LSE Rejects Nasdaq Offer of $5.1 B

Elena
20 Nov, 2006
New York City

The London Stock Exchange rejected a fresh takeover bid from The Nasdaq Stock Market which made its second attempt to acquire the company. LSE said that the $5.1 billion bid ''substantially undervalued'' the London Market. The offer represents a premium of 54% on LSE''s closing price March 10, the day before the LSE said it had received an approach, and was the minimum bid it could make under British takeover rules.

[R]9:45AM Stocks opened lower, despite multibillion-dollar deals.[/R]
Stocks opened slightly lower on Monday, despite several megadeal announcements with a combined value of more than $70 billion. Investors, still worried about the health of the economy, were more cautious than usual when there is a flurry of merger news. The five major acquisition deals included Blackstone Group’s bid for Equity Office Properties Trust, Freeport-McMoRan Copper & Gold’s offer to acquire Phelps Dodge, Nasdaq Stock Market’s bid for LSE, Bank of America’ bid to buy U.S. Trust from Charles Schwab, and Russia's Evraz Group offer to buy Oregon Steel.

The Blackstone Group’s record-breaking agreement to buy Equity Office Properties Trust ((EOP)) for about $36 billion in cash and debt, rank as the largest leveraged buyout in history. Equity Office Properties rose 7.1% $47.90. In another deal, Freeport-McMoRan ((FCX)) agreed to acquire copper miner Phelps Dodge ((PD)) for $25.9 billion in cash and stock. Freeport-McMoRan gained 2.7%, while Phelps Dodge jumped 29%. Charles Schwab Corp. ((SCHW)) advanced after agreeing to sell its wealth-management division to U.S. Trust to Bank of America Corp. ((BAC)) for $3.3 billion. Similarly, shares of Oregon Steel ((OS)) climbed 8.6% after the steel producer agreed to be acquired by Russia's Evraz Group for $2.3 billion.

The London Stock Exchange rejected a fresh takeover bid from The Nasdaq Stock Market ((NDAQ)) which made its second attempt to acquire the company. LSE said that the $5.1 billion bid 'substantially undervalued' the London Market. The offer represents a premium of 54% on LSE's closing price March 10, the day before the LSE said it had received an approach, and was the minimum bid it could make under British takeover rules.

In the first hour of trading, the Dow Jones industrial average was down 9.52, or 0.08%, at 12,333.04. The Standard & Poor's 500 index was down 0.97, or 0.12%, at 1,400.23, and the Nasdaq composite index was down 5.46, or 0.22%, to 2,440.40. Bonds showed little movement, with the yield on the benchmark 10-year Treasury note unchanged at 4.61% from late Friday.


[R]9:30AM London stocks drop despite the bid for LSE as media stocks weighed.[/R]
By mid morning, the FTSE 100 in London lost 24.7 points, 0.4%, to 6,167.2.

Economic news

The UK exchange has turned down an approach from Nasdaq for the second time this year, rejecting an offer of 12.43 pounds a share, having rebuffed an initial takeover attempt in March.

Advancers

Miners recovered some of the losses from last week, excited by news that Freeport-McMoRan had agreed an $26 billion deal buy copper group Phelps Dodge. Antofagasta rose 3.3%.

Home Retail Group added 2% on weekend reports that buyout groups Blackstone and Kohlberg Kravis Roberts were considering a takeover bid for the company.

Decliners

ITV plunged as dealers reacted to news late on Friday that satellite broadcaster BSkyB had acquired a 17.9% stake in the broadcaster. ITV fell 1.7% while BSkyB dropped 1.4%. Credit Suisse cut its recommendation on ITV from overweight to neutral.

Other media stocks moved lower in sympathy. Yell Group fell 1.4% while WPP Group gave up 1% and Reed Elsevier was 0.7% lower.

Energy stocks were hit by a 1% drop in the price of oil. BG Group shed 1.5% to, Royal Dutch Shell lost 1.2% and BP was lower by 0.6%.


[R]9:00AM U.S. stock futures traded lower following overseas weakness.[/R]
U.S. stock market futures were trading in the negative territory Monday morning, reflecting inflation concerns and declines in overseas markets, with the Japanese Nikkei down 2.3% and London FTSE 100, down 0.4%. Several multibillion-dollar acquisition deals failed to offset the negative mood.

In the largest deals, Freeport-McMoRan ((FCX)) agreed to acquire Phelps Dodge ((PD)) for $26 billion and The Blackstone Group offered $20 billion for Sam Zell''s Equity Office Trust. Freeport-McMoRan shares fell 3.3% to $55.50, while Phelps Dodge shares surged 30% to $123.05 in pre-open trading.

Blackstone agreed to buy Equity Office ((EOP)) for $20 billion, or $48.50 a share, including debt assumption which makes it the largest ever private equity buyout. The deal represents an 8.5% premium to Friday''s closing price. The stock tacked on 7% to $47.85. In another deal, Nasdaq Stock Market ((NDAQ)) made its second bid for the LSE in a deal worth $5.1 billion to create a trans-Atlantic giant to compete with the New York Stock Exchange''s acquisition of the four Euronext exchanges. The offer represents a premium of 54% on LSE''s closing share price March 10, the day before the LSE said it had received a bid. The stock tacked on 2.5% to $37.50 in the pre-open. Further in the merger-and-acquisition news, Bank of America ((BAC)) agreed to buy U.S. Trust from Charles Schwab ((SCHW)) for $3.3 billion, The Wall Street Journal reported. Schwab shares rose 2.9% to $19.08 in pre-open trading. Russia''s Evraz agreed to buy Oregon Steel Mills ((OS)) for $2.3 billion, or $63.25 a share, in cash.

In other news, Credit Suisse upgraded Microsoft ((MSFT)) to outperform from neutral, citing increased confidence in earnings estimates. Microsoft shares rose 0.6% to $29.56. S&P 500 futures dropped 2.30 points at 1,402.50 and Nasdaq 100 futures were down 5.75 points at 1,801.00. Dow industrial futures fell 13 points to 12,355.


[R]8:00AM Freeport-McMoRan Copper & Gold Inc. agreed to buy Phelps Dodge for $25.9 B.[/R]
Freeport-McMoRan Copper & Gold Inc. agreed to acquire copper miner Phelps Dodge Corp. ((PD)) in a $25.9 billion cash-and-stock deal that will create the world''s largest publicly traded copper company Freeport-McMoRan valued its offer at $126.46 per share, 33% premium over the $95.02 closing price for Phelps Dodge shares in Friday trading on the Nymex. Each Phelps Dodge share would be exchanged for $88 in cash plus 0.67 of a common share of Freeport-McMoRan. Shareholders and regulators are expected to approve the deal by the end of Q1 of 2007.

Of the transaction total price, $18 billion will be paid in cash and Freeport-McMoRan said it would issue 137 million shares to Phelps Dodge shareholders. That would give them about 38% of the combined company on a fully diluted basis. J.P. Morgan and Merrill Lynch have committed to funding the cash portion of the transaction, which will boost its total debt by year-end to about $17.6 billion. The merged companies will operate under the Freeport-McMoRan Copper & Gold name, though businesses operating as Phelps Dodge will continue to do so. The combined company''s headquarters will be in Phoenix.

In October, Phelps Dodge reported a sharply higher Q3 profit to $888 million, or $4.36 per share from $366.1 million, or $1.81 per share a year ago. Freeport-McMoRan more than doubled its Q3 earnings to $350.7 million, or $1.67 per share, compared with $165.8 million, or 86 cents per share a year earlier.


[R]7:30AM Asian markets dropped on Monday as Japanese stocks lost ground.[/R]
Asian markets were mostly lower on Monday. The Nikkei 225 Index in Tokyo dropped 2.3% to finish at 15,725.94. Mizuho Financial Group fell 3.1%, Matsui Securities dropped 8.4% and personal lender Promise declined 6.2%. Oil company Inpex Holdings shed 3.4% and machinery maker Ebara sank 3.7%.

Hong Kong shares ended lower taking their cue from Japan. The Hang Seng Index fell 1.2% to 18,954.63. China Mobile fell 2.7%, even after reporting strong growth in new subscribers in October. HSBC declined 0.9%, continuing falling for the sixth time in seven days due to poor results from its U.S. units. Bucking the trend, Bank of China rose 1.1% and China Construction Bank rose 1% on the bullish view on the mainland banking sector.

The Korea Composite Stock Price Index, or Kospi, also fell 0.7% to 1,402.21. Kookmin Bank declined 0.3% and Korea Exchange Bank, or KEB, lost 1.6%. A weak won hurt exporters such as Hyundai, the largest auto maker by sales in the country, which fell 2.3%. In Shanghai, a stronger currency boosted banking shares. The benchmark Shanghai Composite Index advanced 2.3% to 2,017.28.

Australia S&P/ASX 200 Index declined 1.8% 5,322.40, even as shares in Telstra sold by the government soared on their market debut, with investors lured by the large yield on offer. Taiwan Taipei Weighted Price Index also finished flat at 7,261.48 and Singapore Straits Times Index shed 1.5% to end at 2,771.41.


[R]6:30AM European markets fall Monday on auto, banks and oil shares.[/R]
European markets were lower on Monday. By mid morning, London FTSE 100 lost 0.5% to 6,159, 1.Frankfurt Xetra Dax fell 0.5% to 6,379.62, the CAC 40 in Paris shed 0.8% to 5,397.75.

Decliners

Carmakers were on the decline. Porsche was set to make an offer for its rival Volkswagen but press reports in Germany on Monday, said Porsche did not plan to make a full takeover of VW in spite of building up a 29.9% stake. Volkswagen shares were fell 0.2%, while Porsche fell 1.1 %. Fiat of Italy fell 1.6%, while Peugeot lost 1.4% and domestic rival Renault shed 1.3%.

Total of France down 1%, while Repsol YPF of Spain fell 1% and Royal Dutch Shell, the Anglo-Dutch producer, lost 1%.

ITV of Britian led the media sector lower after investors feared stakebuilding by rival UK broadcaster BSkyB would put off potential bidders. ITV fell 2%, while BSkyB shed 1.5%.

French media group Vivendi fell 0.8% after the company announced that bid talks with Kohlberg Kravis Roberts had ended.

Advancers

RTL Group, the pan-European broadcaster which had been in talks with ITV, gained 0.9.

Stock exchange operator Deutsche Borse rose 2%, getting its boost from takeover speculation after Nasdaq, the US trading platorm, launched a $5.1 billion bid for London Stock Exchange. LSE shares gained 5.7%.

Swiss Re gained 1.8% after the reinsurer said clients had put in the lowest claims in 10 years, while premiums had remained robust.

Oil and gold

Light sweet crude oil for January delivery was down 59 cents to $58.38 a barrel in electronic trading on the NYME. January Brent crude at London ICE Futures exchange was down 68 cents to $58.31 a barrel.

Gold traded at $624.10 an ounce on Monday, up $5.90 an ounce from Friday close of $618.20.

Currencies

The euro traded at $1.2836, from $1.2829 in New York. The yen traded at 151.57 against the euro. It was at 118.08 per dollar from 117.75. Against the dollar, the British pound was at $1.8979 in London, from $1.8946 late on Nov. 17.