Merger Monday

123jump.com Staff
08 May, 2006
New York City

Market averages traded lacklusted for the most part of the day. Oil and gold fell on the news that Iran has sent a letter to President Bush to find a diplomatic solution. Gold fell more thn $4 but copper rose. News of two large deals kept traders busy. Golden West Financial agreed to be acquired by Wachovia Bank and Thermo Electron and Fisher Scientific agreed to merge.

[R]3:00PM Merger news drives Monday trading.[/R]
Golden West Financial Corp ((GDW)) jumped 6.2% after agreeing to be acquired by Wachovia Corp for $26 billion. The acquisition offer is at 15% premium to the closing price on Friday. Entrecom ((ETM)) shares gained 8.5% on earnings news of 19 cents from 34 cents a year ago. The radio operator board also approved to buyback $100 million worth of its common stock.

Midwest Air ((MEH)) reported April revenue passenger miles grew to 352 million, up 40% and available seats miles increased 26% to 435 million. Midwest reported that load factor jumped 8.3% to 82.6% in April. Journal Register ((JRC)) stock jumped 5% after company reported on after-the-market-close on Friday that its president and chief operating officer resigned.

[R]12:30PM European markets closed mixed.[/R]
European markets closed mixed as declining oil prices helped markets in Germany and France but weighed on commodity-sensitive London FTSE 100. The German DAX 30 rose 0.25%, supported by 3.3% gain for Adidas-Salomon. The French CAC 40 reversed from a 4 ½-year high reached earlier in the session to close down 0.1%. The U.K.’s FTSE 100 fell 0.4% as gas company BG Group and oil giants BP and Royal Dutch Shell weighed. However, mining stocks provided some help with Xstrata rising 4.9%.

Crude oil prices fell below $69 a barrel on sufficient gasoline supplies and a letter from Iran’s leader to President Bush proposing new solutions to settle the tensions. Light sweet crude June delivery lost $1.49 to $68.70 a barrel. Gasoline fell 5 cents to $1.992, while heating oil lost 2 cents to $1.929. Natural gas futures dropped 17 cents to $6.61 per 1,000 cubic feet. London Brent declined $1.28 to $69.67. European gold declined after hitting new 25-year highs on weaker dollar and growth in the international money supply. In London the precious metal fell to $677 per troy ounce from $679.90. In Zurich gold closed at $675.90, down from $678.95. Silver closed at $13.90, up from $13.80. The U.S. dollar gained ground in European trading. The euro traded at $1.2711, down from $1.2735. The dollar bought 111.45, down from 112.43 yen. The British pound was quoted at $1.8585, down from $1.8592.


[R]11:30AM Stocks traded in a lackluster fashion.[/R]
Over the course of morning session stock markets have turned volatile, reflecting investors’ cautiousness ahead of FOMC meeting on Wednesday, weaker dollar and falling oil prices. Multibillion merger deals were in the spotlight Monday morning. Golden West Financial Corp. ((GDW)) shares rallied 7.5% after the company agreed to be acquired by Wachovia Corp. ((WB)) for $26 billion. Fisher Scientific International Inc. ((FSH)) stock surged 6% after the company agreed to be acquired by Thermo Electron Corp. ((TMO)) for $10.6 billion, in a move to create a leading provider of laboratory products and scientific equipment. Apple Computer Inc. ((AAPL)) shares gained after the company won a lawsuit filed by Apple Corps, which represents the Beatles'' commercial interests. The decision enables the computer maker to continue to use an apple logo on the iTunes Music Store.

Crude oil prices slipped below $69 a barrel, contributing to significant strength among airlines and other transportation stocks, leading the Dow Jones Transportation Average to a new record high. The price decrease was partly due to news that Iranian President Mahmoud Ahmadinejad sent U.S. President George W. Bush a letter suggesting new solutions to settle the differences between the countries. At the same time, energy stocks came under pressure, following the price decrease, with the oil service sector down 2.2%. Oil and natural gas stocks moved to the downside as well. Significant weakness was visible among gold stocks, reflecting a sharp fall in the price of the precious metal. Gold for June delivery was last traded down $6.30 at $678.00 an ounce. Some defense stocks showed weakness, with shares of United Industrial ((UIC)) down 17% on lower-than-expected Q1 earnings.

[R]10.30 AM Indian Sensex Hits Another High.[/R]
Sensex in India ended up 102.77 points higher, or at 12, 462.47. The turnover on BSE was $1.1 billion or Rs 4,732 crore, flat from previous session. Strong earnings results in Q4 March 2006 and the inflow of mutual funds kept the index on the rise for a second week in a row. The liquidity with mutual funds is stable on strong assembly from stocks based mutual funds in the recent months.

Reliance Industries led gainers and soared 6% to Rs 1,163.80. More than 2.8 million shares were exchanged. Investors were keen to buy the stock prior to the listing of Reliance Petroleum, its subsidiary which is likely to open at a price higher than Rs. 80. Local mortgage lender, HDFC surged almost 5% to Rs 1, 350, as the demand for housing finance is still high. ACC also advanced by 2.3% to Rs 1.011 and Gujarat Ambuja Cements gained 1.9% to Rs 120.

Automotive stocks gained as well. Hero Honda advanced 1.7% to Rs 873 on sales jump of 6.3%. Satyam Computer advanced 0.8% to Rs 782 and Infosys gained 0.4% to Rs 3,226. Tata Steel put up 0.5% to Rs 644.50, lifting its annual contract prices for hot rolled coils by Rs 1,000. There were few decliners, among which was Vijaya Bank, losing 3.7% to Rs 52.20 as the bank posted a quarterly loss.


R] 9:45AM Stocks opened weak on sliding dollar.[/R]
Stocks opened lower on Monday on cautiousness ahead of a Federal Reserve policy meeting on Wednesday, expected to give a clue on further interest rate increases. A weaker U.S. dollar also weighed, offsetting positive sentiment generated by two major mergers. Investors were upbeat about Wachovia''s ((WBM)) $25 billion takeover of Golden West Financial Corp. ((GWC)), as well as a $10.6 billion offer from Thermo for Fisher Scientific International Inc.

In early trading, airline stocks showed significant strength, benefiting from a sharp decline in the price of crude oil. The Amex Airline Index rose 1.6%. ExpressJet ((XJT)) moved notably higher on news that it will retain 69 aircraft being released from its capacity purchase agreement with Continental ((CAL)). Health insurance stocks like Cigna ((CI)) and WellPoint ((WLP)) also posted strength, contributing to a 1% gain by the Morgan Stanley Healthcare Payor Index. Emmis Communications ((EMMS)), diversified media company, jumped 23.4% after its Chairman and CEO offered to acquire the company for $567 million. Meanwhile, crude oil prices fell below $69 a barrel, contributing to a significant weakness in the energy sector. Gold stocks also came under pressure in early trading, as the price of the precious metal came off recent highs. In the first hour of trading, the Dow Jones industrial average rose 20.01, or 0.17%.The Dow is at its highest levels in more than six years, just 125 points from its all-time high of 11,722.98, reached on Jan. 14, 2000. The Standard & Poor''s 500 index was down 0.10, or 0.01%, and the Nasdaq composite index rose 1.59, or 0.07%. Bonds rose, with the yield on the 10-year Treasury note slipping to 5.1% from 5.11% late Friday.


[R]9:00 AM Stock futures indicated a flat market opening.[/R]
U.S. stock futures traded near the flat line, following Friday’s sharp advance. Two big merger deals are expected to be in the spotlight on Monday. Over the weekend, Wachovia ((WB)), the No. 4 U.S. bank, revealed a deal to merge with Golden West Financial ((GDW)), the No. 2 U.S. savings and loan, making a bid of roughly $26 billion in cash and stock. Wachovia agreed to pay 1.051 shares of its stock, valued at $62.42 based on Friday''s closing prices, plus $18.65 in cash for each share of Golden West. The price represents a roughly 15% premium to Golden West''s current market value. Golden West shares were up 7.3% on Inet. In another merger deal, Thermo Electron ((TMO)) agreed to acquire Fisher Scientific ((FSH)) for about $10.6 billion in stock. The deal would create a powerhouse in making scientific supplies and equipment for the life, laboratory and health sciences industries. The price represents a 7% premium over Fisher''s closing price of $73.73 on Friday. Shares of Apple Computer Inc.((AAPL)) rose 1.6% before the opening bell on Monday after a judge in Britain ruled that the company''s iTunes Music Store did not infringe on the trademark of the Beatles'' Apple Corps.

Crude oil prices fell below $70 a barrel on hopes tension over Iran’s nuclear program will ease. Light sweet crude June delivery lost 80 cents to $69.39 a barrel. Gasoline fell 2 cents to $2.0190, while heating oil lost 1 cent to $1.9425. Natural gas futures dropped 13 cents to $6.645per 1,000 cubic feet. London Brent declined 75 cents to $70.20. European gold futures hit new 25-year highs on weaker dollar and growth in the international money supply. In London the precious metal rose to $682 per troy ounce, up from $679.90. In Zurich gold gained to $681.55, up from $678.95. Silver opened at $13.90, up from $13.80. The U.S. dollar slipped in European trading. The euro traded at $1.2770, up from $1.2735. The dollar bought 111.15, down from 112.43 yen. The British pound was quoted at $1.8648, up from $1.8592.

Holly Corp, ((HOC)), petroleum refiner, reported Q1 net income advanced to $1.56 a share from 42 cents a share a year earlier. The company added that income from continuing operations totaled $1.04 a share and sales surged 26.7%, topping analyst estimate for earnings of 92 cents a share.

ServiceMaster Co., ((SVM)), provider of landscaping and lawn services, reported a Q1 loss of 5 cents a share, down from a profit of 4 cents a share a year-ago. On a continuing operations basis, the company earned 4 cents a share in Q1. If not for severance costs and other restructuring charges, the company earned 5 cents a share in Q1. Revenue advanced to $662.4 million from $623.8 million in the same period a year ago. Analysts’ estimate was for a profit of 4 cents a share on revenue of $666.3 million.

United Industrial Corp, ((UIC)), energy and defense company, reported Q1 earnings were 67 cents a share, down 32.4% from 84 cents a share in the same period a year ago. If not for special items, earnings would have been 69 cents a share. Sales advanced 28%. The company missed analysts’ estimate for earnings of 74 cents a share.

Thomas Weisel Partners, ((TWPG)), investment bank, reported that it reversed to a Q1 net income of 96 cents a share, on a one-time tax benefit. If not for a number of items, it would have earned 29 cents a share on 30% revenue growth. Investment banking revenue improved on a rise in transactions as well as average revenue per transaction, the company added. The company topped analyst forecasts for earnings of 28 cents a share.

American Railcar Industries Inc, ((ARII)), railcar manufacturer, reported Q1 net income of 35 cents a share on revenue growth. Q1 includes charges of $3.6 million in stock-based compensation expense related to restricted stock and stock option grants. The company missed analysts view for earnings of 40 cents a share. American Railcar''s net income came to $2.5 million, but the company had a loss of 18 cents a share after deducting preferred dividends; revenue came in $130.9 million.


[R]8:15AM European markets traded mixed at mid-day.[/R]
European markets traded mixed at mid-day as declining oil prices helped markets in Germany and France hit 4 1/2-year highs, while commodity-sensitive London FTSE 100 dropped. All markets gained on strong U.S. markets close Friday after weaker jobs report helped ease interest rate concerns. The German DAX 30 rose 0.5%, supported by 2.4% gain fir Adidas-Salomon and 2% rise in the shares of retailer Metro. The French CAC 40 added 0.4%, while the U.K.’s FTSE 100 fell 0.2% as oil giants BP and Royal Dutch Shell weighed.


[R]7:45AM Asia advanced, led by China Shanghai Composite.[/R]
Asian-Pacific benchmarks surged on Monday, led by China Shanghai Composite which hit a two-year high, rising 3.95% to 1497.10. The index was boosted by gains in oil and real estate issues, following new stock rules which will permit listed Chinese companies to raise extra money on the country''s stock exchanges. Among advancers, China Petroleum & Chemical rose 6.3% and China Yangtze Power surged 6.2%. Insurance, metals and food stocks also advanced. The Nikkei climbed 0.8% to 17,291.67 after the week’s holiday, benefiting from strength in financial and heavy industries. In Hong Kong, the Hang Seng soared 1.7%, supported by metals shares which advanced along with rising commodity prices. South Korea’s Kospi gained 0.8% helped by Samsung Electronics and steelmaker Posco. Australia’s All Ordinaries rose 1.3%, with Rio Tinto and BHP Billiton each rising 3.6%.


[R]7:00 AM Tech stocks close higher after large gains.[/R]
The Nasdaq Composite Index advanced 19 points to close at 2,342. Total volume on the Nasdaq Stock Market came to two billion shares. The positive report from the Labor Department boosted market sentiment that the Fed could end its policy of lifting the interest rates.

Advancers
Activision gained 13% in the trading despite reversing to a fourth-quarter loss on the promise of booming sales of its “Call of Duty 2” product. THQ rose 4.3% after reporting swinging to a quarterly loss, owing to its upcoming game based on “The Sopranos”. Circuit City advanced 11%, following the company’s statement that its earnings have been underestimated by the market and also by the benefits the company gathers from its turnaround efforts.

Decliners
Open Text stock declined 19% due to missed analyst estimate for a quarterly earnings profits and weaker-than-expected sales. Electronic Arts was also down by 11%, following the release of its disheartening guidance. McData sank 4% in the wake of its announcement that the first-quarter profit and revenue would just meet forecasts.