to have its espresso-based coffee service up in all 14,000 U.S. locations by next year, but the push into latte land comes as Starbucks is closing more stores than it is opening. And so far, according to McDonald’s data, the coffee drinks don’t seem to be selling well in the 1,700 test stores. McDonald’s says the data paint an incomplete picture. And sales could rise when McDonald’s starts marketing its new espresso offerings. But some franchises aren’t buying the concept. “Nobody wants to spend the money on that,” one franchisee groused. (The Wall Street Journal)

 

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