good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew is off this week. novartis announcing a majoring restructuring including several mega deals. it will be paying glaxo smithkline $14.5 billion for glaxo's cancer drug business. the price tag on that transaction could rise to $16 billion if certain development milestones are met. novartis is also selling its vaccine business to glaxo for $5.3 billion. that price tag could rise to $7 billion depending on milestone payments as well. glaxo and novartis are combining consumer units in a join the venture. in a separate deal, novartis is selling its animal health division to eli lilly to $5.4 billion. ceo joseph jimenez says these deal will improve the financial strength and add to growth rates

immediately. a lot of moving parts here. it is completely overhauling and remaking this company. >> it just depends on which businesses fit in with the ones you have and how you want to position yourself for the future. we're talking to lickliter, aren't we? >> we are. from eli lilly. >> novartis is up 1.25% in reaction to the news, glaxo smithkline is up by more than 4.5% and eli lilly up by 0.5%. a couple programming notes for glaxo's ceo, sir andrew witty will be here. at 7:15 eastern time as joe just mentioned, we have an exclusive interview with eli lilly's chief john lechleiter. >> when there were rumors about more consolidation, they're all looking for ways to go into a somewhat uncertain future by a promising future as well.

animal health, that's a big business. i was thinking about it upstairs. we love our pets. we'll pay anything for them. what's the worst that's going to happen? i'm sorry. it's heart breaking but you lose a patient, it's not quite the same thing. not quite the same thing. >> my uncle was a -- >> veterinarian. >> thank you. >> was he also in the army, a vet, too. >> he was a veterinarian. this gekko has a weak jaw. he has a weak jaw, what do i do? he said replacement therapy, $5. >> we had a russian tortoise. it was supposed to live to 150. when we went and got the news from the doctor that the prognosis was not promising, i just remember thinking we could do this, could do that, it could run up into hundreds and almost a thousand dollars to save this

tortoise. my daughter is like we have to do it. it's like he's out in the backyard now. i'm afraid one of our dogs will dig him up. his name was rudolph. >> poor rudolph. >> you do your best. it's a lucrative business. eli lilly also is a big psychotropic -- a lot of mental health drugs. a lot of these dogs are walking around depressed. they do prescribe prozac -- >> for dogs? >> for certain maladies, obsessive compulsive scratching. >> i can see that. >> i think eli lilly saw synergies there. i want to talk about this. ackman -- >> this is the other part of it. >> i keep this company in business. more drug related news this morning, william ackman teaming up with valeant to make a run at -- >> valeant or allergan? the botox? >> don't they make contact lens

stuff? >> that's the product they are most known for. >> i wear contact lenses. >> i'm sorry. >> i'm old! >> i'm sorry. this awkward moment was brought to you by -- >> no, that's what i was getting at. obviously, allergan shares jumping on the news, valeant said it expected to offer a mix of stock and $15 in cash for the botox maker which makes contact lens stuff. barclays and rbc are lined up to finance a cash portion. sources told cnbc that the total value would be slightly more than 45 billion. there's a step that got out of here. ackman looks at a company, says, you know, i'd like to get this thing sold and then he even identifies a buyer. this is a new and novel. he's already controversial. and pershing square has about $4 billion worth of allergan.

it's the biggest investment ever, a 9.7% stake. >> i didn't know if all those shares were just shares of pershing square. this is a combination of pershing and valeant. >> they make rostasis. do they make the stuff that makes your eyelashes longer. >> i don't think so. brooke shields was the pitch. >> latisse. >> i think ackman keeps that company in business with his long, luxurious lashes. >> i don't think they're related. >> you sure? >> no. but i don't think they're related. >> but does he have -- yes. >> yes. >> we'll get to mulally eventually, right? >> we are. before we do, can i tell you about netflix? >> you may. >> netflix, we were waiting for after the bell got a strong first quarter result.

the video streaming server beat expectations, 86 cents a share, 3 cents better than the street was expecting. netflix also announced they will be raising fees for new subscribers by a buck or two. that stock up by 8%, a began of 28 today's $377 a share. also during the webcast, following the company's results, the ceo, reed hastings had comments about his objections to the comcast/time warner cable deal and control of the internet. >> we're really concerned about what happens when the combined entity, if the merger were to go through, would have with, you know, over 60% of u.s. homes passed and eventually over 50% of u.s. homes subscribing to cable internet. that's a worrisome factor. we think it's more in the public interest to not have them merge or if the government goes ahead with it, to at least put some

significant merger agreements, settlements in there. >> brian roberts is incredibly thoughtful. i'd say if there's anyone that you wanted to trust with controlling half of the u.s. internet, you might pick roberts. it's thoughtful, long term about it, reasonable. i don't know that we want anybody to control half of the u.s. internet. that's the real basis of our objection to the merger. >> and here was the response from comcast, which is our parent company. comcast says netflix's opposition to our time warner cable transaction is based on inaccurate claims and arguments. there's no company that's had a stronger commitment to the openness than comcast. we're the only isp that is currently bound by the net neutrality rules. we'll have much more on netflix and comcast throughout the show. they are scheduled to release

quarterly results this morning as well. >> netflix is a competitor to comcast as well. >> yes. content company. >> that's what you'd expect him to say. >> originally because of the deal that was struck between netflix and comcast in terms of paying for faster access to it. >> he likes what he got to some extent. these are all -- none of these things are that surprising. >> no. >> that he would weigh in like that. i thought it was damning with praise, you know. if anyone would own 50% -- >> he said 60%. >> he's saying brian is a good guy but -- it's all sort of a par for the course. and of course there's going to be -- i'm not going to be a defender. comcast said there would be a

lot of things that would happen with charter or whatever. >> with losing some subscribers. >> making it -- the bottom line, they really operate in different geographic parts of the country. so it's going to be, if you're going to use the normal metrics to measure it, it doesn't come under -- >> comcast's point has been there are so many other things they're competing with, whether it's verizon, fios, google. >> apple, amazon. the future is wide open. you know, whether -- i haven't seen anything in the digital world that costs more now than it did 10, 15, 20 years ago. you let the market work and consumers will, you know -- >> benefit as a result. >> eventually. we'll see. >> it is a big week. we have a ton of earnings starting today. a busy earnings season. we have annual meetings coming up. coca-cola will be holding its annual meeting tomorrow. ahead of that activist

shareholder, david winters has been reaching out to coke's largest shareholder, warren buffett. he sent him a second letter urging buffett and berkshire hathaway to oppose the equities plan. he says that this is a situation where he really wants warren buffett to stand up and take his side on this. >> no way. this is a guy like 100 shares. >> david winters is a long-term investor. >> he has no money in it. he has $90 million in it. >> he's been a long-time investor. >> it's like 100 shares compared to what buffett has. this is $90 million on a $160 billion company. 90 million. >> he raises fair points about what warren buffett has said in the past about executive pay. he quotes from some of his own annual shareholders. >> on wednesday, we'll be speaking, tomorrow, with warren buffett. he'll be joining us after he

dines with the winner of the annual glide foundation auction, the lunch that was auctioned off. the winning bid was $1.1 million. it goes to provide services to the poor and homeless throughout san francisco through the glide foundation. we'll be talking to buffett tomorrow on "street signs." he hasn't said anything yet. we'll get a chance to talk to him tomorrow. >> i would say he probably -- coke's been doing better. the last report was much better than people thought, too. >> it was. >> coke over the years trying to replace new coke and all that. >> a lot of money. this is a big step up. >> it's based on performance, the way that it works. we'll see. >> okay. we'll be talking to him tomorrow. we'll find out. >> i hope he's watching. i hope he listened to what his answer should be. >> i'm sure he was taking notes. >> okay. it's me? i thought we were going to do mulally. what happened? all right.

because mulally, you know why, his entire career, as he's been ascending and doing better, he's still a young guy. i see where he's headed? >> where? >> cnbc contributor. i'm positive that's what he's -- >> we can only hope. >> different boards. he may serve on a few boards. >> now he is qualified. >> right. he's paid his dues. >> after a live -- lifetime. >> wouldn't you love to have him here as a guest host? >> yes, i would. >> as the pinnacle of an illustrious career -- >> training ground for this next gig. >> he's hoping we offer that to him. netflix, company reported first quarter results that beat wall street expectations. the movie streaming giant, they moved into that pretty fastily, didn't they? it announced it will raise

membership prices later this quarter. for new subscribers. never thought, bill, it would be easier for people to deal with will? you've gone with it, your entire life, will power. you never get tired of this? >> it has positive connotations. >> you're right. the guy that does the motivational speaking, will power will be a good name for that. anyway, this was better than -- >> it's good to have options. >> how can this stock which you mentioned netflix to anyone, and they know what the valuation is. how does it get bid up another $30 based on any type of results? what did it show? >> look, it's a classic growth momentum name, right? as long as they continue to deliver strong subscriber growth, revenue growth, earnings growth, the stock will continue to work. we think the prognosis looks good for probably the next

several years. >> i looked at it yesterday. just to see what the projected earnings were so be. i can see the story. i remember a couple quarters ago. there were items where they earned pennies. it was like $200 or $300. you wonder, how can you possibly justify that kind of price? this company is supposed to earn $10 or $20 in a couple of years, right? >> that's exactly right. we're looking for earnings of close to 350 this year, going to 6 plus next year, $9, $10 the year after that. the story is international. they deliver very strong domestic results. the bigger beat in the quarter, both in terms of subscriber growth and profitability is on the international front. the company is still getting started on that front. that's 20%, 25% of the business. over time, that will probably be the majority of the business. you have several launches this year. that will dove tail with more

launches than that. >> what do this he have that's proprietary? isn't everyone going to be streaming content eventually? >> there's no question there's increase in competition. one of the challenges is to find ways to differentiate itself. of course that's what it's trying to do with its original programming. house of cards, orange the new black launched a season here. they have a whole host of new programs coming. that's what really establishes longer term differentiation for them. >> well, now they'll be dependent on content. we know you've seen the network wars over the years. or even movie studios. you can have flops. it's expensive. i don't know if i'd bid it up based on that. >> i think that's one of the reasons they're raising prices a bit. >> they tried that one other time. he had to come out and apologize and everything else. it's a hard business. >> yes.

well, i think they've learned lessons from that. they're looking at a very modest price increase, really initially only for new subscribers. i think that's the right play here. it's still a great value, even if it's $8, $9, particularly with the rising con tonight the they'll deliver. >> if you want to be a new customer, sign up right now? >> that's exactly right. that will probably help q2. it does give you extra incentive. they made it pretty clear over time, even those that are grandfathered will start to pay a higher fee. $1 to $2 is a raez anable number, we think. >> the dvds aren't out yet, it's not on demand, it's on netflix. >> i used to be a subscriber. >> it's on our playstation. it's confusing. this new world is confusing to me. why is it on my playstation, will? >> they want to make it as widely available as possible.

playstation, chromecast, apple tv. simplicity. >> that's me. that's why it's on -- because i have to switch the button to the playstation. this world is daunting, this new world. will, thank you. appreciate it. >> good morning. thanks have having me. when we come back, ford's succession play, the automaker expected to announce ceo alan mulally will be stepping down. we'll see if mark fields has the right stuff to keep the company moving forward. and sir andrew witty, glaxo smithkline ceo will be our special guest. he'll talk about some of the big deals with novartis. more "squawk box" right after this. st dcircumstances. experience builds character. experience builds confidence. and experience... has built this.

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welcome back, everybody. the futures at this point barely budge. if you're looking at the dow futures, up by 3.25 points. nasdaq up by 7.25 points. s&p up by less than a point. down right now. take a look at what's been happening with the ten-year note. we've been watching this yield very closely. this morning, the yield is trading at 2.71%. automaker ford is apparently planning for the exit of ceo alan mulally. various reports say mulally will step down before the end of the year with a more specific announcement coming in a few weeks. the reports say mulally would be replaced by current chief

operating officer mark fields. fields was named to that position in december of 2012 and has been widely seens aa potential successor to mulally. ford wouldn't confirm the reports saying only that it does have succession plans in place for all of its key leadership positions but does not discuss them. alan mulally became ford ceo in 2006. ford was one of big three that did not have to go asking for dollars in washington. ford stock has nearly doubled as a result. >> go out on top, right? well positioned. 68 years old. didn't go to microsoft but doesn't need to go anywhere. >> after boeing, and then turning around -- there were so many doubters when he came into ford. just because you know how to run an assembly line doesn't mean you know how to run a car company. >> he works hard. he travels all over the place. i think he plays golf. might be nice to be on a a couple boards, he'd be widely

sought after. >> i can't imagine mulally retiring officially. >> no, no. i think they had to lock down mark fields, too. he had been offered a star on a primetime soap, the remake of "dynasty." >> he's a good-looking man. >> can someone that pretty be smart. >> we have you. >> what am i thinking? what am i thinking? that's right. but we always kid mark fields about that. >> central casting. good looking man. >> right. >> what does this mean for the future of ford? joining us now is jeff sonnenfeld. he's a senior associate dean at yale school of management and also a cnbc contributor. >> is he good looking enough to be a contribute contributor? >> you would know that as well. we have a picture of you, jeff, that shows the new disappearing

you as well. >> i know. thank you. you used to complain i was using a high school picture. >> we have the 120-pound -- i'm going to buy you a cheese burger. >> he looks good. he's kept it off for a long time. >> he's worked hard. >> jeff, what do you think about this transition? is mark fields the man for the job? >> yes, he really is. this is the classic textbook succession. we wish all companies could do it this way. here's a guy step by step has learned all the core functions. he's a core strategist, the ford one plan that, of course, allan mulally has championed. he championed the restructuring plan. the cross functional skill set operational superstar. he's a marketing wizard. financially very strong.

all key constituents, from the dealers to investment community, employees. it's an awkward situation to be in to get along so well with his chairman in, bill ford, alan mulally and his predecessor. jack nasser was a very strong leader at one point, would have been a mentor to mark at times. mark never disparages anybody who's rising or falling or trying to build his career. he's become a genuine car guy in a business that too many times, too many of these, quote, unquote, finance guys who are accountant types, he's really proven himself since age 38. he took over, became ceo of mazza. the premiere automotive group that he ran very well which is volvo and jaguar and some of these great car divisions that sadly they had to let go for cash at a different period. north american sales, incredible turnaround. that was north american auto business for them, they were

losing record losses. they stepped in there, about $9 billion in profits there alone. >> right. >> he has the track record. >> the one surprise on this, we did expect alan mulally to be staying through the end of the year. he had said that specifically. when push came to shove when there was talk about him leaving for microsoft. why the change potentially at this point? >> we don't know officially this is actually happening. the rumors are that alan, as he has had before, people coming after him. he's become one of the greatest icon of u.s. global industry. what he's done to revive manufacturing. one of our ceo summits, an extremely promising financier said who wouldn't invest in a plan? alan practically fell out of his seat. he has shown how you can be a tough turnaround guy without being abusive. he's been a great mentor to mark along the way.

i think he has a lot of opportunities and perhaps something has heated up on a front burner for alan. it clears up ambiguity. on the inside, it's clear how this succession was working and they were quite comfortable with each other. somebody seems to be talking. >> jeff, i realize that i can -- the way my mind works, i can figure these things out. i just thought they don't need that guy from discovery anymore. to do their commercials. the guy from dirty jobs, whatever his name is. his name is mike rowe, february 19th, ford splits with mike rowe. he's gone. he's no longer -- you don't need him anymore. this guy will be -- can't this guy sell the cars now, too? doesn't he look like he could do the commercials as well? >> i guess so. you're attracting to alan mulally to cnbc. i was just wondering if he's goen to turn around bitcoin or

something like that? i don't think so. or sotheby's is looking for somebody. i'd love to get him here at yale. i don't think that's in his future. >> i have a hard time thinking he's done. >> he's a very young 68. i'd like to look like him when i'm 38. >> what do you mean a young 68? 68 is young already. >> you could teld me he's 58 and i would believe it. >> exactly. he's not that much older than hillary clinton, a little older than joe biden. >> thank you for calling in. great talking to you. >> they did. they split with him just a couple months ago. they probably knew. when you saw that, you should have known fields was rising. more reaction to the deals of the day from big pharma, glaxo smithkline ceo sir andrew witty coming up and then eli

lilly ceo john lechleiter will be with us to talk about his part of this mega deal at 7:15 eastern. and not a number? scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: ranked highest in investor satisfaction with self-directed services by j.d. power and associates. predibut, manufacturings a prettin the united states do. means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources

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to connect with a patient advocate from abbvie for one-to-one support and education. good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. it's april. it's like, this summer you might not do a lot of stuff. have you noticed news overload? >> a lot of news. a loot of earnings that are coming, too. >> in addition to everything

else. american business keeps moving, keeps moving, things keep happening. we have a lot to talk about. in the headlines, novartis, glaxo smithkline and eli lilly are -- i don't know what you'd call this, swapping things, buying things, combining different things that make sense synergistically and saving money. they're all higher in premarket trading. novartis is buying glaxo's oncology unit for $14.5 billion and at the same time selling most of its vaccines business to glaxo for $17.1 billion. it's weird the way this is structured. the investment bankers involved in this are going crazy. i don't know if money eventually changes hands. in a separate deal it will sell its animal health division to eli lilly, this is for $5.4 billion. we are going to talk to the chief of glaxo, sir andrew witty in just a couple minutes to discuss why his company is doing these deals with novartis. at 7:15 eastern we'll talk to eli lilly chief executive john

lechleiter who we talk to a lot about, he's lost some patent protection on huge drugs. they've been dealing with trying to replace those revenues. now they'll get into the animal health business in a much bigger way. years ago, mario, super mario. i have three dogs. i don't walk out of the vet -- people love their pets. i don't walk out of the veterinarian office without $500. >> he's smart. you know what he said with the bad winter season, the day before you got a flat tire he had said you want to be investing in auto parts companies. the roads are so bad, people will get so banged up, the tires. >> tires. he does. he looks at the way -- there was a day he brought in presents for all of us. one of them, this was years ago, one of them was a big bag of kitty litter. you think you're funny. this is not a gift that anyone needs. kitty litter. but he was right. that was to make a point.

petco, petsmart, a lot of those pet-related companies have done well demographically. >> they care about their pets, they are their children. >> what if you have children, what are they? >> they're your children's children in our house. >> your grand kids. markets closing to the upside on monday, so a correction still come? was that it? have we seen it? joining us now is maryann bartels. what do you think, maryann, was that it? >> we said it was an april fool's joke, right? markets hit all-time highs, then we saw the correction come. one of our major macro themes for 2014 was the return of volatility. we have markets up substantially since the lows of '09, last year many of the indices were up 30%, 40%. markets need to consolidate the gains. they either go down or they trade in a range.

we think we've been in a trading range, maybe about a 10% range. we think the correction is over and we continue to encourage our clients to buy the market. >> so what do you think happens this year? are you in the camp that says 3% or better gdp and that's why you think the market continues to grow? >> a lot of it is corporate america sitting on a pile of cash. they've been returning cash to shareholders through dividends and increase dividends. now we're starting to see an m & a cycle start to build. we think capex will be the next step tore investing. what's interesting about this m & a cycle, it's been creative for at choirer. we've seen the acquirer stocks go up. yesterday you have the announcement with pfizer and astrazeneca. you are pfizer stock up. corporate america has learned how to create value by purchasing other companies. i can tell you, becky, i have not seen this in my career before. not at the rate we've been seeing. >> you say flowers to come in may.

>> that's correct. >> but there will be growth in the spring? who are you, chauncey gardner? >> you have april showers. >> the roots take hold, growth in the spring. >> yes. i should have brought you flowers, sorry, joe. >> i like to walk. >> things will blossom. we don't think the market has ended. >> all right. >> so you say you haven't seen this in your career. is that in terms of the m & a where the companies have gotten smart about making creative purchases? >> correct. fund managers that invest in m & a, particularly hedge fund land, they own both stocks. i've never seen this before. >> you think the next step is capex, companies will start investing. does that lead to faster job creation, too? >> probably not faster job creation. but one of the things we are seeing in our global fund manager survey is now that companies have returned part of the cash through dividends and

share buybacks, shareholders now want to see that money re-invested back into the business. because they really haven't done that. >> that's longer term growth. >> that's longer term growth. part of it is yes, we're seeing return of gdp growth. we think part of that gdp growth comes from capex. >> marryia maryann, thanks for n today. >> thank you for having me. next up, sir andrew witty, glaxo smithkline ceo, will be our special guest. that's right after this break. what's in your ear? oooo! a quarter!

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welcome back, everybody. we've been watching u.s. equity futures at this hour.

things are barely moving, right around the flat line. yesterday, stocks up, the dow was up 40, the s&p up 7. this was the first five-day winning streak of the year for the s&p 500. we'll continue to see what happens as we get into earnings today. when we return, more deal rumblings in big pharma. this one involves activist investor big ackman. we'll see if he can pull off a deal for allergan. and glaxo smithkline ceo sir andrew witty on the big pharma deals of the morning. [ dog barks ] ♪ [ male announcer ] imagine the cars we drive... being able to see so clearly... to respond so intelligently and so quickly, they can help protect us from a world of unseen danger. it's the stuff of science fiction... minus the fiction. and it is mercedes-benz... today. see your authorized dealer for exceptional offers

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swiss drugmaker novartis announcing today it will acquire glaxo smithkline's oncology unit. with us to break down the deals, sir andrew witty, ceo of glaxo smithkline. great to see you, sir andrew. >> thank you. >> looks to me like you're getting into a lucrative business, doubling down on consumer products. i think you feel you've got the right person to run it. was it at traction the attracti business that allowed you to part with oncology or was there a reason oncology been fit into your portfolio as much as it may have in the past? >> first of all, thank you very much for the opportunity. this is a three-way deal. what we're able to do is

significantly expand our world-leading vaccine business by acquiring the novartis vaccine business. we're creating the world's biggest over-the-counter medicine business by combining together our two consumer organizations and as you say, we're divesting our marketed oncology assets for $16 billion. we believe that represents great value for our shareholders and allows us to strategically extend within our organization the businesses which have very long annuity or durable sales profile. almost 40% of gsk after this transaction will be made up of consumer and vaccines. >> does novartis have an oncology business that is very complimentary to glaxo smithkline's? what did they think -- were you a leader in oncology or did you feel like you weren't going to be a market leader so you were able to part with that and novartis could better use it? >> we've been a very newcomer to oncology in the last four or

five years. we had a productive period in r & d. we've launched new products in the last few years and done very well with it but we're world number 14 in oncology. novartis was world number two. this was an opportunity for us to pull our assets that we think are important medicines for people in the hands of a company with tremendous distribution network. we believed that was the right thing to do. that is what allows this tremendous value to be held for our shareholders. we're the world's biggest vaccine company, novartis is very much smaller, us taking their vaccine products into our portfolio gives us a tremendous opportunity to create value there. this three-way deal represents a great opportunity for both companies. >> people that don't think about vaccines, sir andrew, not everyone gets sick and needs a therapeutic. but in a perfect world, wouldn't

every newborn or every person benefit from not down the road having meningitis or a disease? i mean, everyone in the world should get most of these ak seen -- vaccines. that's a positive aspect of the vaccine business, isn't it? >> vaccines are everywhere. just at gsk alone, we manufacture some 800 million doses of vaccines a year, every single day 2 million children in the world receive vaccines from gsk. it's a tremendously large, massive volume operation for the company. we have one of the widest portfolios of vaccines of any company in the world. by bringing into our portfolio these novartis vaccines, both today's and the possible future vaccines they have under development. we really believe we're bringing them into the right family to make the most of them over the next 10, 20, 30 years.

the vaccine business is a true annuity business. >> true annuity business. i don't know of anyone that would say that the cost of the vaccine is not worth it compared to what it costs a society to deal with the eventual whatever malady you're trying to prevent. it's a no-brainer. >> exactly. if you think about the vaccine, it's with one course of vaccination you can get a decade, 20 years, in some cases, a lifetime of protection from a whole series of diseases. it's one of the most cost effective health care interventions that's available. >> sir andrew, i remember glaxo ten years ago getting into what i thought was going to be the future. that was a combination of common chemistry and rational drug design. the promise of that, i'm not sure what happened. it's hard to go from the lab bench to the bedside, i think. is there going to be a quantum leap? are we close? >> i think we are going through

a very productive period, actually, joe. if you look at gsk today, we have 45 new molecular entities in phase two or phase three advanced development. we've had seven major new medicines approved in the last 12 months. we've approved in the last 12 months. we have seen a tremendous increase in productivity. largely in part pause of some of the investments you described way back at the turn of the century. i would say they didn't up being an answer but became a component in the answer. my belief is the real answer is how we create the circumstances for extraordinarily creative, brilliant scientists to be able to combine some of the advanced technology. but to apply it pore as an art than a science. you have seen a tremendous step

forward. it is really down to extraordinarily creative r&b scientists who have the chance to let their vision come to light. >> are the margins slimmer there? why is that a good business for a research based company? >> well, the margins are lower in the consumer. they have much more durability and long life. they are exposed extremely positive demographic dynamics. the vaccine is predicted by the world health organization to grow 9% or 10% a year going forward. very steady group. mid single digits. these businesses are not dependent on the patent protection that you see in the

phrma businesses. they are built around brand equity and consumer and around just frankly the difficulty of being able to manufacture a scale for the vaccines. we believe there is much more durability. it has destabilized the value of our sector the last 15 years. it takes a long time to reshape these companies. that's our long-term strategic goal. and today's announcement takes us a big step in that direction. >> all that money to develop it. you get it for a while. then you fall off a patent cliff. no other business is like that. do you have to be -- if i'm a british citizen, can i become a knight? or do i have to be born there?

sir nick faldo, sir elton john. if i move there do i become a shot? >> i'm probably not the surety on that. my understanding is if you're a brit and they knight you, you're allowed to change your name, so you get to use your sir. if you are knighted as a nonbritish citizen, you have the honor but you cannot change your name. so it is only, joe. come to london and meet the right people. >> if i can't say sir joe. >> i just wonder, all of this makes sense as you explain it. was it management's idea, investment bankers? >> becky, this really came up in a conversation between joe and myself, so the head of nevartis. we had a historic supply

arrangement between the two companies in vaccines. basically one thing led to another. it led to vaccines, consumer, and then to oncology. we really took the decision together, khwhich was the first thing we had to decide. how about trying to do these three things and allow the two big companies to make a significant strategic shift in the direction we both wanted to go. once we had done that, the easy bit of the deal was done. it was down to an extraordinary level of complex negotiation as you can imagine under that surface. but the strategic logic really compelling for both of us. that's where we began, in a vaccine conversation. >> we had joe on in davos. he wanted to do big things with with novartis. we appreciate your time. any time you're ready to talk with us, we would like to have

you on the show, sir andrew. we appreciate your time this morning. >> very kind of you, joe. thank you very much. >> we're also going to talk to -- we'll have an sphroexclus interview with sir john. i just knighted sir john lechleiter. being the swiss maker animal health division. >> quarterly results expected from dow component travelers. and media giant comcast coming up at the top of the hour.

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good morning, everybody. welcome back to "squawk box" on cnbc. andrew is off. we have been watching futures. not a lot of movement. this comes after the first five years of gains. up to five days in a row. the first time that has happened since february. the yield is sitting just at around 2.7%. 2.71% the last tick. we have hraerpbgs that have just been hittings. we have earnings from dow. insurance company coming with $2.95 per share for the quarter for travelers. revenue was slightly below

consensus. travelers announcing a 10% increase in its quarterly to 50 cents a share. incredibly strong performer for as many quarters as i can remember. >> beating estimates by 5 cents. revenue slightly above consensus. aerospace raised the lower end of its 2014 earnings. nbc universal parent comcast just out with quarterly numbers. the company earnings of 68 cents per share beat expectations by 4 cents. revenue exceeded consensus. there are a lot of different

metrics that people look at for comcast. >> it excludes $17 million in costs related to the time warner cable transaction. amount of that was legal fees. but without that, operating cash flow would have been up 10.4%. >> so the video ads once again grew. that's the second quarter in a row. >> for the cable company. >> comcast. their video ad. and nbc universal and steve burke. 28.8%. 1.1 billion. if you haven't seen it, how the company, nbc primetime is doing

that's number one. things that used to be -- some breath at a loss the network at one point. people said if they could just turn around nbc it's -- and it's happening right before our eyes. >> you back it out and it's still up. as you said, the "today" show is up and late night. remember some of the previous attempts to move to the next level? didn't go quite as smoothly. revenue increase 12.6%. some of that with sochi. you can see cable network revenue, it's hard to grow. it was up 1% without sochi.

you look at any of the cable entities and that is still doing well but not the kind of growth we saw three or four years ago. even theme parks grew. that had nothing to do with the olympics. does that say joe? novartis announcing a restructuring. it will pay glaxosmithkline $14.5 billion for its cancer business. hopefully you saw the interview with sir andrew of glaxo. you can see why they like vaccines. the interview was five minutes ago. they are also combining consumer

units in a joint venture. and it is selling animal health unit to eli lilly. people love their pets and they blow all kinds of money on them. $5.4 billion is what that is for. let's talk big phrma. me go terrell. have you been on "squawk box" before? >> it's my first time. >> oh, my god. for you -- >> i'm in awe. i want to call you sir, i think. >> call me sir joe. you can see how much i want that. >> and if i said to you i know about it, you wouldn't assume i have botox experience. >> definitely latisse. >> have you seen that guys eyelashes? he has beautiful eyes. he is put together everywhere.

his hair. look at him. look at those eyes. do you feel when you look at him? david? >> scary. i just think there's a pretty big demand for botox. >> a huge demand. it became a huge market cap company, did it not? >> absolutely. let's get to david in chicago. david, what's the most compelling thing? everybody wins on this? >> very attractive aesthetics business. you don't have to deal with the pricing pressure from government payers or private insurance companies or pbms. and durable products. they have very long life expanse. they are going to see significant synergies there. allergan has a tax rate of 25%.

you're going to see a lot of tax savings there. i think allergan shareholders will get a good price if this goes through. >> i think you have to think about how much allergan is going to go for. it reports $45 billion. this is on a market cap of a runup of $42 billion. what kind of premium are they going to be able to get? seeing astrazeneca/pfizer rumors that was a $100 billion deal on an $80 billion market cap. >> it's very attractive. i think they will be able to pay a higher price than anyone else because it has the lowest tax the rate but better synergy opportunities than anyone else.

i think they will be able to create the most value of those assets. they will be able to pay more than anybody else. >> why do they have such a low tax rate? >> a lot of profits are showing up there. any u.s. income they do have it's really going to be confirmed by the interest tax shield. >> we don't think of it as lower taxes than here, do we? >> canada has a treaty with bermuda. allergan has been a name we have heard about in the past. it's all about botox too. what is with this society? >> we think allergan is not too

keen on the deal. allergan tried to do the fingerprintly deal. now they're going hostile. navartis has a presence in ophthalmology already. they already had the sales force dealing with plastic surgeons. >> it's like elective surgery. >> people are paying out of pocket. >> you're going under the knife. there's nothing wrong with you. except you're ugly. >> it's a needle. >> i know it's a needle.

>> david, you have seen the show. you know what you're in for. david, thank you. we appreciate it. meg, blockbuster first appearance. thank you. we will be seeing a lot of you. great beat to be covering it. >> great time to be covering it. we hired you as biotech started plummeting. >> i know. i was hoping it didn't have anything to do with me, a barometer of the industry. >> markets made modest advances in monday's trading. but it is up. it is a heavyweight. we have had a few today. as you know, we're right in the middle of earnings. are we halfway through the s&p? >> no. this is a really busy week. we have today, tomorrow, thursday. and then maybe you get to the point. >> joining us now is julian, executive directsor in u.s. equity and derivative strategies. and founder and senior portfolio

group at newberger berman. >> remember when with he did the that shoot? >> you have the accent to be like -- that's the home of golf. >> the home of golf. >> i was expecting a little bit more. but you did chemical. julian, correction is over? >> you may get more side ways chop. you called it in terms of the correction. we have been doing a lot of hand holding in recent weeks. what we think is really happening. the market has absorbed a lot of difficult news. you had a chinese growth square. russian geo-political scare. bad weather in the u.s. we think we are getting towards the end of all of that. obviously earnings season will be impacted by the weather. we think you are in this transition phase. ultimately news like today in

the phrma space is one of the reasons we think the market is going to go higher. companies with cash will deploy the cash towards capex and mma. >> it looks like they are buying growth because things aren't that great. they are looking for cost savings, putting things together. redundancies. this is a positive you're saying? >> there is an element for certain. and i think there's always an attempt to cost save. but i think if you listen to what the executives were talking about earlier, there is an aspect of one plus one equals three at some point. >> is that where you start to worry about evaluations? >> i think the news this morning is so much about foot and focus. these are not audacious deals.

i think the real opportunity is what happened to it. it is 8%, not cost of money. that's comfortable another $15 of earnings per share for the market over time. does it get invested well? if it approximate does get invested well, that's tremendous. if it gets wasted that's bad for the market. but nothing we have seen so far suggests that. these are rather thoughtful deals that the markets like because they are not that complicated to understand. >> okay. >> this is not animal spirits. >> not even close. that was pretty definitive.

you have done cable before. >> it's not only mma but cap ex as well. if you look at consumer confidence, it's held up nicely. ceo confidence, it's rebounding. the fed is the driver of this. >> we had a guest earlier this morning who said, look, this is what you expect. but for the first time in her career, you are seeing deals that actually make sense and the stock goes up because they are created immediately. >> you worry about it getting wasted. in times of this, folks will be thinking strategic. folks will be thinking about complicated earnings. they are looking at their businesses and say how would an

inside see these businesses. it looks at a company that spends a tremendous amount of r&d. it is about reducing r&d. >> for now it's been good for shareholders. >> julian, i would think that the activist stuff is animal spirits. a lot of management is entrenched. business as unusual. they're afraid. maybe you need them to come in and shake things up. >> mma has been missing from the bull market. we're up 17%. maybe it is tempered animal

spirits. >> they see value. they're trying to shake up a little. juli julian, thank you. >> when we come back, media analyst rich greenfield joins us to break down the numbers from comcast and netflix. an interview with eli lilly chairman and ceo of john lechleiter.

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welcome back, everybody. a big morning for earnings. we have seen five days in a row for gains for the s&p 500 and for the nasdaq. for the s&p 500, that's the first time it has happened. the markets still trying to figure out which way to go. we have gotten a lot of earnings, many beating expectations. >> he lie lilly stock hitting a 52-week high. john lechleiter, president and ceo of eli lilly. >> hi, joe. >> we just spoke to sir andrew of blackstone. all you guys have had to watch some of your biggest products go off patent.

you have been dealing with trying to keep revenues where they are and grow the company. >> with the action of novartis, it grows to be the number two player in terms of global revenues. we have been quite clear all through this period that you refer to where we are losing patents on some of our big pharmaceutical products that we would be very interested and aggressive in terms of expanding our animal health business. we believe there are a lot of synergies between animal health and human health. we believe it represents a great market opportunity for us as people around the world look to put more protein into their diet. safe, nutritious food. and we're all concerned for our pets. we think this deal represents a great opportunity for lilly shareholders to benefit from not

only the size of the new company but the complimentarity of our new business. >> you said livestock and food supply. how much of it is sort of -- it probably isn't. when i think about it probably equally. people are just as concerned about their pets as their food probably. one is not less consistent than the other i guess, is it? >> joe, novartis had sales of $1.1 billion. half of that in the food animal segment and half in companion. it is more focused on the food animal side. again, the deal is very complimentary. it helps to build strength in both of these areas. >> so you're getting more into it.

>> companion animal is growing a little more quickly. companion animal market is a little more steady. >> is this created right away now? >> i'm sorry, joe? >> is this a creative right of way? >> this will be a creative beginning in 2016. we hope to have a deal closed by early in the first quarter next year. >> john, can i ask you real quickly what you think about the remake of novartis as far as what it means as a competitor. it is buying gloxo's cancer drug. that's an area you have been competing in terms of bringing out a new breast cancer drug.

what does it mean to your overall competitiveness with novartis. >> i learned about the other transactions this morning when i woke up and read their press release. we were obviously focused on the animal health part of the transaction. i believe you see companies can gravitating toward what they do well, trying to build up strength and mass in those respective areas. so we have been the global growth leader in animal health the past five years or so. so we have doubled the size of our business since 2007. but when you see an opportunity like novartis that's not going to come along very often. we were quite intent on securing this. >> did it make you say, oh, like maybe i wish i had that cancer unit as well? >> well, we've got a pretty good cancer business of our own. it's been an interesting 12 hours.

we learned the fd approved syranza, one of the pipeline products in that deal we announced just over five years ago. this will be indicated for advanced gastric cancer for patients who haven't responded to earlier chemotherapy. so we're excited about that too. >> i'm wondering once this closes, changes around your dividend. you have been clear about wanting to maintain that at a minimum. does the nature of these cash flows mean possibly that dividend can grow now over time? >> no. this does not change our dividend policy. we will maintain our dividend at least at our current level. after we resume growth and work through the impact of these patent expirations we will look and see if we can't increase it. >> so nobody knew what anyone else was doing. >> joe knew.

>> right. >> it's just interesting. >> thanks, john. we'll see you later. >> thank, joe. thanks becky. >> comcast, travelers and united technologies. more returns in just a few moments. moments. those little things still get you. cialis tadalafil for daily use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines,

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good tuesday morning to you. a lot of activity in the business world today. mergers and acquisitions. we have earnings. when we return, the spotlight will turn to the media sector. comcast reporting just a few moments ago. netflix last night. we have rich greenfield joining us. you know what else i can do on my phone? place trades, get free real time quotes and teleport myself to aruba. i wish.

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welcome back to "squawk box". swiss drug company novartis announcing a series of multibillion dollar deals that would reduce sales but boost products. it is buying glaxosmithkline's cancer business and selling its sack seen business for $5.3 billion. they are also combining their consumer units in a joint venture. separately, the company is selling its animal health division for $5.4 billion.

>> we believe it represents a great market opportunity for us as people around the world look to put more protein into their diet. of course we are all concerned for our pets. we think this will benefit from not only the size of the two but the complimentarity of the two businesses. >> he said he found out about the other deals just this morning. >> mark fields successor to alan mullaly. since he took over as ceo, ford stock price doubled because of what he did to prepare that company before the financial crisis in 2008. ford did not have to seek assistance from the government.

in the midst of a big earnings, the two dow components. united technology reporting $1.32 profit, 5 cents better than expected. sales grew in all five of its businesses. ruts many proved in underwriting and invested. mcdonald's is expected to report at 8:00 eastern time. >> we have more drug related news this morning. bill ackman is teaming up with valeant to make a run at allegan. it is expected to offer a mix of stock and about $15 in cash for the maker of botox and different eye-related stuff. latisse.

restasis, contact lens solutions. all kinds of stuff. sources told cnbc, that the total value slightly more than $45 billion. the persing square began buying allegan in february. its biggest ever investment. it has a 9.7% stake. the word is they would go hostile on this. >> we have had a couple of people raise the question, will they have to cough up more. >> right. to shareholders. you would start down where you are. valeant is -- ackman is start. >> he just started in february? >> he made the agreement in february and started buying in february. >> that's what's interesting. we have an agreement that, yeah, we're going to do this.

it's a closer relationship. teaming up with another company knowing you think they are going after -- >> normally you a mass a stake and then search for a buyer. >> i'm not a legal expert. >> it feels we are pushing the boundaries. i'm not sure how the sec would weigh in on any of this. knowing there is going to be a deal. >> you buy and say, look, this is undervalued. >> if you washed at valeant, as an individual -- we have seen that story. remember berkshire? >> you know that valeant is

interested in buying. >> but you were talking him into it. the berkshire case. >> it was a violation of berkshire's own. this doesn't look funny to me at all. this looks genius. >> i think it's very smart. i would be surprised if it doesn't raise some questions about how it was done. >> i have already put my money into it. i don't know there's a buyer doing it. when i know this company, i talked you into buying it. and i'm going to buy it just knowing it is going up.

>> it would be a fit for another company. >> it's another if you have cut the deal and paperwork that says, i promised we are going to do this. we will hold shares for six months to a year. maybe there's nothing wrong with it. it feels like an activist investor. >> you can see that it got a huge play in the journal. >> maybe they needed mr. ackman to get it done. >> so you are a major owner of the company at that point? i'm talking myself in circles.

>> you don't know whether you are going to be successful. if he buys it, he could easily use all of his money. allergan says no. it's not a done deal. i think allergan would be hostile anyway. you don't know the prospects. >> i'm guessing if he had announced his stake without any parp, i think given his representation the market would like that as well. you bought it as it is running out. >> i bought my 10%. then we will announce you and i and a bunch of others are going to buy it. and that runs it up. >> that's legal too though.

>> it feels a little different to me. you're right if this was just an announcement without valeant. >> i'm guessing you have good legal counsel as well. >> it feels different to me. >> there's no guarantee a deal would be done. >> comcast out with quarterly numbers early this hour. earning 68 cents a share. it was well above expectation. looming price increase after solid first quarter results. earning 86 cents a share. rich greenfield is the media and technology analyst. great to see you this morning. >> thanks for having me.

>> let's go through this morning's numbers first. comcast, what do you think? >> nothing terribly surprising in the comcast results. this was another quarter of results. it continues to lead the industry and blaze a path. you look at their subscriber growth. the second straight quarter they are adding. so you are seeing in inflection point. the cable company has been losing subscribers to satellite, the telephone companies. you finally now seeing the bundle, they are finally adding subscribers again. that is why you are going to see so much opportunity the next couple of years. >> if that's not a surprise, what's the surprise, rich? >> look, at the end of the day, nbc becomes a relatively small part. no offense. >> it's been 10 years. just working for the company and

watching it happen -- it's been a while since it has been primetime. >> just keep that in mind. >> absolutely you have to look at that and say things are moving in the right direction. raise a little bit of concern as you look out across the rest of the media. >> that's kind of across the board in cable, isn't it? >> in terms of the largest media, that's a key driver is cable network advertising. >> the stock has been under pressure because of the time warner, that teal and the talks that are out there. what would you do with stock at this point. >> we would continue to be buying it as a cheap way to get a hold of comcast. it goes through. buying time warner in an all stock deal. you are getting it as a discount. we can't figure out why they are

not continue to go buy twc at these levels to buy comcast. >> it is up 50% the last year. but you still think it is cheaper. >> reed hastings saying unprecedented fees -- it's never been done before. comcast is already dominant. being able to capture unprecedented fees from providers. limelight, google, all have similar deals with verizon, at&t, level three, sprint. unprecedented. that's not true, is it? >> we co-moderated the call last night. said imagine if brian roberts were sitting up here and look how much comcast has invested to create access for netflix to reach the end consumer.

why should comcast have to keep paying? why shouldn't the burden fall on netflix. hastings pushed back hard saying they used to end up getting paid and now they are forced to pay. i think the reality is this is a little bit of a challenging topic both regulatory wise and between these big companies. no one expected netflix traffic to get as big and as fast as it did. they had to provide free access without netflix having any cost in the game. i think it will be a tough one. >> the stock has gotten crushed the last five or six weeks. would you drown grade. >> i think at this level it looked like 3.75 in the after

market, premarket. >> it is occurring substantially earlier than we expected. earnings in general were in line. guidance was within a range of in line with expectations. the real surprise in earnings they are raising pricing not just by a dollar but two dollars globally on a market-by-market basis in the second quarter 2014. >> good surprise or bad surprise? >> good news, it is a tremendous amount of incremental cash. they can't afford it. they are basically being forced to the raise price and hindering or altering to the consumer.

that will be the target. i think that's why it isn't up more. they have to and need the cash to generate earnings. >> netflix is a content provider, right? that's a business they decided to go into, right? they want to keep any other costs down as much as they can. this is not a big business for comcast. the isp stuff, is it, the interconnection? >> well, it's a small amount of dollars right now. as they look at it, broadband by far is their biggest business. >> it's about keeping costs down at netflix is what it's about. >> comcast is looking for as many ways to drive the margin profile of broadband as possible. they don't care about netflix as margins. >> rich, thank you for joining us. >> thank you for having me. >> i have to go back to school, i think. >> re-learn? >> yeah. don't we? >> yes.

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quarterly earnings taking center stage along with big deals in the drug business. big names you should be watching now. do you position yourself for breaks you saw two weeks ago? or do you just stay in the right names? >> i think it's more important that people try not to move with every single move in the marketplace. you just want to own the right names, the right valuations, companies that may have catalysts that the street is not anticipating. positive readvises we watch very, very closely. las vegas is reporting this is a gaming leader. three main geographies. macao, we anticipate upside.

singapore. and then las vegas itself. but the company is more of an international company at this point. this is one of those stories where you get the best of both worlds. a very strong grower that can compound earnings growth the next three years. mid-20s. you have a company that's returning cash to shareholders with a dividend of 2.6% and buying back 3% to 5% of shares every year. you get the best of both worlds in a choppy environment. it's a great stock. >> i wish you would have called me during the financial crisis and told me to buy it. do you remember the low? >> oh, my gosh, yes. well, you have to remember the high and the low to get the full picture. >> from $150 a share to $1.38. and now back to 70. >> unbelievable. >> disney? >> we like disney as well.

it's growing very nicely. where they are in the product cycle or maturity cycle is they are very well positioned. the theme parks, looking for an upside there. espn continues to grow very nicely. it is a cash of redeployment story as well. they put a lot of money into their theme parks as it wanes as far as an incemental cap ex, they will deploy back to the us. >> right. >> the yield is $1.25%. that's the best of both worlds. >> facebook, their advising model starting to get it together, huh? >> yeah. the advertising model is very strong. 1.1 billion users worldwide can't all be wrong. when they look to where they can advertise best they want to go where the eyeballs are. that is where usage numbers continue to amaze. >> all right. chris, thanks.

>> thank you, chris. >> all right. you got it, joe. >> i can't guarantee it. >> when we come back, we have earnings from another dow component. mcdonald's. later, city executives will address shareholders for the first time after they suffered two high-profile black eyes. know what the experts at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. why relocating manufacturingpany to upstate new york?

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valeant announcing a bid for allergan. it's offering $48.30 a share in cash. 4.3 for each share. and bill ackman would take only stock as his part of the deal. he would remain a long term shareholder. >> valeant shares up 10%. >> three times 12. >> another stock that we're watching this morning is 13

cents above wall street expectations. the company maintaining up to 284,000 motorcycles it plans to sell in 2014. i think that looks like a new high. i wouldn't be surprised. heats up now. >> what happened? it's hog. it used to be hdi. not quite. it is almost there. just under it. >> all right. when we return, more on the big drug deals of the day. mcdonald's dough component set to report quarterly results. rly. [ male announcer ] the wright brothers started in a garage. mattel started in a garage. disney started in a garage. amazon started in a garage.

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they sell a lot of hamburgers. that's all i know. welcome to "squawk box".

i'm joe kernen along with becky quick. mcdonald the's is reporting. right now they are reporting. it's $1.21 a share. lately things have been not going as swimmingly at dick donald's. >> it's down. it was 3 cents below expectations. >> revenue came in line. >> the company itself said earnings per share declined because of the impact of prior year income tax benefits. >> if people knew what their tax rate would be. you know where you look? the comps. they are probably disappointing. global comps up 5%. >> on a month by month basis. >> they have been having trouble. u.s. comp sales down 1.7%.

>> down 1.7%. >> mcdonald's around the balance sheet, leverage and refranchise opportunities. they started to suggest it may be more aggressive with the balance sheet. it is uncredibly conservative with the balance sheet. for the -- >> stocks down more than a dollar right now. >> for the longer term -- >> the mcdonald's commercials. >> they have to deal with market share in the u.s.

always interesting from mcdonald's is what they have to say about the rest of the world. they had a very good been in russia. those comps held up well. interesting to see if there's been any russian effect spoebgs the next five months or so. >> they talked about weather being part of the problem. it pressured the traffic. they are pointed to weather for this. they say the u.s. remains focused on improving the restaurant experience through a continued commitment to operation and service excellence. >> europe was up but only 1.4%.

>> those were trending higher. those are tougher margins as well. >> all right. we'll keep an eye. right now i have it indicated between 99 and $99.49. >> it will come back to the commentary on the balance sheet. >> it is right near an all-time high. it's not all that bad compared to where we were six months or so. the question is to whether they could keep it going in terms of all the innovation. >> they have reached the point where there are too many items on the menu. franchisees were complaining they couldn't handle that many items on the menu. they are trying to pair back some of the offerings. >> remember a few years back

they went to coffees and lattes. they bring back the mcrib. >> in the u.s., no question they have to execute the stores better. and that hasn't happened. and they need to fix that. for growth to return in north america. >> okay. well, again, we will continue to decline the stock. >> valeant farm sue cals offering cash and stocks for allegan. bill ackman on set with us. he bought almost 10%. >> right. >> if he went over 10, he would know we did it. >> yeah. he started accumulating. started accumulating really fast. that's the point from which they are calculating the high premium. it's on top of $116.63. day before he crashed the 5%

threshold. i did a quick back of the envelope on what this represents. based on valeant, this represents a 16% premium to where allergan closed. so getting to $165.33 for this offer. getting you to about $49 billion in this deal. so 16% premium is not as high as we have seen in the deals in the past. interesting valeant has gone after big companies. they came in as a white knight. looking at this statement they just put out, they printed a later they sent to david piatt. they had been going after allergan 18 months. >> the way they structured the

deal is to convince the allergan shareholders is we will share with you all the costs of the deal. r&d will be quite significant. >> how did that work i wonder? did anyone else know that valeant was buying allergan. they have been publicly and privately saying it's not in the deal.

>> just mad he didn't tell us. >> a lower tax rate. it would be in the high single digit tax rate. stocks really, really coming down. looking for $2.7 billion at least in annual costs. cuts are indeed cutting jobs. it will do the same thing here. $300 million that it would retain in late stage r&d? got approval in migraine. this is not the strategy that he has been pursuing.

he has been trying to buy stuff himself. he's been vocal in that. >> i think if you get rid of your wrinkles, you're less depressed. >> apparently it's if you can't frown it does kind of stop depression. >> put a smile on your face early this morning. >> they have done studies. >> i'm just looking at other big shareholders. the biggest shareholder is sequoia capital. 3.4% of the company. fidelity is in there. >> it is a canadian company. single digit tax. people hate that. it's a canadian company. >> they have not disliked this the at all. i think strategically from a

shareholder perspective you sit there and see what is allergan's return on capital. the skepticism out there in germ. and it has been for a long period. most of the stuff doesn't go through rigorous enough testing. it is very different than just running an r&d company. this is where the discussion is. within the context of what's going on in the u.s. today. if you can't give the customer more value. if you can't improve outcomes you're at the wrong end of this. here is the methodology to meaningful reduce the overall cost structure of the industry. >> do you think that is a playbook that others will pick up too or more of a one off of valeant. >> i don't know if this is a one

off. a lot of deal activity. i think some of the other stuff is all around fit and focus. >> just like slashing r&d not necessarily looking for the big science. . >> it's just a balance. it is right inside these companies. they would argue they are completely wrong. over time you will know the answer for the shorter term it's working. if you don't have new products to sell over a longer period of time you have run out of things to do. >> allergan is way up. so is valeant. animal spirits. look at that. pretty amazing. >> as it goes up, the deal goes up. >> that's right. >> coming up, citigroup executives facing shareholders today in st. louis after two high profile black eyes. fraud in mexico and failing the fed stress test. d stress test. a big day for the whole drug

group. novartis glaxo and eli lilly. check out the "squawk box" market indicator. all stations come over to mission a for a final go.

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welcome back to "squawk box", everybody. we have earnings coming in "fast & furious". also big deal news too. if you haven't heard already, novartis announcing a major restructuring including several mega deals. it will play glaxosmithkline's cancer business for $14.5 billion. and they are selling their vaccine business for $5.3 billion. that price tag could rise to above $7 billion. glaxo and novartis. >> this is an opportunity to put our assets we think are important for medicines in the hands of a tremendous distribution. we believe it was the right thing to do.

>> in another day, novartis is selling animal health to eli lily. we talked about ceo john lechleiter earlier. >> citigroup executives facing shareholders in st. louis. kayla tausche is there. it's all drug sector today, kayla. you're an expert on all the other companies. >> well, i don't necessarily regret it, joe. there are interesting things in the financials even though they have become more of a utility space. we talk about it all the time. this is one of the core beats within the u.s. economy. citigroup of course one of the core companies. in an hour and a half they will be meeting shareholders since the first scandals erupted in the first quarter. four shareholders today in st.

louis. of course they are going to have to approve citigroup's board of directors. a lot of those up for reelection. they are going to have to make a nonbinding vote on michael car bet's compensation last year. that could be the sticking point today. it's of course been a troubling first quarter and troubling second quarter so far. in march they had a high profile stress test. it is also down much more than its piers. financials have not been performing as well as the growth sectors if we look at year to date so far. it's been a tough year for michael. this is his second shareholder meeting. this year of course there are a lot of other issues facing the firm. you can expect they will be

vocal. criticizing the firm for holding the event in st. louis. why not hold it in new york? why not webcast it. to be fair, citi announced it would alternate cities other year. it has about 4,000 employees at the citi mortgage. a busy day for us. busy day for citigroup. becky, for now, i'll send it back to you. >> it will always be interesting, kayla. you have the way compensating. >> just humor me, okay? >> look at what's happening in europe, france. you look at what compensation used to be in financials. and now compare media guys to financial guys. they make two or three times what financial guys make. >> right. >> it's like a utility. dodd/frank is not even done. they will make it even more restrictive you would think. so it is interesting. >> right. joe, we talk about these financial companies like utilities. the cruel irony here is michael

corbat made $17.6 million. that is a nice paycheck for a year's work. utility executives actually make twice that in a year. >> utility executives. >> 17 times what you're allowed to make in france in the banking business now. they have all the answers over there for how to run an economy. toss back to you. >> kayla, thank you. we will be watching because it is an interesting thing to be seeing. >> it is. with kayla, i always like a little curveball. >> when we come back, we'll talk more about ronald mcdonald. shares initially under pressure. hey, i just checked. looks like they have turned around. the stock has traded higher. eps lower than expected. revenue came in line.

investors should be thinking about this and whether or not they should be beefing up. we'll ask an analyst in just a little bit. little bit. know what the experts at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. [ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle.

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it's one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. welcome back, everybody. we have been talking about these annual shareholder meetings. coca-cola will be holding its annual shareholder meeting tomorrow. ahead of that, we have heard a lot of noise from david winters.

winters actually reaching out to coke's largest shareholder, warren buffett sending the legendary investor a letter to oppose the 2014 equity plan calling it something that shouldn't be happening. he said the implications for investment returns in our country may be devastating if they don't vote against this. this topic will be one we will be covering tomorrow with warren buffett. he will dine with the winner of the glide foundation lunch that is auctioned up every year. this year the winning bid came in of $1 million, $100. tune in to street signs tomorrow. after they finish the lunch, we will talk to warren buffett. the questions we will be asking is how they voted shares of coca-cola and why. he hasn't said anything publicly. >> he hasn't had enough to -- these are nonbinding anyway, the compensation issues, aren't

they? >> yeah. if he were to come out and say something against us, that is the point. definitely at least register something. >> do you know this situation? is it not tied to performance to the extent it should be? >> i have no clear reading to the statement and how the compensation plans are designed. it would be irresponsible of me to give an opinion on that. >> qaa minute sky says how to you pronounce sun core. >> sun core. >> you finally visited the company and wore gucci loafers into the sands. >> he may be confusing me with some of his other family

members. you worked with him for a long time. >> he was terrific to work with. a few folks on wall street think of it as a "we" equation. he was terrific to me, helpful to my career and supportive of things i was trying to do. >> neuberger -- i mean, the u.s. economy is resilient. it's mazing. >> yes. >> we shouldn't be surprised when it does well, i think, because we have the best system probably on earth. it's taken a while either because of the depth of the financial crisis or because some of it might be self inflicted. do you think we are on our way to what we used to be able to do, 3% year in and year out? >> i think there are many things going on in our economy that's very exciting. the stuff in energy.

if it had a dotcom it would be all you're talking about. it makes the company safer of the long term and reduces volatility. i think the economy has remained resilient. it has lost -- >> i saw that article yesterday. >> -- than many would have thought. it doesn't have to be gang buster growth. i would say at the moment, it feels like the banks are lending more. it feels like there is more credit available for everyone. i don't think 3.5% is completely off the table. ultimately it comes down to earnings. earnings have remained incredibly resilient on year to date. around $180 per share for this year. there's a lot of noise out there. but nothing has really moved

that number. if that number holds -- for sure there will be volatility. maybe it won't be as easy as last year. i think it is still quite solid. >> is it enough when we have people talking about the middleclass and talking about large segments haven't been part of the recovery, will they become part of the recovery eventually, or are we changing the makeup of this country where a lot of people are just going to be, whether it's food stamps or disability, or out of the workforce or whatever it is, we have become a lot more like aour the last five years. >> i think that's an ideological debate. it believes where you believe over the long term it's good for everyone. if you knock the spirit of the u.s. folks, you knock everything. the willingness to wake up and try to be better and get

rewarded is very -- >> basically -- there are people that can do better. >> if they go the wrong direction it is certainly not good for evaluations all around us. there's no suggestion that the scales are tipping. but if they were to and you prevent me from waking up because i don't have a good risk/reward for my effort, that's not good for anyone. >> i have something for you on the coca-cola winners thing. and coming up, mcdonald's. stock has been trading higher. we'll talk to you more when squawk comes right back. es righ.

es righ. hi, are we still on for tomorrow? tomorrow. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. what a day. can't wait til tomorrow. e financial noise financial noise

financial noise financial noise

welcome back to "squawk box", everyone. let's take a look at stocks that are moving after earnings reports. comcast earnings 68 cents a share excluding certain items, 4 cents better than the street was expecting. of course they have a lot of different metrics.

the nbc universal parent helped by a surge thanks to the winter olympics. jimmy fallon taking over to the host of the "tonight show", adding video subscribers. >> time warner acquiring company, many people waiting to see. >> although most people think it would be tough to make the case, and i think only al franken is -- i don't know what's in it for him. >> reed hastings. >> exactly. >> they are still talking. there would be some investors or ways of making it more

palatable. >> and picking up net neutrality. time warner not at this point but comcast is. one of the only internet providers that is. harley davidson shares earned $1.21 for the first quarter, 13 cents above expectations. revenues as well. the company is maintaining its prior full-year forecast up to 284,000 motorcycles sold for 2014. that stock is up 6.6%. xerox beating estimates by 27 cents a share. but it did go below consensus. they are impacted by declining sales, printing, slower growth and services. that is down 5.8%. netflix reporting 86 cents a share. 3 cents better than expectations. video streaming service announcing that it will increase its monthly membership fee by $1 to $2 a month for new

subscribers. and profits above straoefp estimates. that stock is up $28. shares of mctkopd's. just out of the top of the hour. earning $1.21 a share. 3 cents below estimates. but if you take a look, the stock is trading higher. right now to give us his action is r.j., senior restaurant and retail analyst at morningstar. r.j., why is the stock trading higher? >> the initial reaction is it was down on the earnings miss. if you look at the numbers a little bit closer, there was a one-time close beyond the operating profit line. if you take that out, the numbers are a little bit better than expected. comps had expected to be positive in april. that's getting people excited. even modestly. it is going to be a transition story. they will need to show traffic. >> charles cantor is here.

we were just talking a little bit about it. the stock is yielding 3.25% which came as a surprise to me. >> yeah. >> do you think most of the bad news is out there? >> yeah. it's been priced in the stock. the company set the barlow for 2014 saying competition would still be a factor. margins a little bit pressure said up. value platforms out. back of the kitchen investments. so a lot of negative news then. but to charles's point, it is paying a healthy dividend. i don't think this is a completely broken story at this point. i think they have a lot of things. a brand recognized globally. i think it's a brand you can still get behind. it is trading at one of the wider discounts i have seen. >> you don't usually see the market leader trade at that discount. there is still some value in

this name. >> what do you think they need to do in north america to turn it around? >> that is the key question how they turn it around and how they execute. i like what they are doing in terms of the back of the kitchen investment. they are going to make the ability to make more customization of products. but also keep in mind that the fact they need to key service up a bit. the prep tables, they will be able to add new ingredients, new flavors. things you have never before seen at mcdonald's or in america. i think it will help get people more excited about the story here. i think that's the first step. just getting the brand perception a little bit better in north america and help to start to move momentum. it has been the sweet swat for years. >> what is the opportunity

there? it gotolks quite excited the last month. >> i think they have an opportunity to add some leverage and potentially return more cash to shareholders that way. at the same time, too, maintaining the investment grade rating. i think makes sure the franchisees get the best rates possible when they are looking for capital as well. i think there is opportunities for other leverages as well. >> do you worry about competition from taco bell? >> there has been a lot of competition the, particularly on the breakfast front. so it is a concern. but i think the company will talk about a number of initiatives it has. i think we will see potentially announcements such as extended

hours. new breakfast products. >> what's your favorite name in this entire arena. >> right now i like starbucks. that's probably the most compelling. i like what they are doing in terms of diversifying not only from brand and geographic perspective but also the movement they are doing into the package coffee space and really becoming not only a retail player but retail wholesale hybrid. and its grocery store partners as well. it's a real interesting story. >> r.j., thank you. >> thank you. >> he knows a little. >> initially stock sold off. i will. go ahead. do you think that was a buying opportunity when the stock sold

off, ronald? i don't think there was anything wrong. i was going to do it but they didn't trust me to be running it. they said three seconds. anyway, you try something. it doesn't work. you want to tell me about coke. >> yeah. >> here's the thing with coke. i would like to assume the best in muktar and the board and the managers there. i don't think their whole intention is to swim money and line pockets at the expense of performance. >> this is a much bigger share than they have asked. i think this is for four years. >> you're talking hundreds of

employees? >> thousands. >> he says this plan has the potential to dilute shareholders 14.4%, transfer of $28 billion worth of equity to 6,400 people. >> i don't know what that means, ferrer. >> is it 60%? >> i think they have come the last maybe four or five -- >> they don't need -- >> they could take longer to use that. >> is it based on performance, hitting certain metrics? >> much larger grant. >> wouldn't the appreciation in the stock allow for them. >> he thinks the company buried it in the proxy. this is not in line with past

equity plans. it has been less than 1% a year. >> okay. my question was, the offset, if they need appreciation in coke cadillac stock, revenue, comps, whatever it is they used to measure the performance, if hitting that more than offsets what they are -- >> it's $28 billion, though. >> i don't know whether that's a big number. >> i think the legitimate question is coach hasn't been a terrific stock. >> right. >> and maybe you said this but we haven't spoken about it. he may just feel this is too low a price to give this much equity. >> he says he thinks he is a fantastic manager. he has said that. >> seems an easy target to

inflate. >> i will do more research on it. >> we told but a couple of deals in big phrma. california may be in trouble if el nino returns, which some are expecting. expecting.

at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you,

you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. if you don't like the weather phenomenon, just wait a

membership. it will change. the price of copper, that's a pretty good tease there. jane wells is preparing to dust off her up principle la and explain. >> yes. >> you tell me. explain the copper part. i don't get that. >> joe, torrential rains in south america could flood these mines. copper may not be as much of a deal as nickel. copper is expected to be in excess this year. so we'll have to the see. but here in california, i'm going to first talk about ag a little bit. they are saying 94%, 94% of the state's $45 billion ag economy is either in severe, extreme or exceptional drought. now, if with he do get an el nino later this year, perhaps starting in the late summer, it will be the first time in five

years. the historic dry spell could be eradicated in one season. it could. it has happened before. >> some of the historically strong el ninos, 29-93, 97-98, the hallmark were flooding rains and heavy mountain snowfall across much of california. >> yeah. we also got a lot of flooding and mudslides. the current chance are between 50% and 6%. if it happens, it generally usually means colder, rainier weather in the u.s. drought in australia and asia. if that happens, it could significantly affect coco and coffee. where wheat is lacking say in india, you could see dire poverty situations. it usually creates good weather for corn and soy beans in the u.s. that could mean lower feed

prices, which means lower meat prices. other conditions could raise soybean prices. >> you get situations, for instance, where fish swimming patterns change as a result of this. there is less fish meal to feed them so soybean is used to elevate that complex. >> the circle of everything. it also will impact metals. nickel in particular may be one to watch as supplies are already expected to be low. he tracks 13 commodities from cocoa to zinc. that strategy pays off and 71% of the time is right. we don't know if el nine know is

going to happen yet. if it does, there is one other positive. see less of this video. there could be fewer hurricanes in north america. guys, back to you. >> el nino. it gets confusing. i took latin instead of spanish. >> el nino is the boy. >> el nino is the little boy. it's spanish. it means wet. la nina is the little sister and means dry. >> that's too complicated, el and la. >> sometimes it's el problema. you have an el with an a. >> the spanish i speak. here's something. let me see if you know this. bienvenidos.

i said welcome, parking lot. >> tango buen dia. >> thanks, jane. >> adios. >> thank you. >> when we come back, live from the floor of the new york stock exchange. mcdonald's, comcast, the big drug maker deals and much more after the break. after the break. tomorrow on "squawk box", the ceo of dow come talks earnings. plus, the state of the consumer and quarterly profits from proctor & gamble cfo. right here on "squawk box". profit from it. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this. the 2014 glk. the engineering, and the experience,

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[ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen.

down to the new york stock exchange jim cramer joins us now. everybody likes to talk about netflix, one of the stocks people made so much money on. people on it that could earn, 10, $20 at some point in the future. is it cheap, expensive in do you have it in your charitable trust? >> i don't. the main thing about netflix they seem to like it as much international as domestic except netflix can make more money. a great line in the conference call where he said the total adjustable market worldwide is

people who like good programming and obviously that's billions of people. this was a very, very good quarter and there's still a lot of firms that are saying under perform, they have to raise their price targets. a big short position. still have to wonder why didn't apple buy them? why didn't a google buy them? this was a remarkable quarter and they did a terrific job. >> we're doing it right now, talking about coke, i don't know enough details. i like -- when you're talking about 6800 employees or whatever and i'm trying to figure out how you compensate them in the most shareholder friendly way to try to spur performance and hit numbers and hit metrics. i don't know, if you do it with stock or stock options, is it a line the shareholders interest with the company? do you do it? is it tax advantage? what do you make of this, jim? >> you do red shirt stock units. those are tax advantaged. give them to your staff in you

would like to. invest over a four-year period, makes a lot of sense. least tax impact. it's very easy to do. i'm surprised people don't do it. >> is coke trying to rape its shareholders here? it's a $28 billion number do you think? >> no. muhtar kent is a good exec and coke is in a tough business. it's not like carbonated soda is doing well. where they are doing well is emerging markets is the place to do it. the idea of attacking coca-cola, i know becky was speaking to warren buffet, is fat tu was. many companies underperforming where the business is quite good and you should go after them. there are sectors very strong and some companies are doing badly in the sector. when you look at coca-cola's performance and the sector you have to say you know what, they're performing as best they can given a fact they sell a product no longer in vogue in the united states. >> you're smart and you went to harvard, see i feel fat tu was after christmas, easter, i mean, i had ham, i had macaroni and

cheese, beef -- >> i said i feel fat tu was. but that's a totally different use of -- >> who knows what that means. >> i didn't go to college to get stupid. >> no. >> to quote the godfather. >> yeah. >> charles sent me information too that's very interesting. he says, based on what you've seen, this is another echoing what jim was saying this time around it is not that far out of line with what they said in the past, the impact of the plan appears to be more or less with previous plans. based on the idea that they've set specific annual growth targets that are in line with companies long-term growth plans, the addition of operating income growth as a metric and some other things. anyway we'll talk about this a lot more. >> it's $90 million. your charitable trust has i think that much coke, doesn't it? >> it's not a lot of money. look, activists want to make a name for themselves, makes it easy if they get on cnbc they can raise money easily.

>> i wouldn't put david winters in that camp though. >> i don't know what's his game but there are so many companies in the s&p 500 that you could go after. look i thought carl icahn was right to go after e-bae, there's a lot of value there. coca-cola it's not clear what they can do to do a better job. i think they're motivating their employees in a correct fashion and coca-cola is actually a -- they are a paragone of good american business. >> yeah. and winters said the same thing, he does appreciate the management and thinks they're good management. i wouldn't put winters in the same camp with other activists which seem to be a long-term holder. they're yelling at me. >> go after the bad guys. >> you say this, we'll hear more in a few minutes from jim, "squawk on the street" will join you then. we have more from charles cantor. . treat you. care for you. today, you can come to cleveland clinic for anything, everything or just to get that "thing" checked out. big, small, and yes,

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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ welcome back, everybody. charles cantor is our guest host this morning and charles, we've been going back and forth about the coca-cola situation. this comes to a head tomorrow with their annual shareholders' meeting. what do you think? you've gotten stuff on both sides of it. hard to come up with an answer? >> i will side with coke management. i think both an incredible company over decades and ultimately for the stock it will be how they handle today's

competitive landscape and if they execute well there and innovate around the core products we won't be worried about their shareholder incentive plans. i really like the fact that they are not issuing options that reprise them everywhere year. that aligns them with us shareholders that stock option plans don't do. i vote with coke here given what i know and if they execute well in the market and manage the competitive landscape the market will be fine. >> we need to economic growth will do a lot for income inquality and i wish we had a full employment and everybody who wanted to work would get a job. so many things i want to do to help this problem not good for anyone but in this politically charged environment right now with income inequality, it's easy for this guy winters to pick a number like $28 billion and say that coke's management -- this is another

fat cat corporation lining the pockets of senior management doing to make money for himself. >> for shareholders, for shareholders. >> it's an easy target. you see politicians do these wedge issues all the time to try to win elections and, you know, they make it simplistic. people are paid too much. in france, that resulted in executives making a maximum of a million dollars a year. people look the other way when sandra bullock makes $70 million and a lefty picture makes $180 million, yet a ceo that has hundreds of -- >> south paw. >> what did i say? >> lefty. >> yeah, south paw. >> you have "occupy wall street" and there are countries where you will hear people say, why does anyone need more than $70,000 a year? that's not the way that we built the united states here. you get rewarded for effort and working hard and if you don't work hard and put up the effort you're not supposed to be here. >> i would say this, coke

wouldn't come to these decisions lightly. i think on balance they heard the shareholder voice, the performance measures in the system, and hopefully they continue to grow for the neck decade. >> go become one of the 6800. >> join us tomorrow. right now it's time for "squawk on the street." the street." ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david is at the active passive investor summit in new york city and what a morning for it with the flurry of deals we've seen in the past 24 hours. more from david in a minute. futures are flat. the s&p going for its first six-day win streak since september. lot of earnings including mcdonald's, harley, utx and more. ten-year crept up to 2.72 and europe getting back to work today with gains around 1%. road map