http://www.businessweek.com/stories/2005-03-13/closing-bell-chiron

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Closing Bell: Chiron


Michael Cherkasky took control of beleaguered insurance broker Marsh & McLennan (MMC) in October -- not long after New York Attorney General Eliot Spitzer hit it with a suit alleging bid-rigging and other fraudulent activities. Since then there has been a board shakeup, and several key execs have been axed.

But Cherkasky's troubles aren't over. On Mar. 1, Marsh Mac announced a steep quarterly loss, stemming largely from the $850 million payment to settle the Spitzer suit. It also announced plans to halve its dividend -- and a restructuring that could eliminate up to 2,500 jobs. Most of the cuts will be in its brokerage unit, Marsh Inc., and could result in annual savings of more than $375 million, Cherkasky said.

"We are trying to be realistic about a very tough year and where we're going to come out of it," he told investors. Still, Marsh employees should get some solace: In May the company plans to ask shareholders to replace about 40 million worthless stock options with new ones.

The final showdown between Qwest Communications International (Q) and Verizon Communications (VZ)for control of MCI (MCIP) is about to begin. On Mar. 2, Verizon granted MCI a two-week window to talk with Qwest, after Qwest revised and upgraded its previous offer for the nation's second-largest long-haul carrier. The move comes after MCI accepted a $6.75 billion bid from Verizon on Feb. 14, spurning an $8 billion offer from Qwest. After MCI shareholders balked and Qwest CEO Richard Notebaert asked MCI to explain why it preferred Verizon's offer, the MCI board decided to ease the strain by talking with Qwest again, even as it signaled that Verizon remains the favored suitor.

Now that its private-equity arm is minting money, JPMorgan Chase (JPM) has decided to spin off the unit by the end of next year. Although JPMorgan Partners, which manages $13 billion, reported $1.4 billion in profits last year, it has contributed to big swings in earnings. Chief Operating Officer Jamie Dimon noted that the unit's appetite for bigger deals could lead to conflicts with customers such as buyout firms Kohlberg Kravis Roberts and Blackstone Group. JPMorgan still will hold a 65% stake in the $6.5 billion global fund and will contribute up to $1 billion more in 2007. Meanwhile, JPMorgan will use One Equity Partners -- inherited from the January, 2003, merger with Bank One -- for private-equity investments.

San Diego defense contractor Titan (TTN) will pay $28.5 million to settle criminal and civil charges that its payments to win business in Benin violated U.S. anti-bribery laws. The payout was the biggest ever by a company to run afoul of the Foreign Corrupt Practices Act. Titan pleaded guilty in federal court on Mar. 1 to three criminal charges and will pay a criminal fine of $13 million. It also agreed to pay a $15.5 million penalty to the Securities & Exchange Commission, without admitting or denying wrongdoing. The SEC had alleged that Titan paid more than $3.5 million from 1999-2001 to an agent in Benin, who funneled about $2 million to the President's reelection campaign.

To the delight of investors, Continental Airlines (CAL) on Feb. 28 announced tentative deals with its pilots, flight attendants, and mechanics to cut wages and benefits at the end of March. If the deals are approved by workers, the airline is expected to hit its $500 million annual labor savings target. Workers will receive 10 million stock options as part of the agreements. Robert Ashcroft of UBS (UBS) figures that the agreements would put Continental's pilot pay in the middle of the pack among its U.S. peers. Continental shares rose 14%, to $12.18, on the news.

-- General Electric (GE) expects most of its growth to come from developing countries in the next decade.

-- AutoZone's (AZO) quarterly earnings rose 30%, thanks to strong sales and a tax benefit.

-- Halliburton (HAL) said it knows of no antitrust violations after disclosing a Justice probe of possible bid-rigging.

Shares of Chiron (CHIR) rose 6.4%, to $37.69, on Mar. 2 after British regulators cleared its Liverpool plant to make flu vaccines for the 2005-2006 flu season. Last October the plant was shut down due to contamination, causing a fourth-quarter loss of $22.9 million.


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