Arcelor to Merge with Russian Severstal

Elena
26 May, 2006
New York City

Stock futures pointed to a lackluster opening ahead of holiday weekend and economic data. On Friday steelmakers are seen in the spotlight as Arcelor SA, rejecting a hostile bid from rival Mittal Steel Co., reached a deal that would give it a controlling stake in Russian largest steelmaker Severstal and $1.59 billion in cash in exchange for 32% of Arcelor.

[R]9:00AM Stock futures were mixed ahead of economic data.[/R]
U.S. stock futures were mixed Friday, ahead of the long holiday weekend and several economic data releases, including the April core personal consumption expenditure deflator and data on April personal income and personal consumption expenditure. On Friday steelmakers are expected to be in the spotlight after Arcelor agreed to merge with Russia's Severstal. The deal would give it a controlling stake in Russian largest steelmaker Severstal and $1.59 billion in cash in exchange for 32% of Arcelor. Other European steelmakers like Corus Group advanced after the deal on consolidation hopes. Brokerages may draw attention after three of them, Goldman Sachs, Merrill Lynch & Co., and Charles Schwab drew upgrades. General Motors ((GM)) was upgraded for a second time in three days, with Prudential raising its rating of stock to overweight. Large-sized women''s apparel company Chico''s FAS posted a 20% sales increase and Weight Watchers International''s $250-million buyback plan. Dow Jones futures were recently up 12 points, S&P 500 futures eased 0.7 of a point, and Nasdaq futures were down 0.8 of a point.


Rex Stores Corp, ((RSC)), consumer electronics retailer, reported Q1 earnings of 13 cents a share, down from a profit of 48 cents a share a year-ago. The company added that it incurred $600,000 in stock option expense in Q1. Sales declined to $86.1 million from $87.9 million in the same period a year ago while same-store sales inched 0.5% higher in Q1.


[R]8:00AM Lay and Skilling were found guilty on Enron-related charges.[/R]
On Thursday, chairman Kenneth Lay and former president Jeffrey Skilling of former Enron Corp., were found guilty on Enron-related charges. A jury capped a four-month-long fraud and conspiracy trial, returning guilty verdicts against the two executives. Kenneth Lay, Enron''''s founder, was convicted of all six counts in the main trial, as well as of four charges of bank fraud and making false statements to banks in a separate non-jury trial before U.S. District Judge Sim Lake. Skilling was convicted of 19 counts of fraud, conspiracy and insider trading. About 5 years ago Skilling sold 500,000 shares of Enron stock for $15.5 million, for which he was convicted of insider trading. He was acquitted on the remaining nine insider trading charges.

Lake set Sept. 11 as sentencing date for Skilling and Lay. Skilling faces a maximum of 185 years in prison. For Lay, the fraud and conspiracy convictions carry a combined maximum punishment of 45 years. Jurors found out that the men, who received millions in pay and stock options, had repeatedly lied to cover up accounting tricks and business failures that led to the company''''s 2001 destruction. The collapse wiped out more than $60 billion in market value, almost $2.1 billion in pension plans and 5,600 jobs.

Skilling remains free on $5 million bond, which restricts him to the continental U.S. Lay submitted his passport and posted a $5 million bond secured with property. The Enron founder also was ordered to stay in the Southern District of Texas or Colorado. The government''s victory caps a 4 1/2-year investigation that resulted in 16 guilty pleas from ex-Enron executives, including former Chief Financial Officer Andrew Fastow and former Chief Accounting Officer Richard Causey.


[R]7:30AM Asian stocks advance on positive overseas sentiment.[/R]
Asian markets finished higher. Japan’s benchmark Nikkei 25 Average advanced 1.77% to close at 15970.76 points. Among gainers in Tokyo were Toshiba Machine, advancing 2.8% and Nippon Steel, climbing 2.6%. Banking and other financial sector shares also recovered some of their losses Friday after Thursday’s sell-off. Resona Holdings soared 7.3% and Mitsui Sumitomo Insurance reported a 2.9% gain. Hong Kong stocks recouped, led by property and export companies. The Hong Kong’s Hang Seng Index advanced 1.3% to 15895.10. South Korea’s Composite Stock Price Index, or Kospi, finished up 2.1% at 1322.43, hitting a six-month low on Thursday. Kookmin Banksurged 7.4%, SK Telecom advanced 5.1% and Hyundai Marine & Fire Insurance rose 7.4%. Taiwan’s Weighted Price Index advanced 0.3% to 6879.51 and Shanghai Composite Index climbed 1.4% to 1613.89. The Shenzhen Composite Index advanced 2% to 404.43 and Australia''''s S&P/ASX200 index gained 1.6% to 5053.7.


[R]6:30AM Europe advances in the morning on Arcelor and U.S. higher close.[/R]
European markets started higher in the morning session of trading. On the corporate front, Arcelor, still fighting a hostile takeover bid from Mittal Steel, announced that it had agreed to buy Russia’s Severstal. Despite the deal, Arcelor fell 4.1%, while its rival Mittal Steel gained 2.8%. Another steel maker, Thyssen Krupp, also added 4.2%. Natexis Banque Populaire, an investment bank soared 10% on hopes that the merger with Caisse d’Epargne’s IXIS can now proceed. Deutsche Börse jumped 3.9% and Euronext climbed 2.4% after being upgraded both by Credit Suisse to ''outperform''.

Crude oil advanced 15 cents to $71.47 a barrel by 0247 GMT; London Brent crude gained 17 cents at $70.88. Gold bullion opened Friday at a bid price of $650.80 a troy ounce, higher than $643.75 late Thursday. The dollar gained against the euro. The euro bought $1.2785 in morning European trading, down from $1.2793 in New York late Thursday. The British pound remained virtually unchanged, moving up to $1.8718 from $1.8717. The dollar advanced to 111.92 Japanese yen from 111.76 yen.