Sabre, Biomet, Corus: Merger Talks

123jump.com Staff
11 Dec, 2006
New York City

Merger talks, airline industry consolidation rumors and rising home builder stocks drove market averages higher at close. The Sabre Group is reported to be in talks with private equity groups to sell the company for more than $4 billion. Biomet is likely takeover target from UK based comany. Tata and CSN are in bidding war for Corus. United Airlines parent UAL Corp is rumored to announce merger plan at analyst meeting. Global SantaFe and JP morgan rose on analyst comments.

[R]4:00PM NY - 10:00PM Frankfurt – 2:30PM Mumbai[/R]

Yield on 10-year U.S. bond closed at 4.520% and the 30-year bond closed at 4.629%.

Gold increased $2.50 to close at $633.50 a troy ounce, silver advanced 6.5 cents to end at $13.96 a troy ounce and copper gained 2.65 cents to close at 313.85 cents per pound.

Oil lost 67 cents to close at $61.36 a barrel and heating oil declined 3.3 cents to finish at 172.43 cents a gallon. Gasoline was down 2.25 cents to end at 159.88 cents a gallon. Natural gas decreased 9.5 cents to close at $7.466 per mBtu.

Asian markets closed mostly higher led by Hong Kong with a gain of 0.99%, Singapore with an increase of 0.77% and Australia with an advance of 0.74%. The decliners were led by India with a loss of 2.90%, Indonesia with a decrease of 0.88% and Thailand with a decline of 0.62%. Japanese markets gained on a falling yen that gave a boost export oriented companies such as Toyota and Nissan.

European markets closed higher led by Spain with a gain of 0.94%, France with an increase of 0.81% and Germany with an advance of 0.65%. There were no decliners. European stocks recorded gains boosted by takeover bids for Corus Group and Egg, the Internet banking division of insurer Prudential.

Latin America markets closed higher led by Brazil with an increase of 0.74%, Mexico with a gain of 0.27% and Argentina with an advance of 0.16%. There were no decliners. Brazil gained as the market maintained an upbeat tone amid continued strong participation by foreign investors.

Peru and Venezuela are the two best performing stock markets for the year with gains of 103% and 84% respectively, followed by China, Indonesia, Russia and India. Saudi Arabia is the worst performing market in the world with a loss of 52% for the year. Of the 75 stock markets followed by 123jump.com, Saudi Arabia and Turkey are the only two markets down more than 10% year-to-date so far in 2006.

[R]1:00PM European markets finished higher, supported by takeover bids.[/R]
European stocks posted gains Monday, boosted by takeover bids for Corus Group and Egg, the Internet banking division of insurer Prudential. Corus shares climbed 5.5% in London after Brazil's CSN made a bid for Corus, valuing the company at 4.9 billion pounds, or 515 pence a share, a premium of 3% on Tata Group's second offer for the miner. The news lifted other steelmakers, with shares of Germany's ThyssenKrupp up 1.5% and Spain's Acerinox, up 2.5%. Automakers were also notable gainers as crude oil prices dropped below $62. BMW and Renault led advancers in Europe. The French CAC 40 climbed 0.8%, followed by the German DAX 30, up 0.78%, and London FTSE 100, up 0.1%.

Crude oil prices dropped below $62 a barrel. Crude oil January contract fell 45 cents to $61.58 a barrel. London Brent lost 13 cents to $62.07. The U.S. dollar was mixed against its major currency rivals. The euro was quoted at $1.3213, up from $1.3200. The dollar bought 117.05 yen, up from 116.47. The British pound was quoted at $1.9538, up from $1.9625. European gold prices declined. In London, gold traded at $629.30 per troy ounce, down from $636. In Zurich, the precious metal traded at $627.93 per ounce, down from $632.85. Silver closed at $13.79, down from $13.90.


[R]11:30AM Market averages turned higher, helped by deal news.[/R]
Stock markets were lackluster Monday, as several takeover deals generated positive mood, but cautiousness ahead of interest-rate decision Tuesday and weaker oil limited the gains. While the Fed is widely expected to leave rates unchanged, traders are worried what will be said in the accompanying statement.

Metals stocks advanced after hedge fund SAC Capital Advisors LLC bought a stake in mining company Phelps Dodge Corp. ((PD)), and said it would oppose the company's planned takeover by Freeport-McMoRan Copper & Gold Inc. Among rising stocks, Biomet ((BMET)) rose 4.1% on a report that Smith & Nephew might bid $11 billion to buy the medical device maker. Sabre ((TSG)) jumped 7.7% on deal talk. Time Warner Inc. ((TWX)) hit multiyear highs after it was upgraded by Prudential Securities, citing strong potential for improvement at the media conglomerate's cable division. Shares rose 1.3%. Harrah's Entertainment ((HET)) advanced on several buyout offers. The casino operator received one from private equity firms Apollo Management and Texas Pacific Group, and Penn National Gaming Inc. and hedge fund D.E. Shaw are also said to be considering an offer.

The biggest drag on the Nasdaq was drugmaker Nuvelo ((NUVO)) which tumbled nearly 82% after the company and German drugmaker Bayer said a Phase 3 clinical trial of a blood clot dissolver failed to meet its main goal. In late morning trading, the Dow Jones industrial average rose 26.19, or 0.21%, to 12,333.68. The S&P 500 index rose 3.58, or 0.25%, to 1,413.42, and the Nasdaq composite index was up 11.93, or 0.49%, at 2,449.29. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.52% from 4.55% late Friday.


[R]10:30AM The Sensex declines on RBI move to tighten monetary policy.[/R]
The Sensex on BSE lost 400.06 points, or 2.9%, to end at 13,399.43. The market-breadth was rather weak. As 1,974 shares declined, 589 advanced and 43 shares were unchanged. From the Sensex stocks, 25 stocks declined, the rest advanced. The turnover on BSE was Rs 4,830 crore, much higher than Rs 4,148 crore on Friday. On NSE, the turnover today was Rs 9,344.45 crore, higher than Rs 7,556.04 crore on Friday.

Economic news

On Friday, the RBI had raised the rates in cash reserve ratio, which is the amount of assets that all banks must deposit with the central bank, by 50 basis points to absorb Rs 13,500 crore from the system.

Finance Minister P Chidambaram expressed his confidence that bank stocks will adjust to new RBI guidelines and today’s market drop is not a long term concern.

Most-active stocks

Reliance Communications was the most-active stock with a turnover of Rs 409 crore followed by Indiabulls, Reliance Industries, Tata Steel and SBI.

Decliners

That banks will raise lending and deposit rates in he wake of RBI move weighed down bank stocks. SBI plummeted 9% to Rs 1,230, ICICI Bank dipped 7% to Rs 814, and HDFC Bank was off 5.3% to Rs 1,027. Reliance Industries shed 3.2% to Rs 1,227.

Cellular service providers fell under selling pressure. Bharti Airtel was down 4.9% to Rs 602 and Reliance Communications lost 4.6% to Rs 426.70.

Tata Steel declined 6.7% to Rs 460. In response to the CSN bid Tata Steel announced Monday, it was reconsidering its position on Corus. CSN today proposed a bid for Corus that outbid Tata’s. Cement large-cap ACC took a dip, sinking 6.8% to Rs 1,029.50, and NTPC lost 6.5% to Rs 141.65.

Infosys was 0.6% lower to Rs 2,182 in volatile trade. The company is renewing a few of its contracts at a premium. The stock has been included in the Nasdaq 100 index.

Zee Telefilms declined 8.7% to Rs 316.45, after ESPN-Star, a joint venture of Walt Disney Co and News Corp, got the broadcast rights for International Cricket Council matches.

L&T shed 1.3% to Rs 1,431.50. L&T has secured a Rs 5,400 crore contract from GMR Infrastructure, to design and construct the terminal and airport runway at New Delhi airport. Oil explorer ONGC was down 0.4% to Rs 837.

Advancers

Budget airline SpiceJet surged 8.7% to Rs 58.10, after Tata group on Monday announced it had bought less than 10% stake in the company as a purely financial investment.

Satyam gained 0.78% to Rs 460.25, Cipla moved 0.61% higher to Rs 248, TCS added 0.37% to Rs 1,180.55 and ONGC advanced 0.23% to 842.45.

IVRCL Infrastructures gained 0.3% to Rs 404, following the company’s statement that Cushman & Wakefield India had valued land reserves of its subsidiary, IVR Prime Urban Developers, at Rs 3,887.90 crore - Rs 4,297.10 crore.


[R]9:45AM Stocks opened little changed amid cautiousness ahead of Fed’s meeting.[/R]
U.S. stock markets opened little changed Monday, with investors cautious ahead of Tuesday’s Fed Reserve’s decision on interest rates. Market also digested a number of merger deals in the metals sector which provided a boost in pre-open. Metals stocks gained after hedge fund SAC Capital Advisors made a bid for miner Phelps Dodge ((PD)), ready to oppose the company''s planned takeover by Freeport-McMoRan Copper & Gold Inc. However, weakness among energy stocks like Exxon Mobil Corp. ((XOM)) offset optimism over the corporate deal activity. Some biotechnology and semiconductor stocks have also came under pressure. Oil-sensitive airline sector posted some strength, generated by weakness in the price of oil, as crude for January delivery traded at $61.48 a barrel.

In corporate news, chemicals giant DuPont ((DD)) said on Monday that it plans to eliminate about 1,500 jobs and reduce operating costs by roughly $100 million per year. Company’s shares added 1.26%. In the first hour of trading, the Dow Jones industrial average rose 15.94, or 0.13%, to 12,323.43. The S&P 500 index rose 0.60, or 0.04%, to 1,410.44, and the Nasdaq composite index fell 1.50, or 0.06%, to 2,435.86. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.51% from 4.55% late Friday.


[R]9:30AM The FTSE 100 is little changed with gains on Corus erased by weak oil.[/R]
In afternoon trade, the FTSE 100 in London was flat, at 6,153.

Advancers

The Anglo-Dutch steel manufacturer Corus is the most sought after company after Brazilian group CSN launched a revised bid. The company shares are currently trading at a premium to CSN’s offer in the belief that this battle is not over. Corus advanced 5.30%.

Prudential has re-stated its commitment to its loss-making internet bank, Egg, after rebuffing a rumoured offer for the online bank from Citigroup. Prudential gained 0.95%.

Pearson, up 1.51% has sold its Pearson Government Solutions, its government services business, to private equity firm Veritas Capital and 10% of the equity of the business.

Decliners

BP declined 0.34%, Cairn Energy was 1.09% lower and BG declining 0.73% led the enegry sector down, while Royal Dutch Shell, also in the red 1.03%, has made new proposals to give up control of the huge Sakhalin-2 energy project to Russian Gazprom.

Life insurer Resolution is one of the biggest decliners though JP Morgan started coverage with underweight advice. Computer company Filtronic expects a flat performance in the second half, with both Compound Semiconductors and the Point to Point activity not expecting to show revenue growth. Filtronic plunged 4.36%.

The tobacco sector was also badly hit on profit taking following last week bid for Gallaher, down 0.43%. Imperial Tobacco and BAT traded to the same result, lower 1.51% and 0.89%, respectively.


[R]9:15AM Stocks futures rose on merger activity and deal speculation.[/R]
U.S. stock market futures advanced, 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 ((TSG)) is expected to bid $12 billion for U.S. rival Biomet ((BMET)) by the Tuesday auction deadline. Biomet 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.