$70 B of Mergers

123jump.com Staff
20 Nov, 2006
New York City

Blackstone Group, private equity group agreed to acquire Equity office Properties for $20 billion and assuming the debt of $16 billion. Bank of America agreed to purchase U.S. Trust from Charles Schwab for $3.3 billion to boost its private banking business. Nasdaq, the electronic market for tech and small companies, said that it has raised its stake in London Stock Exchnage to 28.75% and offered $5.1 billion. LSE rejected the offer and Nasdaq plans to take the offer directly to shareholders.

[R]4:30PM NY – 10:30PM Germany[/R]
Merger activity of $70 billion today boosted early gains in the averages lost in the afternoon trading.

Yield on 10-year bond closed at 4.595% and the 30-year bond closed at 4.677%.

Gold increased 50 cents to close at $622.60 a troy ounce, silver gained 5.5 cents to end at $12.795 a troy ounce and copper declined 0.10 cents to close at 307.75 cents per pound.

Oil decreased 15 cents to close at $58.82 a barrel and heating oil climbed 0.48 cents to finish at 167.37 cents a gallon. Gasoline gained 1.32 cents to end at 155.43 cents a gallon. Natural gas lost 15.4 cents to close at $8.025 per mBtu.

Asian markets closed mostly lower led by Japan with a decline of 2.27%, Australia with a decrease of 1.63% and Singapore with a loss of 1.48%. The few advancers were led by Indonesia with a gain of 0.71%, Philippines with an increase of 0.03% and India with an advance of 0.01%. The stocks ended lower as investors dumped exporters such as Toyota Motor Corp. and financial stocks such as Mitsubishi UFJ Financial Group in Japan.

European markets closed higher led by a gain of 0.73% in Norway, an advance of 0.62% in Germany and an increase of 0.61% in Spain. The decliners were Netherlands with a decline of 0.19% and Belgium with a loss of 0.05%. The stocks ended higher helped by M&A moves in the metal and exchange sectors and lower oil prices.

Latin America markets finished higher as Mexico and Brazil were closed for national holidays. Canada ended with an advance of 0.53% and Argentina closed with a gain of 0.51%. Canadian stocks climbed boosted by merger activity.

[R]1:00PM European markets closed higher on merger activity.[/R]
European stock markets closed in the positive Monday, lifted by merger activity in the metal and exchange sectors and weaker crude oil prices. The German DAX 30 led the regional gainers with an advance of 0.62%. The index was boosted by 2% gain for defensive utility stocks RWE and E.On, as well as lower oil. The French CAC 40 gained 0.28% and London FTSE 100 added 0.2%. Oil sensitive stocks contributed to the advance, with air line Air France-KLM and cruise operator Carnival moving higher. Mining stocks were among the most notable gainers, with copper miner Antofagasta, up 4.1% and peer Lonmin, up 1.7% as gold prices recovered from recent losses and consolidation hopes were sparked by Freeport-McMoRan Copper & Gold''s bit to buy Phelps Dodge and create the world''s largest copper miner. Shares in the London Stock Exchange rose 6% after the Nasdaq Stock Exchange offered to pay 2.7 billion pounds to acquire the exchange. However, LSE rejected the bid.

Crude oil prices declined on mild weather. Crude oil December contract fell 36 cents to $58.61 a barrel. Heating oil lost 1 cent to $1.6595 a gallon, while gasoline inched up to $1.5464. Natural gas futures fell 16 cents to $8.020 per 1,000 cubic feet. The U.S. dollar declined against its rival currencies. The euro was quoted at $1.2817, up from $1.2816. The dollar bought 118.17 yen, down from 117.84. The British pound was quoted at $1.8969, up from $1.8940. European gold prices advanced. In London, gold traded at $624.10 per troy ounce, up from $617.75. In Zurich, the precious metal traded at $625.25 per ounce, up from $618.03. Silver closed at $12.88, up from $12.68.


[R]11:30AM Stocks gained ground, helped by merger deals.[/R]
Stocks gained some ground in late morning trading, helped by a series of merger deals. After seeing some early weakness, stocks moved to the upside, lifting the Nasdaq and the S&P 500 modestly above the unchanged line. The Nasdaq was boosted by strength in the semiconductor sector, with Marvell ((MRVL)), Novellus ((NVLS)), and Broadcom ((BRCM)) posting notable gains. At the same time, a steep loss by Verizon ((VZ)) limited the upside for the Dow. Metal stocks continued to post strong gains on news of Freeport-McMoRan''s ((FCX)) $25.9 billion acquisition of Phelps Dodge ((PD)). Housing stocks posted significant weakness in late-morning trading.

In earnings news, home improvement retailer Lowe''s Cos. ((LOW)) reported 10.8% profit rise in Q3 driven by an upside in total net sales. The company earned $716 million, or 46 cents a share, up from $646 million, or 40 cents a share a year earlier, beating estimates of 43 cents. Revenue increased to $11.2 billion, but same-store sales dropped 4%. The retailer lowered its Q4 outlook.

Among companies driven by analyst comments, ProLogis ((PLD)), real estate investment trust, gained 4.4% after RBC Capital Markets upgraded its rating on the company''s stock to outperform from sector perform. Shares of Sonus Networks ((SONS)) also moved sharply higher after Piper Jaffray upgraded its rating on the company to outperform from market perform on positive expectations about fiscal 2007. Sonus rose 4.4%. On the other hand, shares of Applebee''s ((APPB)) fell down 1.2% after J.P. Morgan downgraded its rating on the restaurant operator to neutral from overweight, citing valuation.

In late morning trading, the Dow Jones industrial average was up 2.66, or 0.02%, at 12,345.22. The Dow hit another trading high of 12,354.91. The Standard & Poor''s 500 index was up 1.26, or 0.09%, at 1,402.46, and the Nasdaq composite index was up 6.33, or 0.26%, to 2,452.19. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60% from 4.61% late Friday.


[R]10:30AM The Sensex rebounds in late trading on a rally in tech stocks.[/R]
The Sensex on BSE finished the trading session 1.23 points, or 0.01% higher, at 13,430.71. The market-breadth, extremely negative since the opening, kept on recovering throughout the day, but still ended in the red. For 1,530 shares that declined, 943 advanced and 64 shares were unchanged. From 30-Sensex stocks, 19 declined while the rest finished higher. The turnover on BSE was Rs 4,242 crore, lower than Rs 4,472 crore on Friday. The turnover on NSE was Rs 9,628.51 crore, higher than Rs 8,720.45 crore on Friday.

Economic news

The rupee fell, ending two days of gains, on speculation that importers sold the currency after it reached a one-week high. Indian currency dropped to 44.9637 per dollar. It reached previously a high of 44.7938, the strongest since Nov. 10.

India is poised to achieve the target of attracting $10 billion of foreign direct investment this year as inflows have nearly doubled to $4.4 billion in the six months between April and September 2006. In absolute terms, Delhi region continues to remain on top of the table with $936.5 million foreign direct investment inflows, showing a growth of over 25%. The Mumbai region was second on the chart with total inflows of $867.5 million.

The central government may consider lifting a ban on sugar exports as the country is likely to witness a record production of sugarcane this year.

The European Union on Monday dragged India to the World Trade Organisation for the latter high tariffs and taxes on import of wine and spirits. EU Trade Commissioner Peter Mandelson will ask the WTO to rule against Indian import taxes applied on top of normal customs duties for alcohol.

Advancers

Telecom services provider Bharti Airtel led the gainers, up 6.10% to Rs 616.55, on a volume of 3.49 lakh shares. And housing finance large-cap HDFC also jumped 3.51% to Rs 1,664.

IT stocks advanced on renewed buying. Infosys gained 3.24% to Rs 2,257, TCS rose 2.07% to Rs 1,115, Wirpo advanced 1.31% to Rs 556.50 and Satyam Computers moved 1.96% higher to Rs 442.

Index heavy Reliance Industries rose 0.38%, at Rs 1,264, on a volume of 7.97 lakh shares. The stock rebounded from a low of Rs 1,236.50, after the company said that it expects a fire-damaged hydrotreater unit at its refinery in Jamnagar, Gujarat, to restart operations within a few days.

Development Credit Bank advanced 2.13% to Rs 52.75, after its board approved a hike in Foreign Institutional Investors ceiling from the existing 24% to 49%. Mphasis BFL surged 6.78% to Rs 281, extending its recent rally on reports that it had bid for a large $2.4 billion contract along side EDS, its American promoter.

Decliners

The largest cement manufacturer in India, ACC, led the decliners, down 4% to Rs 1,053, after RBI restricted further Foreign Institutional Investors purchases in the stock as foreign holding had crossed the 22% ceiling.

Tata Steel declined 2.70% to Rs 463.10, after its offer to buy Anglo-Dutch steel-maker Corus Group was topped by Brazilian Companhia Siderurgica Nacional or CSN.

Banks suffered a steep decline as stocks were hit following the Reserve Bank of India draft circular on exposure to capital market by banks. Private sector bank ICICI Bank lost 1.95% to Rs 857.75, HDFC Bank dipped 3.60% to Rs 1,085.50, SBI was down 1.45% to Rs 1,207.50, Centurion Bank of Punjab slipped 2.87% to Rs 28.80, and Kotak Mahindra Bank was off 2.85% to Rs 375.90.

Metal shares also declined on profit-booking. Hindustan Zinc lost 5.92% to Rs 840.25, Sterlite Industries shed 1.14% to Rs 506, Hindalco slid 1.77% to Rs 171.70 and Kalyani Steel lost 3.12% to Rs 409 and National Aluminium Company edged down 1.11% to Rs 217.50.


[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.