U.S. Stocks Up; Yuan Band to Widen

Arthi Gupta, Mayank Mehta and Sanjay Barot
21 Jun, 2010
New York City

U.S. stocks traded higher after China allowed the yuan to trade more freely against the dollar. U.S.-based Corn Products agrees to buy National Starch unit for $1.3 billion and Valeant agreed to merge with Biovail.

[R]9:45 AM New York – U.S. stocks traded higher after China allowed the yuan to trade more freely against the dollar. U.S.-based Corn Products agrees to buy National Starch unit for $1.3 billion and Valeant agreed to merge with Biovail.[/R]

U.S. stocks rose after China''s announcement for greater flexibility in allowing its yuan to move against the greenback and lifting the peg imposed since 2008. Global markets too advanced on news that the yuan, which has been tied to the dollar is to be made more flexible.

The People’s Bank of China said on Saturday that it would make the yuan, which has been tied to the dollar for about two years, more flexible, but dismissed the idea of an instant revaluation, noting it’s already near fair value.

On June 19, the PBoC had said the solid recovery of the Chinese economy had made it """"desirable to proceed with reform of the [yuan] exchange rate.""""

The Chinese central bank on Sunday said it intends to keep the yuan """"basically stable"""" and is not planning an immediate one-off revaluation of the currency.

Corn Products International, Inc., the agriculturally derived ingredients provider said today that it has entered into an agreement to acquire specialty starch business National Starch from the Netherlands-based coatings and specialty chemicals company Akzo Nobel NV for $1.3 billion in cash.

The deal is expected to close in the third quarter of 2010, subject to regulatory approvals.

The acquisition, which has been approved by the boards of both Corn Products and Akzo Nobel, would create an ingredient solutions leader with nearly $5 billion in revenues.

National Starch, a New Jersey-based specialty starches provider, was taken over by Akzo Nobel as part of its acquisition of Imperial Chemical Industries Plc, in January 2008. Akzo Nobel decided to sell the unit after its board concluded that National Starch did not offer sufficient opportunity to create value within the company''s transformed coatings and specialty chemicals portfolio.

According to Corn Products, specialty and modified starches, two ingredient solutions the company has identified as important to its ongoing growth, have been developed by National Starch. Corn Products expects that its offerings would be broadened by National Starch''s ingredient solutions, such as texturants, blends and environmentally """"green"""" solutions.

The transaction is also projected to generate cost synergies of at least $50 million, mainly from efficiencies in the areas of manufacturing, procurement, logistics and general & administrative functions.

In the transaction, J.P. Morgan Securities Inc. acted as exclusive financial advisor to Corn Products.

Corn Products International, Inc., ((CPO)) fell $0.20 or 0.57%, and closed Friday''s regular trading session at $34.85 on a volume of 436,227 shares. In the past 52 weeks, shares have been trading between $24.15 and $37.62.

Akzo Nobel NV ((AKZOY.PK)) rose $0.28 to close at $55.58 on Friday.

Valeant Pharmaceuticals International and Biovail Corp., the two specialty pharmaceutical companies announced today that their boards have approved a merger deal under which the companies would combine to have an expanded presence in North America and eight other countries. The combined company will be named Valeant Pharmaceuticals International, Inc.

Upon completion of the merger, shareholders of Canada-based Biovail will own about 50.5% and Valeant stockholders will own nearly 49.5% of the shares of the new company on a fully diluted basis. For Biovail stakeholders, this merger represents a 15% premium based on a calculation of stock prices over the last 10 trading days.

The transaction, which is expected to close before the end of the year, is anticipated to be cash adjusted earnings per share accretive to the shareholders of both the companies within the first 12 months post-close.

In order to finance the merger, the drugmakers have secured a commitment of $2.8 billion through a term loan facility provided by Goldman Sachs Bank USA, Morgan Stanley & Co. Inc., and Jefferies & Company, Inc. As a part of the transaction, existing Valeant 7.625% and 8.375% senior unsecured notes will be refinanced.

Following the completion of the merger, the new Valeant will be headquartered in Mississauga, Ontario and will remain a Canadian domiciled corporation, listed on both the Toronto and New York Stock Exchanges.

Currently Valeant''s lead director, Robert Ingram will be appointed as lead independent director of the board of the combined company. Chairman of Biovail''s Audit Committee, Michael Every will be serving in the same function for the combined board.

Both Valeant and Biovail stated that the new Valeant will be able to leverage its complementary product lines and operations in specialty Central Nervous System, Dermatology, Canada and emerging markets/branded generics. Further, the combined company is anticipated to have limited patent exposure and enjoy strong and stable cash flows from legacy products.

In Friday''s regular trading session, Valeant Pharmaceuticals International ((VRX)) closed trading at $45.87 per share on the New York Stock Exchange. In the past 52-week period, the stock traded in a range of $22.17 to $50.40.

Biovail Corp. ((BVF)) closed Friday''s regular trading session at $14.60 per share on the NYSE. In the past 52-week period, the stock traded in a range of $12.14 to $17.28.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2394 and increased against the Japanese yen to 91.38.

Crude oil increased $1.37 to $78.55 a barrel for a front month contract, natural gas edged higher $0.10 cent to $5.09 per mBtu and gasoline increased 3.120 cents to 217.88 cents.

Gold increased $1.30 in New York trading to close at $1,259.60 per ounce, silver closed higher $0.176 to $19.36 per ounce and copper for the front month delivery increased 10.850 cents to $3.01 per pound.

Yields on 10-year U.S. bonds increased to 3.29% and on 30-year U.S. bonds traded at 4.22%.

Stock Movers

BGC Partners, Inc., the inter-dealer broker added 1.9% and The Goldman Sachs Group, Inc. advanced 1.3%.

Merck & Co., Inc. fell 0.06% after the company and GlaxoSmithKline announced today the U.S. Food and Drug Administration has approved STAXYN™ (vardenafil HCI), an orally disintegrating tablet indicated for the treatment of erectile dysfunction.

The Walt Disney Company rose 0.9%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 242.99 or 2.43% to 10,238.01, Hang Seng index in Hong Kong increased 625.47 or 3.08% to 20,912.18 and CSI 300 index in China higher 84.50 or 3.13% to 2,780.66. ASX 200 index in Australia increased 60.70 or 1.33% to 4,612.60. The FTSE Bursa KL Composite index in Malaysia closed higher 17.60 or 1.34% to 1,335.29.

The Kospi Index in South Korea increased 27.73 or 1.62% to close at 1,739.68. SET index in Thailand closed higher 14.22 or 1.80% to 806.07 and JSE Index in Indonesia increased 12.31 or 0.42% to 2,941.90. The Sensex index in India increased 305.73 or 1.74% to 17,876.55.

Europe Markets Review

In London FTSE 100 Index closed higher 53.72 or 1.02% to 5,304.56, in Paris CAC 40 Index increased 61.00 or 1.65% to 3,748.21 and in Frankfurt DAX index traded higher 89.54 or 1.44% to 6,306.52. In Zurich trading SMI increased 79.59 or 1.23% to 6,526.65.