$8.3 B Offer for Aramark

Elena
08 Aug, 2006
New York City

U.S. stocks opened higher on optimism the Fed Reserve will keep its key interest rate steady at 5.25%. In earnings news, Sara Lee Corp, consumer products company, reported it swung to fiscal Q4 net income of 1 cent a share from a year-ago loss of 19 cents. Contact lens maker Bausch & Lomb said it will delay filing its Q2 earnings report and warned that its full-year profits could fall well below estimates.

[R]9:45AM Stocks opened higher on rates optimism and mergers.[/R]
U.S. stocks opened higher on optimism the Fed Reserve will keep its key interest rate steady at 5.25%. Yet a Labor Department report on productivity signaled threatening inflation increase. Economists fear that slower productivity and higher costs could lead businesses to increase prices, thus triggering inflation.

Merger-and-acquisition news dominated the headlines Tuesday. Food service company Aramark Inc. ((RMK)) agreed to be taken private by a group of investors led by its chairman in a deal worth $8.3 billion, including the assumption of $2.3 billion in debt. Under the terms of the offer, shareholders of Aramark, will receive $33.80 in cash for each share of Aramark common stock they hold. The offer tops a $32 a share bid in May by the same buyout group. Aramark shares dropped 1%. In another deal, metal products maker Aleris International ((ARS)) agreed to a $1.7 billion takeover offer from private equity firm Texas Pacific Group. Company’s shares shot up 24%.

In earnings news, Caremark Rx Inc., pharmaceutical service provider, posted 20% jump in second quarter profits and lifted its full-year forecasts. Packaged food producer Sara Lee Corp. posted Q4 profit after a year-ago loss, beating estimates. In early morning trading, the Dow Jones industrial average rose 30.89, or 0.28%.The Standard & Poor's 500 index added 3.01, or 0.24%, and the Nasdaq composite index gained 3.50, or 0.17%. Bonds were little changed ahead of the Fed meeting, with the yield on the 10-year Treasury note steady at 4.92% from late Monday.


[R]Labor productivity and costs rose more than expected.[/R]
Tuesday morning, the Department of Labor released its preliminary report on labor productivity and unit labor costs in the second quarter. The report showed that productivity and labor costs both rose more than economists had expected. The Labor Department said that productivity in the non-farm business sector rose 1.1 percent in the second quarter compared to an upwardly revised increase of 4.3 percent in the first quarter. Economists had been expecting second quarter productivity to grow by about 0.9 percent compared to the 3.7 percent growth originally reported for the previous quarter. The report also showed that unit labor costs rose 4.2 percent in the second quarter following an upwardly revised increase of 2.5 percent. The increase in the second quarter exceeded economist estimates of a 3.8 percent increase in unit labor costs. Unit labor cost growth in the first quarter was revised up from the 1.6 percent increase previously report.


[R]9:00AM Stock futures pointed to a higher start ahead of FOMC meeting.[/R]
U.S. stock futures moved higher Tuesday morning, supported by strong beliefs the Fed Reserve would pause in its two-year monetary tightening cycle at a meeting later today. The Federal Open Market Committee is expected to halt a run of 17 straight interest-rate rise, keeping its key rate steady at 5.25%. A number of merger deals also helped lift sentiment. Shares of McData Corp. ((MCDT)) jumped 32% before the opening bell on Inet after Brocade Communications Systems Inc. ((BRCD)) said it agreed to buy the company for $713 million. Also on the deal front, aluminum products maker Aleris International Inc. ((ARS)) said it agreed to be acquired by Texas Pacific Group Ventures Inc. in a $1.7 billion deal. Nokia ((NOK)) said it had agreed to buy U.S. digital music distributor Loudeye Corp. ((LOUD)) for $60 million.

On the earnings front, Clear Channel Communications Inc. ((CCU)) posted a lower quarterly profit, while Sara Lee Corp. ((SLE)) posted a slight quarterly profit. Shares of eye care products maker Bausch & Lomb Inc. ((BOL)) may be in focus after the company warned of 79% decline in its 2006 pretax earnings, compared to previous forecast. Cisco Systems ((CSCO)) is expected to post results after the market''s close. Standard & Poor''s 500 futures rose 1.9 points, above fair value. Dow Jones industrial average futures were up 19 points, and Nasdaq 100 futures gained 3 points.

Aleris, ((ARS)), aluminum products maker, reported its Q2 profit more than doubled to $1.75 a share, compared to 60 cents a share a year ago. Revenue in Q2 rose to $1.01 billion from $603.6 million last year.

Polo Ralph Lauren ((RL)), fashion brand, reported Q1 net income rose to 74 cents a share, from 48 cents a share in the year-ago period. Net sales increased to $903.3 million from $694.6 million. The company beat analysts’ forecasts for earnings of 67 cents a share.

Sara Lee Corp, ((SLE)), consumer products company, reported it swung to fiscal Q4 net income of 1 cent a share from a year-ago loss of 19 cents. On a continuing operations basis, the company reported a loss of 15 cents a share versus year-ago income of 38 cents. Sales from continuing operations advanced to $4.1 billion from $4.03 billion last year. The company, which is the process of shedding businesses, added it expects to complete the spin off of its Hanesbrands Inc. apparel business on Sept. 5, with the company trading on the New York Stock Exchange the following day.

Overseas Shipholding Group, ((OSG)), tanker company, reported Q2 earning of $1.52 a share, down from $2.89 a share in the same period a year ago, when it benefited from gains on vessel sales. The company said total shipping revenue fell to $230.8 million from $238.4 million a year earlier. Time charter equivalent revenue shed 5% in Q2 to $216.3 million from $228.6 million a year ago. Time charter equivalent revenue represents shipping revenue less voyage expenses. The company was in line with analysts’ estimates for earnings of $1.52 per share.

Gold Kist Inc, ((GKIS)), chicken company, reported a fiscal Q3 loss of 14 cents a share, down vs. a profit of 87 cents a share a year earlier on revenue decline, due primarily to a decline in average boiler prices and competing meats. The company met analysts expectations for a loss of 14 cents a share.


[R]8:00AM Texas Pacific to buy Aleris for $1.7 billion.[/R]
Aleris International Inc. ((ARS)), aluminum and zinc producer, announced that it agreed to be acquired by Texas Pacific Group for $1.7 billion in cash. The private-equity firm also agreed to assume or repay $1.6 billion of debt, with debt financing committed by Deutsche Bank. The deal''s expected to be completed early next year. Under the terms of agreement Aleris stockholders will receive $52.50 for each common share, a premium of nearly 27% to Aleris''s Monday closing price of $41.39.

Aleris, formed in the 2004 merger of Imco Recycling Inc. and Commonwealth Industries Inc., ranks as one of the largest recyclers of aluminum and zinc in the world and one of North America''s leading manufacturers of common-alloy sheet from recycled aluminum, serving customers in transportation, building and construction, and consumer durables industries. Texas Pacific will acquire a company that operates 50 production facilities in North America, Europe, South America and Asia. Last week, Aleris completed the purchase for about $1.1 billion of rolling and extrusion businesses previously.


[R]7:30AM Japanese stocks soared, leading the entire region higher.[/R]
Asian markets finished higher on Tuesday. The Nikkei 225 Average gained 2.05% to close at 15,464.66 as exporters such as Toyota and Fujitsu led the gainers. Toyota Motor gained 2.65% and Honda Motor added 2.67%. Electronics maker Fujitsu Ltd advanced 2.33%. Oil explorer Inpex Holdings jumped 2.73% and refiner, Nippon Oil Corp, rose 1.96%.

Hong Kong''s Hang Seng Index gained 0.56% to finish the day at 17,048.20 as telecom, property and energy shares all put in a strong showing. China Mobile, Henderson Land and and CNOOC Ltd. were among the advancing stocks.

China''s Shanghai Composite gained 2.1%, South Korea''s Kospi Index advanced 1.67% and Australia''s S&P/ASX 200 index added 1.27%, with miners BHP Billiton and Rio Tinto climbing in spite of a strike in a key Chilean copper mine jointly owned by the two firms. Korean mobile-phone maker, LG Electronics, rose 1.7%.


[R]6:30AM European markets advanced as crude oil prices eased.[/R]
European markets rose on Tuesday. The FTSE 100 in London was 0.2% higher at 5,842.6, the Xetra Dax in Frankfurt nudged up 0.8% to 5,668.78 and the CAC-40 in Paris advanced 0.5% at 4,983.28. In spite of the retreat most oil companies advanced with Neste Oil up 1.4%, Norsk Hydro gaining 0.9% and Statoil adding 0.8. The sector as a whole though was pushed lower by BP’s 1% retreat in continued fallout from its shutdown of the Prudhoe Bay field.

Metrovacesa, the Spanish property company, advanced 2.7%, as Spain’s stock market regulator said it would not rule on an improved offer for Metrovacesa until September. Salzgitter advanced 5% after the German steel maker sold its entire 17% stake in Vallourec, a French steel tube manufacturer. Vallourec shares slipped 4.4%.

Rheinmetall, a German car parts and defence group, plunged 3.8% on disappointment with a 1.4% rise in first-half operating profit and Swiss reinsurer Converium rose 0.7% after beating forecasts with second-quarter net profit.

Light sweet crude oil for September delivery declined 28 cents to $76.70 a barrel in midmorning, while September Brent at London''s ICE Futures exchange fell 41 cents to $77.89 a barrel. Gold traded at $646.00 an ounce, down $2.50 an ounce from Monday''s close of $648.50.

The euro on Tuesday continued its slight slip against the U.S. dollar ahead of a meeting by the Federal Reserve. The euro purchased $1.1.2835 in early European trading, marginally below its level of $$1.2839 in New York late Friday. The British pound fell to $1.9052 from $1.9061. The dollar gained advanced the Japanese currency, rising to 115.08 yen from 115.07 yen.