U.S. Housing Starts Drop, Oracle Net Up 8%

Arthi Gupta
19 Jun, 2012
New York City

U.S. indexes gained and housing starts fell. Walgreen agreed to acquire 45% stake in Alliance Boots for $6.7 billion. Air Products agreed to buy stake in Chile-based Indura for $884 million. Brookfield Office agreed to purchase office buildings in London for $829 million. Oracle net rose 8%.

[R]9:35 AM New York – U.S. indexes gained and housing starts fell. Walgreen agreed to acquire 45% stake in Alliance Boots for $6.7 billion. Air Products agreed to buy stake in Chile-based Indura for $884 million. Brookfield Office agreed to purchase office buildings in London for $829 million. Oracle net rose 8%.[/R]

U.S. indexes edged higher ahead of the 2-day FOMC meeting beginning today and investors hope for additional stimulus measures and the extension of the long maturities dated bond purchase program from its June expiry.

U.S. housing starts fell less than estimated to 708,000 in May and FedEx quarterly earnings fell 1%.

European markets gained on the rising hopes that political leaders in Greece haggle to form a new government that may demand loosening of bailout terms and Spain bond yields rose at the latest debt auction.

Asian stocks ended on a mixed note tracking developments in Europe.

U.S. Housing Starts Drop

U.S. housing starts declined 4.8% at a seasonally adjusted annual rate of 708,000 in May from the revised April estimate of 744,000, according to the data released by the U.S. Commerce Department today.

The revised April housing starts are the highest since October 2008.

Walgreens, Alliance Boots Ink Strategic Partnership

Walgreen Co. and Alliance Boots GmbH entered into a strategic transaction that will create a global pharmaceutical leader with 11,000 stores in 12 countries and presence in 25 nations and 370 distribution centers and serve 170,000 pharmacies.

Walgreen will acquire 45% stake in Alliance Boots for a total of $6.7 billion in cash and stock comprised of $4 billion in cash and 83.4 million shares. Walgreen could also acquire the full control of the company by 2015 for $9.5 billion in cash and stocks.

Walgreen at the end of 2011 had 8,210 store locations and the deal will expand its presence in Europe and emerging markets.

The transaction is expected to be accretive to Walgreens net earnings per diluted share in the first year following completion of the initial step of the transaction, by approximately 23 cents to 27 cents, excluding one-time transaction costs.

Stefano Pessina, executive chairman of the company with the investment firm KKR acquired Boots in 2007 for 12 billion pounds and since then the drug retailer has acquired several other companies to expand its reach in emerging markets.

Goldman Sachs and Bank of America offered short term financing of $3.5 billion to Walgreen before the company lined up permanent capital.

Air Products to Buy Stake in Chilean Company

Air Products & Chemicals Inc. said it agreed to purchase a 67% majority stake in Chilean industrial gas company Indura S.A. for $884 million or 451 billion Chilean peso. The company said the acquisition would enhance its growth opportunities in the region and be accretive to Air Products earnings per share in fiscal 2013.

Brookfield Office to Acquire Office Buildings Portfolio

Brookfield Office Properties Inc. agreed to acquire a portfolio of premier office buildings and a development site in the London financial district from Hammerson plc for $829 million or £518 million.

The portfolio consists of four operating assets totaling 884,000 square feet which is being acquired at an initial yield of 6%. In addition, the acquisition includes a development site with in-place planning consent for an office and residential tower comprising 857,000 square feet.

InterDigital Sells Patents to Intel

InterDigital Inc. agreed to sell about 1,700 patents and patent applications to Intel Corp. for $375 million in cash, related to 3G, LTE and 802.11 technologies. The deal is expected to close in the third quarter of 2012.

Earnings Review

Autodesk, Inc. ((ADSK)), the design software maker confirmed its outlook for the second quarter. The company estimated earnings to be between 29 cents and 34 cents per share and revenue between $580 million and $600 million for the second quarter.

FedEx Corporation ((FDX)), the parcel delivery company said fourth quarter revenues grew 4% to $11 billion from $10.6 billion in the prior-year quarter. Net income in the quarter fell 1% to $550 million or $1.73 per diluted share compared to net income of $558 million or $1.75 per share last year.

IHS Inc. ((HIS)), the information and analytics company said second quarter revenue rose 20% to $387 million from $323 million a year ago. Net income for the quarter climbed 10% to $44 million or 66 cents per diluted share compared to net income of $40 million or 61 cents per diluted share last year.

Oracle Corporation ((ORCL)), the enterprise software developer said fourth quarter revenue rose 1% to $10.92 billion from $10.78 billion a year ago. Net income for the quarter increased 8% to $3.5 billion or 69 cents per diluted share compared to net income of $3.2 billion or 62 cents per share for the year-ago quarter.

For fiscal year 2012, total revenues were up 4% to $37.1 billion and net income was up 17% to $10 billion.

Walgreen Company ((WAG)), the drugstore chain stated third quarter net sales dropped 3.4% to $17.75 billion from $18.37 billion in the prior-year quarter. Net earnings in the quarter fell 10.8% to $537 million or 62 cents per diluted share compared to net earnings of $603 million or 65 cents per share last year.

Total same store sales fell 6.6% in the quarter and front of the store same stores decreased 0.9% and same store traffic declined 2.6% but average basket size increased 1.7%. Prescription sales, which are 65% of total sales declined 6.6% and same store prescription sales plunged 9.9%.