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Many investors are having a hard time navigating the stock market right now, as choppy conditions have led to a volatile start to the new year. Major market indexes gave up early gains on Monday, and Wall Street looks ready for a lower open on Tuesday morning based on stock index futures.
Several stocks made big moves Tuesday morning on news related to mergers and acquisitions. For Oak Street Health (OSH 27.47%), speculation about a potential acquisition by a healthcare giant gave the stock a big boost. Elsewhere, Frontline‘s (FRO 25.68%) decision regarding a planned combination with Euronav (EURN -15.31%) led to sizable moves for both stocks.
Shares of Oak Street Health jumped 34% in premarket trading on Tuesday morning. The climb came after reports that CVS Health might be interested in purchasing the operator of primary healthcare centers.
CVS is exploring a potential acquisition of Oak Street Health, according to reports from Bloomberg. The report speculated that a deal could put a $10 billion valuation on the company, which would represent a significant increase from its current market capitalization.
Oak Street has taken a specialized approach in its business model, concentrating on helping Medicare patients who need more comprehensive preventive care and integrated health services. By looking to expand on the traditional scope of primary care, Oak Street has appealed to patients needing equitable access to various levels of healthcare.
Drugstore chain retailers like CVS Health have worked hard to try to bring more healthcare services directly to customers, and so the fit with Oak Street Health is clear. What’s uncertain, though, is whether the two companies can come to a deal that will satisfy the aspirations of highly paid Oak Street co-founder/CEO Mike Pykosz — yet shareholders seem optimistic based on the stock price’s big gain.
Meanwhile, shipping companies Frontline and Euronav saw their stocks move in opposite directions Tuesday morning. Frontline picked up 24%, while Euronav was down 17% in premarket trading.
Frontline announced late Monday that it had terminated its combination agreement with Euronav. Frontline is no longer pursuing an acquisition, and so shareholders should no longer expect the company to make a conditional exchange offer to acquire Euronav stock.
Frontline CEO Lars Barstad was circumspect in his comments about the deal. Barstad expressed regret that the two companies’ plans from 2022 weren’t able to go forward, because the deal as contemplated would have led to the creation of the largest publicly traded tanker shipping company.
Reports speculated that Euronav’s major shareholder failed to reach agreement with its counterparts at Frontline regarding the future strategy for the combined company. That was particularly troublesome at the moment, because sanctions imposed on Russia after its invasion of Ukraine have had a dramatic impact on the tanker shipping industry worldwide. At the same time, Euronav has been more proactive about addressing the carbon emissions impact of its own shipping fleet, and its owners appeared to be concerned about possibly losing that differentiating emphasis if Euronav and Frontline were to combine.
Even after their big moves early Tuesday morning, both stocks remain at higher levels than where they traded at the initial time of the merger talks. That bodes well for both companies as they move forward independently, although volatility in the energy markets could last for a long time to come.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
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