Mergers Push Futures Up

Elena
11 Dec, 2006
New York City

U.S. stock market futures rose, boosted by a series of merger deals and deal speculation. Citigroup reportedly launched a bid for Prudential plc''s Egg Internet banking arm, but Prudential said it''s not interested in selling the division. Smith & Nephew is expected to bid $12 billion for U.S. rival Biomet by the Tuesday auction deadline. Biomet shares rose 4.8% Travel-booking company Sabre Holdings rose 11% in pre-market trading on deal speculation.

[R]9:15AM Stock futures rose on merger activity and deal speculation.[/R]
U.S. stock market futures rose, boosted by merger activity in the metals sector and deal speculation. Hedge fund SAC Capital is planning to top the acquisition bid for mining company Phelps Dodge Corp. ((PD)) by Freeport McMoRan Copper & Gold Inc. ((FCX)) and offer a price above the $25.9 billion that Freeport proposed. Phelps Dodge shares gained 1.4% before the opening bell. Brazilian steelmaker CSN ((SID)) agreed to buy Anglo-Dutch rival Corus Group for 4.9 billion pounds topping a bid agreed to only hours early by India's Tata Steel.

In other deal mews, Citigroup ((C)) reportedly launched a bid for Prudential plc's Egg Internet banking arm, but Prudential said it's not interested in selling the division. U.K. medical device maker Smith & Nephew is expected to bid $12 billion for U.S. rival Biomet by the Tuesday auction deadline. Biomet ((BMET)) shares rose 4.8% Travel-booking company Sabre Holdings ((TSG)) rose 11% in pre-market trading on deal speculation. S&P 500 futures rose 1.90 points at 1,424.10 and Nasdaq 100 futures advanced 1 point at 1,809.00. Dow industrial futures advanced 19 points to 12,415.


[R]8:00AM CSN topped Tata''s bid, offering $11.4 B for Corus.[/R]
Brazil''s Cia. Siderurgica Nacionale ((SID)) agreed on Monday to acquire Anglo-Dutch steelmaker Corus Group ((CGA)) for $11.4 billion in cash and assumed debt. The offer for U.S. holders is worth about $20.20 a share.

The bid topped an offer that Corus had very recently agreed with Indian rival Tata Group. The offer came only hours after Corus had agreed on new terms with India''s Tata Steel on a 500-pence-a-share bid, which was 10% above Tata''s initial offer. Tata may receive a breakup fee equivalent to 1% of its offer, or some 47 million pounds. The CSN offer is subject to shareholder approval and regulatory clearance.

CSN said the deal would turn it into one of the five largest global steel producers, and would contribute to improving cash flow by $450 million before tax by 2009. CSN said it''s had constructive and satisfactory discussions with the trustees of Corus''s two main U.K. pension trustees to pay 138 million pounds into Corus Engineering Steel''s pension plan and increase the contribution rate on the British Steel pension plan to 12% from 10%.

Corus shares jumped 4.9% in London trading, lifted by hopes that its board may reverse its position again. Corus has agreed not to solicit any other approaches.


[R]7:30AM Asian markets advanced on Monday buoyed by Japanese stocks.[/R]
Asian markets finished higher on Monday, led by a surge in Japanese export-oriented stocks. In Japan, the Nikkei 225 Index ended at 16,560.80, up 0.87%. Stocks were boosted by advances in auto and other exporters stocks as the yen plunged against the dollar. Toyota gained 1.4%, while Nissan added 0.6% after the the company announced it would launch a fuel cell vehicle in the early 2010s in Japan and North America as part of its mid-term environmental strategy. Other advancers included Nippon Steel, which rose 4%, and Nintendo, which jumped 3.6%.

In Hong Kong, the Hang Seng Index gained 1% to 18,924.66. Hutchison Whampoa advanced 2.3% on talk the Hong Kong-listed conglomerate will sell its loss-making 3G mobile operation in the United Kingdom. China Mobile rose 1.7%, bouncing back after shedding 4.3% Thursday and Friday after an institutional investor sold shares in the firm.

The Korea Composite Stock Price Index, or Kospi, finished up 0.02% at 1,390.73, bucking the downtrend after five sessions in a row of declines last week. Shares of Woori Finance surged 4% on foreign buying after losing 7.4%. Posco gained 1.2%, although it said it will jointly buy iron ore with Nippon Steel next year as part of an expanded strategic alliance.

Other indexes around the region also gained. The Shanghai Composite Index added 2.47% to 2,145.30 and Australia S&P/ASX Index 200 ended up 0.81% to 5,469.70, while New Zealand NZSX-50 Index rebounded as it strayed from the overall trend and closed down 0.03% at 3,887. Taiwan Taipei Weighted Price Index fell 0.32% to 7,612.12 and Singapore Straits Time Index gained 0.8% to 2,887.23.


[R]6:30AM European markets gained in early trading Monday on strong steel shares.[/R]
European markets were higher on Monday. By mid morning, London FTSE 100 rose 0.4%, Frankfurt Xetra Dax gained 0.5% to 6,462.11, and the CAC 40 was 0.7 % higher at 5,422.5.

Advancers

Continental shares gained 2.3%. Corus, the Anglo-Dutch group, was 4.6% higher on the prospect of a bidding war as Tata Steel of India said it was reconsidering its position after CSN, the Brazilian steel company agreed to buy Corus for 4.9 billion pounds. Mittal Steel, gained 2.3% and ThyssenKrupp gained 0.6%.

Deutsche Börse advanced 2.9% as weak hopes surfaced that Euronext proposed merger with NYSE Group might not yet be a cut deal, leaving the German exchange operator with a chance of an alternative offer.

Decliners

Autostrade, the Italian road builder and operator, declined 3.4% as hopes of a takeover by Spanish peer Abertis evaporated. Shares in Abertis were 2% higher. Oil groups were lower as crude prices declined. Royal Dutch Shell was off 0.5% as it entered talks with Russian Gazprom over control of the Sakhalin-2 liquefied natural gas project off the Russian far-east coast.

Oil and gold

Crude oil was little changed due to speculation that global stockpiles will limit the effect if OPEC cuts production later this week. Crude oil for January delivery was trading for $61.87 a barrel, down 16 cents, in electronic trading on the NYME in early trading in London. The Brent contract for January settlement on the London-based ICE Futures Exchange gained 37 cents to $62.57.

Gold traded in London at $625.50 per troy ounce, down from $636.00 late Friday.

Currencies

The U.S. dollar was mostly up against other major currencies in European trading Monday morning. The euro traded at $1.3193, down from $1.3200 late Friday.The dollar bought 116.89 Japanese yen, up from 116.47. The British pound traded at $1.9503, down from $1.9525.