Merger Monday; RockTenn Acquires Smurfit-Stone for $3.5 B, Sara Lee in Play

Darlington Musarurwa
24 Jan, 2011
New York City

U.S. indexes traded sideways as merger news dominate trading. RockTenn agreed to acquire Smurfit-Stone for $3.5 billion and Surgery Partners purchased NovaMed for $214 million. Halliburton net surges. Sara Lee Corp becomes the target of deals from private equity buyers.

[R]8:25 AM New York – U.S. indexes traded sideways as merger news dominate trading. RockTenn agreed to acquire Smurfit-Stone for $3.5 billion and Surgery Partners purchased NovaMed for $214 million. Halliburton net surges. Sara Lee Corp becomes target of deals from private equity buyers.[/R]

Several merger deals on Monday dominated trading sentiment in New York as commodities rose in European trading. Markets in Asia closed mixed as China expand property lending curbs to sixteen cities.

Investors are awaiting data on the latest house price index and first estimates of fourth quarter GDP to assess the health of the economy. At the end of rate setting meeting this week the Fed is expected leave the rates unchanged and keep its bond buying program intact.

RockTenn Acquires Smurfit-Stone

RockTenn Co., the packaging products maker agreed to acquire Smurfit-Stone Container Corp. in a cash and stock deal valued at $35 per share or about $3.5 billion to create a $9 billion North American paperboard packaging company.

Smurfit-Stone will become a wholly-owned subsidiary of RockTenn, and the combined entity will become the second largest producer of containerboard as well as coated recycled board in North America. The deal will also help Rock-Tenn expand its geographic footprint to the Midwest and West Coast of the U.S.

Surgery Partners Buys NovaMed

NovaMed, Inc., a leading operator of ambulatory surgery centers in partnership with physicians entered into a merger agreement to be acquired by an affiliate of Surgery Center Holdings, Inc. in a transaction valued at approximately $214 million, including the assumption or repayment of approximately $105 million of debt.

The deal provides NovaMed shareholders with $13.25 per share in cash, a premium of around 2.64% over NovaMed''s closing price on Thursday.

Sara Lee Receives Takeover Bid

Sara Lee Corp., the packaged food company received a takeover bid from a group led by private equity firm Apollo Global Management LLC, according to media reports on Sunday. The group led by Apollo reportedly includes other private equity firms Bain Capital LLC and TPG Capital LP. The group is said to offer for Sara Lee of between $18 and $19 per share according to various media accounts.

JBS SA, the Brazilian meat processor is said to be considering a revised bid for Sara Lee, backed by Blackstone Group LP.

Standard Chartered Purchases GE Money

Standard Chartered Plc said that Standard Chartered Bank signed an agreement to acquire GE Money Pte Ltd, a wholly owned unit of GE Capital that specializes in auto and personal loans in Singapore. The gross assets of the underlying business acquired were S$2.35 billion or $1.81 billion as at December 31, 2009.

According to a report published by The Wall Street Journal, the deal value varies between S$850 million and S$900 million.

GM Vehicle Sales Rise 12.2%

General Motors Corp., the automotive manufacturer reported a 12.2% rise in vehicle deliveries for 2010 to 8.39 million vehicles from prior year''s deliveries of 7.48 million, reflecting strong growth mainly in China and U.S.

Riversdale Endorses Rio Tinto Offer

Riversdale Mining Ltd., the Australian coking coal miner stated that all its directors recommended the company''s shareholders to accept the offer by Anglo-Australian mining giant Rio Tinto Plc in the absence of a superior proposal.

On December 23, Rio Tinto made an all cash off-market takeover bid for all of the Riversdale shares at A$16 per share in cash. Rio Tinto made the offer through its unit Rio Tinto Jersey Holdings 2010 Ltd.

Genoptix Agrees to be Acquired by Novartis

Genoptix, Inc. entered into a merger agreement to be acquired by Novartis. Under the terms of the merger agreement, Novartis will commence an all cash tender offer for all outstanding shares of common stock of Genoptix at $25.00 per share. The transaction implies, on a fully-diluted basis, a total equity value of approximately $470 million and an enterprise value of $330 million.

J. C. Penney Plans Strategic Organizational Changes

J. C. Penney Company, Inc., the department store retailer announced plans to close certain underperforming store locations, wind down its catalog and outlet operations, and streamline its call center operations and custom decorating business. The retailer will begin restructuring in 2011.

Separately, the company announced the appointment of William Ackman of Pershing Square Capital and Steven Roth of Vornado Realty Trust to its board of directors.

Earnings Review

Airgas, Inc. ((ARG)), the industrial gas distributor reported third quarter net sales grew 9.5% to $1.03 billion from $944.76 million in the same quarter last year. Net earnings in the quarter increased 19% to $55.83 million or 65 cents per diluted share compared to net earnings of $46.87 million or 56 cents per share in the previous year.

Bank of Hawaii Corporation ((BOH)), the bank holding company stated fourth quarter net income grew 0.1% to $40.58 million from $40.52 million in the year-ago period. On a per share basis, earnings were $0.84, same as last year. Net interest income, on a taxable equivalent basis, declined 7% to $96.6 million from $103.8 million in the prior-year period.

First Horizon National Corporation ((FHN)), the financial services provider reported fourth quarter total revenue declined 10% to $393.19 million from $436.09 million in the same period last year. Net loss in the quarter narrowed 31% to $48.69 million or 20 cents per diluted share compared to net loss of $70.56 million or 30 cents per share in the year-ago period.

Koninklijke Philips Electronics NV ((PHG)), the consumer electronics company reported fourth quarter sales grew 2% to €7.4 billion from €7.26 billion in the prior-year quarter. Net income in the quarter increased 84.4% to €463 million from €251 million last year. Earnings per share rose to 0.49 euro from 0.27 euro in the same quarter last year.

Halliburton Company ((HAL)), the oilfield services provider reported fourth quarter total revenue grew 40% to $5.16 billion from $3.69 billion in the comparable period last year. Net income in the quarter surged 149% to $605 million or 66 cents per diluted share compared to net income of $243 million or 27 cents per share in the same quarter last year.

Prosperity Bancshares, Inc. ((PRSP)), the holding company for Prosperity Bank reported fourth quarter net income rose 7.3% to $32.80 million or 70 cents per diluted share from $30.57 million or 65 cents per share reported last year. Net interest income slipped 0.7% to $79.51 million from $80.09 million in the prior year, primarily due to lower yields on investment securities.

Full-year net income advanced to $127.71 million or $2.73 per share from $111.88 million or $2.41 per share in the prior year. Net interest income in the year climbed to $318.15 million from $307.10 million.

Smurfit-Stone Container Corporation ((SSCC)), the integrated manufacturer of paperboard and paper-based packaging reported fourth quarter net sales rose 18% to $1.63 billion compared with sales of $1.38 billion in the year-ago quarter. Net income generated in the quarter was $49 million or 49 cents per diluted share compared with a net loss of $6 million or 2 cents per share in the prior year quarter.

Steel Dynamics, Inc. ((STLD)), the steel producer and metals recycler said fourth quarter net sales increased 30% to $1.53 billion from $1.18 billion last year. Net income in the quarter plunged 71% to $7.79 million or 4 cents per diluted share compared to net income of $26.65 million or 12 cents per share prior year.

Verizon Communications Inc. ((VZ)), the telecom services provider said that it will incur a pre-tax charge of $600 million in fiscal year 2010 as the company adopted a new policy that changes its method of accounting for pensions and other post-employment benefits.