Mittal Improves Arcelor Offer

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

Market averages remained under pressure worldwide. Markets in Asia and Europe closed lower for the second week on the heels of lower metals and oil prices and worries of rising inflation and interest rates. Mittal improved on its offer for Arcelor and offered to cut its stake to 45% of the combined company. Mittal also proposed a $800 million plan to modernise iron ore mine production in Ukraine.

[R]3:30PM Mittal revises the offer but Arcelor is still not ready.[/R]
Mittal Steel ((MT)), after only one day of formally launching its offer for its competitor Arcelor ((ARLOY)), raised its bid by 34% to €37.74 a share or €25.8 billion, an increase of €9.53 per Arcelor share. There would also be a maximum of approximately €7.6 billion of cash, an increase of 57% over the previous offer, to be paid by Mittal and additionally a maximum of 684.46 million shares of Mittal will also be issued. Based on the average closing price, on the NYSE, of Mittal shares of the 30 days prior to May 19th 2006, the revised offer values each Arcelor share at €41.5. This offer values Arcelor at an equity value of €25.8 billion on a fully diluted basis.

Under the terms of the revised offer, Arcelor shareholders will receive one Mittal share and €11.10 in cash for every Arcelor share; or €37.74 per share for each Arcelor share, subject to adjustments, including Arcelor’s announced dividend. The offer is 70% over the pre-announcement closing price of Arcelor’s stock.

Additionally, Mittal intends to relocate the company’s global headquarters and domicile to Luxembourg. It would also agree to give up the extra voting rights on shares held by the Mittal family. Arcelor’s shares closed down 5.57% and Mittal’s shares closed down 8.49%.

[R]3:15PM Russian Index RTS Plummets 9.1% and 25% lower in eight days.[/R]
Russian market declines 9.1% and loses 25% in last two weeks of trading on a volume of $1.2 billion. Declining oil and commodity prices have finally caught up with emerging markets and rising interest and inflation rates in the U.S. are spreading around the world. Russian oil, metals and consumer products companies led the decliners. Gazprom lost 12% and Lukoil lost 8% at close. Surgutneftegaz lost 15% and Sibneft slid 9%. In the world market oil price is down from $75 a barrel to $69 a barrel in the last ten days. NorNickle plunged 13% as world copper, gold and zinc prices declined for the third day in a row.

Emerging markets around the world continued to slide led by declines in Asia, Latin America and Europe. India lost 4% today and lost 20% in the last ten trading days. Brazil and Mexico lost 4% and 5% respectively in today’s trading.

[R]2:15PM Hastings announces positive earnings.[/R]
Hastings Entertainment, Inc ((HAST)), a multimedia entertainment retailer, reported earnings of 17 cents per diluted share or $1.9 million up from 6 cents a share in the year-earlier period. In the last three months revenues rose $131.4 million up from $129.1 million a year ago. Total revenues for the year have risen to 1.8%. Same-store sales increased 2.4% for the quarter. Gross profit dollars for Q1 increased 5.9% or approximately $2.6 million to $46.6 million from $44 million a year ago. This was primarily the result of increased volume as well as lower freight, shrinkage and returns expense. As a percentage of total revenues, gross profit increased to 35.5% up from 34.1% in the year-ago period. Selling, General and Administrative expenses increased 32.6% approximately $0.6 million to $42.9 million for Q1 in comparison to 32.8% to $42.3 million a year ago.

The company’s board of directors approved $5 million shares of common stock to be repurchased on March 15th 2006 in addition to the prior $7.5 million from September 18th, 2001 (of $5 million shares) and April 4th, 2005 (of $2.5 million shares). As of April 30th, 2006 a total of approximately 1.2 million shares have been repurchased at a cost of approximately $6.7 million, for an average cost of $5.23 a share. The company did not, however, repurchase any shares during Q1 of this year. The company currently operates 153 superstores that average 20,000 square feet, primarily in mid-sized markets throughout the US. The stock is up at 1.2% this afternoon.

Boykin Lodging Co. ((BOY)), a real estate investment trust that owns interests in 21 hotels in 13 states, has agreed to be acquired by Braveheart Holdings LP, an affiliate of Westmont Hospitality Group and Cadim Inc., which is a division of Caisse de depot et placement du Quebec for $11 a share. The total cost of the acquisition is approximately $416 million. Braveheart’s acquisition of Boykin also includes an assumption of the company’s debt. The offer is 20% more than Boykin’s May 19th closing price of $9.20. Before today, shares of Boykin’s stock had fallen 25% this year. Boykin’s stock is up in afternoon trading at 17%.

[R]12:30PM European markets closed sharply lower.[/R]
European markets finished steeply lower, continuing a downward trend started last week when inflation and higher interest rates weighed. On Monday market sentiment was hurt by a heavy sell-off in the metals and energy sectors, reflecting a decrease in commodities prices. In merger-and-acquisition news, the NYSE Group Inc. proposed a $10.2 billion purchase of pan-European stock-exchange operator Euronext. Arcelor fell 5.6% after its board postponed a decision on whether to accept a 25.8 billion euro bid from rival Mittal Steel. The German DAX 30 slipped 2.2%, the French CAC 40 tumbled 2.56%, and London FTSE 100 dropped 2.2%.

Oil declined to $68 on rising inflation concerns and broad commodities stocks sell-off. Light crude fell 53 cents to $68 a barrel. London Brent crude shed 34 cents to $68.34. Gasoline lost 2 cents to $2.0175 per gallon. European gold further declined. In London the precious metal fell to $652 an ounce from $653.60. In Zurich gold traded at $651.45, down from $653.50. In London silver fell to $12.30 from $12.70. The dollar traded mixed in European trading. The euro traded at $1.2813, up from $1.2772. The dollar bought 112.11 yen, up from 111.66. The British pound stood at $1.8805, up from $1.8780.

[R]11:30AM Market averages traded lower. The Nasdaq fell 1%.[/R]
Stocks continued their downward trend, with commodities helping to lead the markets lower. The gold sector was one of the market''s worst performances, as a retreat in the price of the precious metal, down $5 to $652.50, generated selling pressure. The Amex Gold Bugs Index dropped 3.3%, moving lower for the eighth consecutive session. Significant weakness also remains visible among energy stocks, with the Philadelphia Oil Service Index currently down 2.7 percent while the Amex Oil Index is down 2.5 percent. Energy stocks also posted weakness on declining oil prices.

Semiconductor stocks were under pressure, contributing to a 3.2% loss by the Philadelphia Semiconductor Index. Marvell Technology ((MRVL)) led the sector lower after posting a strong gain in the previous session. Retail stocks also moved to the downside, led by Lowe''s ((LOW)), down 3.7%, despite reporting better-than-expected Q1 earnings. The S&P Retail Index lost 1.5%. Considerable losses by some brokerage, housing, and disk drive stocks also helped to drag the markets lower. Among brokerage stocks, Bear Stearns ((BSC)) and Goldman Sachs ((GS)) stood out among losers. At the same time, utilities stocks bucked the downtrend by the broader market, contributing to a 0.8% gain by the Dow Jones Utilities Average.

[R]10:30AM Stocks were weak. Semiconductors and commodities dropped.[/R]
Continued inflation concerns and a heavy sell-off in commodities pulled market averages to the downside, with the Nasdaq falling 1%.Oil and gold stocks steeply dropped, following a recent surge that led commodities prices to historic levels. The gold sector posted a particularly sharp decline, falling by about 3.5%. Energy stocks were also weak, led by the oil service sector, down about 2.2%. The oil and natural gas sectors each showed declines of 1.8%. Dow component Exxon Mobil Corp. ((XOM)) fell 1%, and ConocopPhillips ((COP)) slid 1.8%. The semiconductor sector moved considerably down, following a rally Friday, when a sharp rise in shares of AMD ((AMD)) helped the sector snap a 9-session losing streak. In early trading, the sector was down about 2%. A decrease in the price of oil helped the airline sector to recover. Drug and bank stocks were also among the early advancers, though posting modest gains only. In midmorning trading, the Dow Jones industrial average fell 45.79, or 0.41%. The Standard & Poor''s 500 index was down 7.61, or 0.6%, and the Nasdaq composite index dropped 23.29, or 1.06%. Bonds extended their recent recovery, with the yield on the 10-year Treasury note slipping to 5.01% from 5.05% late Friday.

[R] 9:45AM Stocks opened in the negative on inflation worries.[/R]
U.S. stocks opened in the negative on profit-taking and concerns about inflation and higher interest rates. Negative sentiment was also generated by sharp declines in overseas markets. The semiconductor sector moved notably to the downside, following a strong performance Friday. The Philadelphia Semiconductor Index fell 2.2% in early trading. Commodities stocks also came under pressure, reflecting a decrease in commodities prices. Gold stocks posted particularly steep losses. Shares of oil companies like Exxon Mobil Corp. ((XOM)) and ConocoPhillips ((COP)) fell as U.S. crude futures slid 86 cents to $67.67 a barrel.

The New York Stock Exchange unveiled a proposal to buy pan-European exchange operator Euronext N.V for $10.2 billion, outbidding a rival offer from Germany''s Deutsche Boerse, which was announced Friday. NYSE said that the acquisition would benefit global securities markets and all of its stakeholders. Euronext said that its supervisory board would hold a meeting on Monday to consider the offer from NYSE and the proposal from Deutsche Boerse.

In other merger-and-acquisition deals, a group of private investors said they succeeded in a $9.7 billion bid for Dutch publishing company VNU, which publishes Billboard and Hollywood Reporter magazines. Wal-Mart announced plans to sell its South Korean unit to local retailer Shinsegae for $882 million. UBS upgraded telecommunications-equipment provider Lucent Technologies to buy from neutral, saying the merger with Alcatel will likely achieve synergies of 1.2 billion euros in 2008. UBS also upgraded coffee chain Starbucks to buy from neutral, citing accelerating same-store sales momentum and better-than-expected cost controls. Piper Jaffray upgraded Electronic Arts to outperform from peer perform, citing valuation.

Lowe''s Cos., ((LOW)), home improvement products retailer, reported Q1 earnings of $1.06 a share, up from a profit of 73 cents a share a year-ago. Sales soared 20.3% in Q1 to $11.92 billion from $9.91 billion in the same period a year earlier and same-store sales rose 5.7%. The company topped analysts’ estimate for a profit of 94 cents a share.

Double Hull Tankers Inc, ((DHT)), shipping group, reported Q1 profit advanced to 39 cents a share, from 32 cents a share a year ago on 20% revenue growth. The company added it continues to see growing demand by charterers for double-hull tankers compared to single hull tankers, leading to a premium being paid for the former.

Hasting Entertainment Inc, ((HAST)), entertainment products retailer, reported Q1 earnings of 17 cents a share, up from a profit of 6 cents a share a year-earlier on revenue growth and 2.4% same-store sales growth. The company reassured its guidance for earnings of 58 to 63 cents a share for the year.

Corning Inc, ((GLW)), technology corporation, reaffirmed its guidance for earnings before items of 24 to 26 cents a share in the Q2 on sales of between $1.29 billion and $1.33 billion. The company said that this outlook includes a negative impact of 1 cent a share from a power outage following a lightning strike at an LCD plant. The company added it expects sequential liquid crystal display glass volume for its Display Technologies business to be between flat and down 5% for Q2, below its previous estimate for volume to be between flat and up 5%.

Golf Galaxy, ((GGXY)), specialty golf retailer, cut Monday its Q1 sales guidance, on weakness in its catalog and ecommerce operations and a slower start to the spring season for its retail stores. The company added it now expects sales between $82 million and $83 million, down from a previous estimate of $84 million to $88 million and same-store sales growth to be zero to up 2% for the quarter. The company however lifted the lower end of its profit forecast range, due to solid expense management and a meaningful year-over-year improvement in the gross profit rate at its retail stores. It now sees net income between 19 cents to 22 cents a share versus a prior estimate of 17 cents to 22 cents a share.

[R]9:00AM Indian Sensex shed 10% on sales and weak Asia.[/R]
Sensex in India fell 10%, or 457 points to close at 10,481.77. The turnover on the BSE was $900 million or Rs 3,978 crore, down from Friday’s $1.2 billion or Rs 5,134 crore. Most small-cap and mid-cap stocks ended lower today. Sensex index lost 10% in the first two hours of trading triggering trading halt in the afternoon Market managed to recover but sill closed 4.2% lower for the day. Sensex has lost 20% from the recent high of 12,612 reached on May 10th, 2006.

Satyam Computer was one of the few stocks that closed 2.3% higher, at Rs 680. Others to end in positive territory were Bharat Heavy Electric Ltd., 0.5% higher to Rs 1,970, Cipla, up 0.2% to Rs 222 and ICICI bank, finishing 0.2% up to Rs 558.

Metal stocks led the decliners with Hindustan Zinc, losing 20% to Rs 631.55, Sterlite Industries, down 11% to Rs 360.30 and Nalco declining 6.4% to Rs 229. Tata Steel lost 7.6% to Rs 465, while Hindalco was down 4.6% to Rs 180. Tata Motors also lost 7.5% to Rs 785, following its disappointing earnings report. Among other companies hit the most were Wipro, declining 8% to Rs 451, Grasim, down 8% to Rs 1,770. Cement stocks were also struck as Ultra Tech Cement shed 8% to Rs 635. Maruti Udyog declined 7% to Rs 729 and heavyweight Reliance Industries suffered a hefty 5% loss to Rs 926.050.

[R]8:00AM The NYSE Group Inc. offered 8 billion euros for Euronext.[/R]
On Monday the New York Stock Exchange offered 8 billion euros ($10.2 billion) in cash and shares for Euronext which runs the Paris, Brussels, Amsterdam and Lisbon exchanges. The offer launched by the NYSE Group Inc. outbid a rival offer for the European stock exchange operator from Germany''s Deutsche Boerse. The merging of the two stock exchanges would create ‘the world''s largest and most liquid global securities marketplace’ with combined listings of $27 trillion. Euronext said in a statement that its supervisory board will meet Monday to consider the offer both from the NYSE and the proposal from Germany''s Deutsche Boerse AG announced Friday.

According to terms proposed, each NYSE share would be converted into one share of common stock of the combined company, which would be named NYSE Euronext. Holders of Euronext ordinary shares would be offered the right to exchange each of their shares for 0.980 shares of NYSE Euronext stock and 21.32 euros ($27.22) in cash. The transaction terms also assume Euronext will pay to its shareholders its ordinary dividend of 1 euro ($1.28) per share this year and its previously announced extraordinary dividend of 3 euros ($3.83) per share. NYSE Euronext common stock would be listed on the New York Stock Exchange and Euronext.

Over the weekend Eurionext received further details of Deutsche Boerse''s proposal. DB clarified that the value of its offer would be based on the two groups'' average share price over the three months leading up to the closure of a deal. Deutsche Boerse issued a statement Monday denying a report that it would consider an all-share offer valuing Euronext at about 90 euros ($115) a share, but said it remains in contact with Euronext. Shares in Deutsche Boerse fell 5.3% to 104.85 euros ($134.02) on the Frankfurt exchange. Euronext dropped 1.9% to 73.15 euros ($93.50).

[R]7:30AM Asian markets closed mostly down save for Singapore and Taiwan.[/R]
Asian markets closed mixed. The Nikkei shed 1.8% to close 15858. Japan shares canceled out early gains as a drop in crude oil and metal prices hit Sumitomo Metal, down 3.9% and other raw material makers, such as Showa Shell Sekiya, losing 3.5%. Some big exporters bucked the downtrend to some extent. Toyota was up 0.66% and Sony gained 1.38%. Commodity prices struck Hong Kong stocks, as Hang Seng Index lost 2.5% to finish at 15910, with mining companies leading the decliners. Lingbao Gold slumped 12.6% and Jiangxi Copper was down 8.7%. South Korea''s Kospi Index ended 2.5% lower at 1338.59, with Hyundai Motor shedding 5.3%. Singapore''s Straits Times Index advanced 0.7% and Taiwan''s Weighted Index gained 0.3%. Australia''s S&P/ASX 200 fell 0.3% due to mining stocks dropping on diving metal prices.

[R]6:30AM European stocks incur losses on commodities and Asian weakness.[/R]
European markets slipped to a four-month low on Monday on commodity sell-off and Asian stocks giving up earlier gains. Banks led decliners as Deutsche bank slid 1.3% and Credit Suisse fell 1.8%. UBS also joined in to lose 2.4%. Oil companies lost too, as Statoil, the Norwegian oil company, fell 1.2% and Royal Dutch Shell shed 1.4%. Mining companies suffered heavily. Antofagasta was down 7.7% and Xstrata shed 1.4%. Mergers provided some respite with Alliance & Leicester, UK bank, gaining 6.1%, after an assessment by Credit Agricole, its potential buyer. In other news, Arcelor said it was in the process of reviewing Mittal Steel’s revised offer to decide on it.

Crude oil was trading 98 cents down at $67.55 a barrel at 0819 GMT after falling more than $1 to its lowest level since April 10. Brent crude was 84 cents lower at $67.85. Gold topped a high of $661.25 an ounce ahead of falling to as low as $643.00 ounce as fund selling speeded up. The U.S. dollar advanced against most other major currencies in European trading Monday. The euro bought $1.2753, down from $1.2772 late Friday in New York. The greenback traded at 112.49 yen, up from 111.66. The British pound traded at $1.8728 down from $1.8780.