U.S. Stocks Weak; Deals of $3 billion

Arthi Gupta, Mayank Mehta and Sanjay Barot
24 May, 2010
New York City

U.S. stocks fall amid worries about European debt and high fiscal debt in Europe. Gentiva Health Services agrees to acquire Odyssey HealthCare for $1 billion. Equity One to buy Capital And Counties USA through $600 million joint venture deal. AT&T sells its Sterling Commerce to IBM for $1.4 billion.

[R]10:20 AM New York – U.S. stocks fall amid worries about European debt and high fiscal debt in Europe. Gentiva Health Services agrees to acquire Odyssey HealthCare for $1 billion. Equity One to buy Capital And Counties USA through $600 million joint venture deal. AT&T sells its Sterling Commerce to IBM for $1.4 billion.[/R]

U.S. stocks decline as traders continue to express anxiety over the developments in Europe. The markets across Europe have pared most of the early gains weighed down by the weakening euro.

Gentiva Health Services agrees to acquire Odyssey HealthCare for $1 billion. Equity One to buy Capital And Counties USA through $600 million joint venture deal and IBM agrees to acquire Sterling Commerce from AT&T for $1.4 billion in cash.

Campbell Soup third quarter net profit declines.

The markets across Asia, excluding Japan, gained modestly on speculation that the economic turmoil in Europe is showing signs of fading. However, the market in Japan ended mixed amid concerns that a stronger local currency might impact exports, especially to those in the Euro region.

The threat of the Greek debt crisis spreading to Spain and Portugal has spooked investors and raised fears that the global economic recovery could be in jeopardy. Bank of Spain was forced to bailout regional savings bank CajaSur over the weekend.

In commodities trading, crude oil for July delivery declined 29 cents to $69.75 a barrel, while gold for June delivery increased $8.60 to $1,184.70 an ounce.

The dollar is up to $1.2365 against the euro and advanced to $1.4362 against the pound. Meanwhile, the dollar is little changed against the Japanese yen, trading at 90.28.

Gentiva Health Services Acquires Odyssey HealthCare Inc.

Gentiva Health Services Inc. agreed to acquire Odyssey HealthCare Inc. in an all cash transaction for a price of $27 per share of Odyssey common stock, or $1.0 billion.

The company noted that the transaction is expected to close in the third quarter of 2010 and is subject to standard closing conditions, including regulatory approvals and clearance under the Hart-Scott-Rodino Act as well as approval by Odyssey''s stockholders.

Gentiva expects to raise about $1.1 billion in new debt financing to fund the purchase price and to refinance existing debt.

Following the completion of the deal, Gentiva expects the acquisition of Odyssey HealthCare to be accretive to adjusted earnings per share, exclusive of one-time costs, within the first 12 months.

The company has secured a financing commitment for the transaction from a syndicate of leading financial institutions, including BofA Merrill Lynch, Barclays Bank PLC, General Electric Capital Corporation, and SunTrust Bank and SunTrust Robinson Humphrey, Inc.

The transaction was unanimously approved by the Board of Directors of Gentiva. Odyssey''s Board of Directors has also unanimously approved the agreement and recommended that Odyssey''s shareholders approve the merger.

Equity One to Acquire Capital And Counties USA

Real estate investment trust Equity One Inc. said that it has agreed to acquire Capital and Counties USA Inc. through a $600 million joint venture transaction with its parent company, U.K.-based Capital Shopping Centers Group PLC.

The transaction, expected to close late in the third quarter of 2010, enables Equity One to enter the California market, in line with the company''s strategic plan.

Under the deal, Capital Shopping Centers will receive 4.1 million shares of Equity One common stock and 10.9 million joint venture units. CSC may redeem its units in the joint venture for Equity One common stock on a one-for-one basis or cash, at Equity One''s option.

Equity One will assume about $330 million of mortgage debt, including its proportionate share of debt held by its joint ventures, with a weighted average interest rate of 5.7%.

Upon completion of the transaction, Northern California will be Equity One''s second largest market after South Florida, representing approximately 16% of its asset value.

David Fischel, the CEO of CSC, will join Equity One''s board of directors following the closing of the transaction.

Fischel said, ""This transaction allows us to focus on our core business in the United Kingdom while providing an expansion platform for Equity One. By retaining a long-term investment in Equity One, we can participate in the significant growth potential of the combined enterprise.""

Turner Newton, who has been CEO of C&C USA since 1994, will continue to lead this subsidiary for Equity One. Equity One intends to retain the majority of the in-place infrastructure, including C&C USA''s operating, acquisition and asset management teams.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2386 and increased against the Japanese yen to 90.15.

Crude oil decreased $0.21 to $69.83 a barrel for a front month contract, natural gas edged higher $0.02 cent to $4.02 per mBtu and gasoline increased 0.010 cents to 196.13 cents.

Gold increased $8.00 in New York trading to close at $1,184.10 per ounce, silver closed higher $0.144 to $17.79 per ounce and copper for the front month delivery increased 1.500 cents to $3.07 per pound.

Yields on 10-year U.S. bonds increased to 3.17% and on 30-year U.S. bonds traded at 4.05%.

Stock Movers

Arch Coal, Inc. added 4.2% after the coal company said its subsidiary announced that its Dugout Canyon Mine in Carbon County, Utah, has resumed coal production with all mining equipment, including the main longwall mining system.

AT&T Inc. fell 0.1% after it agreed to sell its subsidiary Sterling Commerce for $1.4 billion in cash to IBM.

Delek US Holdings, Inc., the refiner climbed 4.4%.

Lockheed Marin Corporation dropped 1.8%. The defense contractor signed a $40 million foreign military sales contract to deliver Sniper Advanced Targeting Pods (ATPs) to the Royal Saudi Air Force.

Earnings Review

AnnTaylor Stores Corp. ((ANN)), the women''s clothing retailer reported first quarter sales rose 11.5% to $476.2 million from $426.7 million a year ago. Net income in the quarter was $22.6 million or 38 cents per diluted share compared to net loss of $2.3 million or 4 cents per share a year ago.

Campbell Soup Co. ((CPB)), the manufacturer and marketer of food products reported net sales for the quarter increased to $1.8 billion from $1.69 billion in the comparable period. Net earnings were $168 million compared with $174 million in the prior year. However, earnings per share for the latest quarter remained flat at $0.49.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 26.14 or 0.27% to 9,758.40, Hang Seng index in Hong Kong increased 121.93 or 0.62% to 19,667.76 and CSI 300 index in China higher 104.68 or 3.78% to 2,873.47. ASX 200 index in Australia increased 90.00 or 2.09% to 4,395.40. The FTSE Bursa KL Composite index in Malaysia closed lower 12.04 or 0.94% to 1,273.69.

The Kospi Index in South Korea increased 4.75 or 0.30% to close at 1,604.93. SET index in Thailand closed lower 21.23 or 2.77% to 744.31 and JSE Index in Indonesia decreased 13.61 or 0.52% to 2,609.61. The Sensex index in India increased 23.94 or 0.15% to 16,469.55.

Europe Markets Review

In London FTSE 100 Index closed lower 26.76 or 0.53% to 5,036.17, in Paris CAC 40 Index decreased 23.84 or 0.69% to 3,406.90 and in Frankfurt DAX index traded lower 79.32 or 1.36% to 5,749.93. In Zurich trading SMI decreased 55.83 or 0.89% to 6,206.59.