Euro Area Flat Inflation; ABB Bids $4.2 B for Baldor Electric

Arthi Gupta
30 Nov, 2010
New York City

European market indexes declined and yields on sovereign bonds of Portugal, Spain and Ireland rose. The euro dropped to a 2-month low and fell 8% from the peak a month ago. German unemployment fell in November. ABB agreed to acquire U.S.-based Baldor Electric for $4.2 billion.

[R]4:00 PM Frankfurt – European market indexes declined and yields on sovereign bonds of Portugal, Spain and Ireland rose. The euro dropped to a 2-month low and fell 8% from the peak a month ago. German unemployment fell in November. ABB agreed to acquire U.S.-based Baldor Electric for $4.2 billion.[/R]

U.S. and Asian markets declined on euro-zone debt concerns and Bank of Portugal urged local banks to increase capital. The yields on 10-year bonds rose for Portugal, Spain, Italy and Ireland barely a day after European nations agreed to lend €85 billion to Ireland.

The euro declined and traded at $1.303 ahead of ECB Governing Council meeting on December 2 to decide the fate of emergency stimulus measures.

The Norges Bank said in its financial stability report today that uncertainty regarding high sovereign debt and solvency at several European banks may result in a renewed increase in premiums in money and credit markets, making it more expensive for Norwegian banks to obtain funding. Further, it said Norwegian banks should make a rapid transition to Basel III.

In Paris CAC 40 Index slumped 40.54 or 1.11% to close at 3,596.42 and in Frankfurt DAX Index edged lower 32.42 or 0.48% to close at 6,665.55.

EU Unemployment Rises, Flat Inflation

The Eurostat said the euro area unemployment rate rose to 10.1% in October, the highest rate since 1998, from a downwardly revised 10% in September with the highest rate recorded by Spain with unemployment of 20.7%.

Compared with September, the number of unemployed persons increased 80,000 in October. The EU27 unemployment rate was 9.6% in October, same as in September.

Euro area annual inflation remained at 1.9% in November and unchanged from October, according to a flash estimate from Eurostat, the statistics office of the European Union published today.

German Jobless Rate Declines

German unemployment dropped further in November, benefiting from the continuing economic upswing and raising possibilities for consumer-led recovery.

The seasonally adjusted number of unemployed fell by 9,000 persons, following a 3,000 decline in October, the Federal Labor Agency said on Tuesday. The jobless rate stayed at 7.5% for the third consecutive month.

German''s unemployment according to the concept of the International Labor Organization decreased a seasonally adjusted 340,000 persons or 10.6% annually to 2.88 million in October, the Federal Statistics Office said on Tuesday.

French PPI Rises

The producer price index for the French market rose 0.8% on a monthly basis in October, compared to a 0.3% rise in September, the statistics office Insee said on Tuesday. Producer prices of mining and quarrying, energy and water industries grew 3.1% in October from September.

On a yearly basis, the domestic PPI climbed 4.3% in October.

Hungary PPI Slackens

Hungary''s producer price index rose 7.1% on a yearly basis in October, versus a 7.9% growth in September, according to a report by the Central Statistics Office released today. Producer prices for manufacturing grew 5.4% annually in October, following a 6.4% rise in September.

On a monthly basis, the PPI decreased 0.8% in October, following a 0.9% fall in September.

Swiss Consumer Demand Improves

Swiss consumer demand picked up in October after declining in September. The UBS bank said its consumption indicator for the country rose 0.02 points to 1.72 suggesting that private consumption grew in October.

October''s increase in the indicator is due to an improvement in business activity in the retail sector as well as growing new car registrations, which rose 5.7% annually.

Denmark GDP Growth Slows in Q3

Denmark''s gross domestic product expanded 0.7% sequentially in the third quarter, following a 1.3% rise in the second quarter, Statistics Denmark said on Tuesday. The figures from Statistics Denmark showed exports climbed 1.9% during the quarter, as against the 1.8% rise in the previous three months.

Spanish Current Account Deficit Contracts

According to the Bank of Spain, the current account deficit declined to €3.71 billion in September, from €4.67 billion a year ago.

The trade deficit narrowed to €3.92 billion in September from last year''s €4.98 billion. At the same time, the surplus in services trade rose to €3.17 billion in September from €2.48 billion.

ABB Buys Baldor Electric

ABB Ltd., the power and automation technologies provider agreed to buy Baldor Electric Co., a manufacturer of industrial motors, in an all-cash transaction valued at around $4.2 billion, including $1.1 billion of net debt.

ABB will commence a tender offer to purchase all of outstanding shares for $63.50 per share in cash. The transaction represents a 41% premium to closing stock price on Nov. 29, 2010.

The deal is anticipated to be earnings accretive in the first year. ABB expects to achieve over $200 million in annual synergies by 2015, comprising cost synergies and global revenue synergies, and estimates that two-thirds of these synergies will be realized by 2013.

Actuant Acquires Mastervolt

Actuant Corporation announced today the signing of an agreement to acquire the stock of Mastervolt, with a view to expand its reach in solar market. The total consideration for the transaction is approximately €115 million.

Headquartered in Amsterdam, the Netherlands-based Mastervolt, focused primarily on high-yield inverters for sub-segments of the on-grid market in Europe and generated revenues of approximately €85 million.

Gainers & Losers

ACS Actividades de Construccion y Servicios, SA gained 0.18% to €33.94 after the Spanish builder''s €2.7 billion takeover offer for Hochtief AG was approved by Germany''s financial regulator BaFin.

BASF SE rose 1.15% to €56.94 after the chemical company and INEOS Industries Holdings Limited intend to combine their global business activities in styrene monomers, polystyrene, acrylonitrile butadiene styrene, styrene-butadiene block copolymers and other styrene-based copolymers as well as copolymer blends into a new joint venture called Styrolution.

RHJ International SA fell 0.57% to €5.27 after the Belgium-based diversified holding company reported revenue from industrial investments for the six months ended September 30 surged 46% to €939.6 million from €644.9 million in the prior year. Loss for the period was €133.1 million compared to a profit of €397.7 million last year.

Sanofi-Aventis SA declined 0.89% to €46.55 after the pharmaceutical company said on Monday that its vaccine division Sanofi Pasteur initiated a phase II study of a vaccine for primary prevention of hospital acquired infection due to Clostridium difficile bacteria.

U.S. regulator FDA has granted fast track status for the company''s investigational Clostridium difficile vaccine candidate recently.