Microsoft to Buy Nokia Units and Acquire Executive

Late Monday, Microsoft and Nokia said 32,000 Nokia employees would join Microsoft as a result of the all-cash deal, which is meant to turn the Finnish mobile phone pioneer into the engine for Microsoft’s mobile efforts.

Stephen Elop, the former Microsoft executive who was running Nokia until the deal was signed, will rejoin Microsoft after the transaction closes, setting him up as a potential successor to Steven A. Ballmer, Microsoft’s chief executive. Mr. Ballmer has said he will retire from the company within 12 months.

“This agreement is really a bold step into the future for Microsoft,” Mr. Ballmer said in a telephone interview from Finland. “We’re excited about the talent capabilities it will bring to Microsoft.”

The deal, which was first broached between Microsoft and Nokia executives in February, is the latest transformation of the 150-year-old Finnish company. Nokia began life as a conglomerate making products like rubber boots and car tires before reinventing itself in the 1980s as the world’s largest manufacturers of cellphones.

Nokia’s once mighty position in the mobile phone business has been lost, as the industry shifted to the era of the smartphone. Samsung and Apple divide nearly all of the profits in the global smartphone business now.

Nokia’s fall has been most spectacular in Asia, a region that its phones once dominated. As recently as 2010, the company had a 64 percent share of the smartphone market in China, according to Canalys, a research firm. By the first half of this year, that had plunged to 1 percent.

While Nokia phones used to be prized in Asia and other developing economies for their durability and value, the company was late to introduce innovations like touch screens. That left the high end of the market to brands like Apple and Samsung.

In the lower price ranges, smartphone makers from China have been more responsive to consumer demands, offering phones with features resembling those of their more expensive rivals at a fraction of the cost.

Risto Siilasmaa, Nokia’s interim chief executive, said on Tuesday that the sale of the handset business was the logical step in the company’s evolution but still pulled on his heartstrings.

“Selling a business is sometimes the right cause of action, but it’s emotionally complicated,” Mr. Siilasmaa said.

Consumers may be less concerned.

At a cellphone store in central London on Tuesday, Geoffrey Widdows, a 33-year-old engineer, said he had once been a devoted Nokia fan but now preferred Android phones because of the greater choice of apps available on phones from companies like Samsung and HTC.

“Everyone had a Nokia when I was growing up,” he said. “You just don’t see them around a lot anymore.”

A megadeal between Nokia and Microsoft is something that pundits and analysts have speculated about for years, after Mr. Elop joined Nokia and signed a pact with Microsoft in February 2011 to standardize the software company’s Windows Phone operating system.

The cellphone fortunes of the two companies have become closely intertwined since that agreement, but the relationship has done little to turn either company into a leader in the mobile business. Handsets running Windows Phone accounted for only 3.7 percent of smartphone shipments in the second quarter, according to the technology research firm IDC.

Nokia remains the second-largest shipper of mobile phones in the world, after Samsung, but that is largely because of lower-end feature phones, from which consumers are moving away. Nokia is no longer among the top five makers of smartphones.

A big question is whether Microsoft and Nokia will succeed as one company where they have not as close partners. Mr. Ballmer said Microsoft and Nokia had not been as agile separately as they would be jointly, citing how development could be slowed down when intellectual property rights were held by two different companies.

“There’s friction,” he said.

Mark Scott contributed reporting from London and Eric Pfanner contributed from Tokyo.

DealBook: Tenet to Acquire Vanguard Health Systems for $1.8 Billion

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Questcor Pays $135 Million to Acquire Rights to a Competitor’s Drug

The company, Questcor Pharmaceuticals, has acquired the rights to Synacthen, a drug from Novartis, that is sold in Europe but not in the United States. Synacthen is similar to Questcor’s drug, which is called H.P. Acthar Gel and used to treat various immune-related ailments.

Questcor’s agreement to pay Novartis at least $135 million trumped a bid from a start-up company called Retrophin that had hoped to sell Synacthen in the United States for a few hundred dollars a vial, sharply undercutting Acthar’s price, according to people briefed on Retrophin’s negotiations.

Questcor’s stock shot up 15 percent on Tuesday, the day its deal to acquire Synacthen was announced. “We believe the acquisition removes a key overhang as a potential competitor to Acthar is removed,” Biren Amin, an analyst at Jefferies & Company, wrote in a note.

One antitrust lawyer, not involved in the negotiations, predicted the deal would receive “intense scrutiny” by federal antitrust regulators.

“The type of acquisition that raises the most concern under the antitrust law is when a dominant firm acquires a potential rival,” said the lawyer, David A. Balto, a former policy director of the Federal Trade Commission who now calls himself a public interest antitrust lawyer.

But Steve Cartt, the chief operating officer of Questcor, disagreed. He said Questcor did not have to report the transaction to antitrust regulators because Novartis, the licenser, would retain some manufacturing rights to Synacthen.

The Federal Trade Commission is now proposing new rules to end such exemptions from notification.

A spokesman said the trade commission did not comment on whether it was reviewing particular transactions but said it could even when that was not required.

Questcor, based in Anaheim, Calif., has achieved huge success with Acthar, a hormone purified from pig pituitary glands that was selling for only about $40 a vial when the company acquired the drug in 2001.

Questcor began increasing the price. In 2007, it was raised to about $23,000 a vial from $1,650, provoking howls from some doctors and patients, and has continued to raise the price since then.

The company initially said the high price was necessary because the main use of the drug was to treat a very rare condition that causes spasms in babies. But the company has aggressively marketed the drug for more common immune-related disorders like multiple sclerosis and nephrotic syndrome. Sales reached $509 million in 2012, and the price of the company’s stock has soared since 2007.

But insurers are now making sure that Acthar is used only when far cheaper steroids cannot be. The federal government is investigating Questcor’s marketing practices. And many short-sellers have been betting Questcor’s stock will fall.

The most obvious threat to Questcor’s business was the possibility of someone bringing Synacthen to the United States. Synacthen is a synthetic fragment of the hormone in Acthar.

Questcor eliminated that competitor by licensing the exclusive rights to the drug in the United States and various other countries, excluding 13 in Europe, according to a company regulatory filing.

Its initial payment of $60 million to Novartis greatly exceeded the $16 million Retrophin was offering, according to a summary of the tentative deal terms that Retrophin was circulating to investors in an effort to raise money to buy Synacthen. Retrophin, however, was offering Novartis a 20 percent royalty on sales, which is likely to be far higher than what Questcor agreed to pay.

Retrophin, which went public through a reverse merger with a shell company, is based in New York and is run by Martin Shkreli, a former biotechnology hedge fund manager. He declined to comment for this article.

It is not clear if there were other bidders. Novartis declined to comment.

Novartis can revoke the rights if Questcor does not meet deadlines in terms of testing Synacthen in clinical trials and seeking approval to market it in the United States, according to a regulatory filing by Questcor. The deadlines are not being made public.

Mr. Cartt of Questcor said the company would spend millions of dollars testing Synacthen to see if it could help American patients. “That is the essence of discovery and competition, not their elimination,” he said in an e-mail.

In the past Questcor executives have disparaged Synacthen.

“We believe it is unlikely to be a competitor to Acthar,” David Young, Questcor’s chief scientific officer, said in a call with analysts last July. He said it was not a protein produced by the body like Acthar was and added, “Synacthen contains benzyl alcohol, which is toxic to children and can potentially cause gasping syndrome, which can be fatal.”

But in a news release this week, Dr. Young said that Questcor intended to test the drug “not only in conditions different than Acthar but also in conditions where Synacthen would potentially provide a clinical benefit over Acthar.”

DealBook: Berkshire Hathaway to Acquire the Rest of IMC for $2 Billion

Kim Kyung-Hoon/ReutersWarren Buffett, left, with Eitan Wertheimer, the chairman of IMC, in 2011.

Berkshire Hathaway has agreed to buy the 20 percent of the IMC International Metalworking Companies that it does not already own for $2.05 billion, giving it full control of the company.

The deal was announced on Wednesday, just days before Berkshire holds its annual shareholder meeting, where Warren E. Buffett is expected to tell investors that he remains on the hunt for big deals.

It is the second big acquisition by Mr. Buffett’s company this year, following the blockbuster $23 billion takeover of H.J. Heinz by Berkshire and 3G Capital.

By buying the rest of IMC, an Israeli tool maker, from its founding Wertheimer family, Mr. Buffett is completing an acquisition that he began seven years ago. Berkshire’s initial purchase of an 80 percent stake for $5 billion was one of the largest takeovers of an Israeli company in that country’s history.

In a statement, Mr. Buffett attributed the 64 percent rise in IMC’s valuation over the seven years to the tool maker’s enormous growth.

“Since the time IMC entered our lives, my partner, Charlie Munger, and I have enjoyed Berkshire’s association with the company, the Wertheimer family, and the company’s management team,” Mr. Buffett said in a statement. “We look forward to continuing our stewardship of this unique company founded by the Wertheimer family in Israel 60 years ago and nurtured into a truly global enterprise.”

Berkshire was advised by its usual law firm, Munger, Tolles & Olson. The Wertheimers were counseled by Wachtell, Lipton, Rosen & Katz.

DealBook: Sony Agrees to Acquire Stake in Olympus

TOKYO — Sony is set to become the biggest shareholder in Olympus with an investment of 50 billion yen, or $645 million, investment, the two companies announced Friday.

The deal could give struggling Sony a jump-start in the lucrative medical equipment business, while helping to bolster Olympus’s balance sheet following its $1.7 billion accounting scandal.

Sony and Olympus will form a joint venture to develop and manufacture endoscopes and other medical devices, the companies said in a statement. Olympus controls about 70 percent of the world’s market for medical endoscopes.

The two companies will also consider cooperating in digital cameras, they said.

Sony, struggling after four years of losses because of its slumping TV business, has been looking for new sources of revenue. It entered the medical device field last year by acquiring the American medical diagnostics firm Micronics for an undisclosed sum. Sony’s president, Kazuo Hirai, has said medical businesses could one day be a major profit driver.

Meanwhile, Olympus, which admitted last year to hiding losses for over a decade, is desperate to shore up its capital.

It replaced its entire board, restated five years of earnings and took a $1.3 billion write-down after acknowledging that it obscured what it said were past investment losses in inflated mergers and acquisition payments.

The deal announced on Friday calls for Sony to take a 11.5 percent stake in Olympus by buying new Olympus shares for 1,454 yen a share — a 4 percent discount to Friday’s closing price.

The two companies will set up a joint company by the end of the year, of which Sony will hold 51 percent and Olympus will hold 49 percent, the companies said. Sony will also select a director to serve on Olympus’s board.

In statements, Hiroyuki Sasa, the Olympus president, and Mr. Hirai of Sony both stressed that the deal would bring together Sony’s technological edge in digital imaging with Olympus’s already-dominant position in the medical field.

‘‘By accepting an investment from Sony, we will not only strengthen our financial base, but also combine our strengths and develop the kind of medical devices that we may not have been able to develop on our own,‘‘ Mr. Sasa said.

Sony will position the medical field ‘‘as one of Sony’s future core businesses,’’ Mr. Hirai said.

Olympus shares gained 1.7 percent to 1,520 yen in Tokyo on Friday, after the Nikkei business daily carried a report on the deal in its morning edition. Shares in the company, which lost nine-tenths of their value after the scandal erupted last October, have recovered to almost half their pre-scandal levels.

Shares in Sony fell 1.1 percent to 919 yen. Its shares have already slumped 34 percent this year.

On Tuesday, Standard & Poor’s cut Sony’s long-term debt rating a notch to BBB, the second-lowest investment grade, and warned of further downgrades unless Sony turns its business around.