Apollo to Acquire Realogy for $6.6 B

Elena
18 Dec, 2006
New York City

U.S. stocks advanced at opening Monday, as a number of takeover deals raised hopes of continued corporate confidence at the end of the year. Pharmacy benefits manager Express Scripts confirmed its $26 billion bid for rival Caremark RX. In another deal, Realogy agreed to be acquired by private equity firm Apollo Group for about $6.65 billion. Dow component Citigroup rose 0.7% after Merrill Lynch upgraded its stock to a buy from neutral.

[R]9:45AM Stocks rallied at opening on merger deals and brokerage upgrade of Citigroup.[/R]
U.S. stocks advanced at opening Monday, as a number of takeover deals raised hopes of continued corporate confidence at the end of the year. Pharmacy benefits manager Express Scripts ((ESRX)) confirmed its hostile $26 billion bid for larger rival Caremark RX. Express Scripts fell 2.3%, while Caremark rose over 10.3%. In another deal, Realogy ((H)) agreed to be acquired by private equity firm Apollo Group for about $6.65 billion. Realogy shares surged 21.8%. Again in the merger-and acquisition news, Harrah's Entertainment ((HET)) is reportedly close to accepting an improved offer from private equity firms Apollo and Texas Pacific Group. Harrah's shares climbed 2.8%.

Dow component Citigroup ((C)) rose 0.7% after Merrill Lynch upgraded its stock to a buy from neutral. In early trading, significant strength emerged in the disk drive sector, with SanDisk ((SNDK)) posting a notable gain on news of a $300 million stock buyback. The semiconductor, networking, and airline sectors also showed strength. In the first hour of trading, the Dow Jones industrial average rose 27.48, or 0.22%, to 12,473.00. The Standard & Poor's 500 index was up 3.17, or 0.22%, at 1,430.26, and the Nasdaq composite index added 9.37, or 0.38%, to 2,466.57. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.57% from 4.60% late Friday.


[R]9:30AM The FTSE 100 traded unchanged near six-year high on Monday.[/R]
The FTSE 100 in London traded unchanged in mid-afternoon down 1.40 points, or 0.02%, at 6,258.60.

Advancers

Smith & Nephew leads the advancers on a broker upgrade, up 8.8% despite reports it is not the favourite to win the race for US group Biomet, with private equity groups now said to be in ahead. Marketmen are suggesting that Smith & Nephew could be a target once the Biomet auction is dealt with. Merrill Lynch upgraded Smith & Nephew to buy and raised its price target.

Petrofac, the oil services company, announced its profits would be towards the top end of current market expectations. Its shares rose 3.7%.

Drug developer SkyePharma, 6.90% higher, announced the US Food and Drug Administration had approved modifications to its asthma treatment Foradil Certihaler.

National Express reported it is trading ahead of forecasts. The trains division witnesses a better second half with strong passenger growth.

Decliners

BT Group declined as the telecommunications group unveiled plans to resolve its huge pension deficit. BT is ready to pay 500 million pounds into the fund this month followed by another 280 million pounds per year between 2009 and 2015 in a bid to address its 3.4 billion pounds deficit. Its shares shed 2.1%.

Software group nCipher was lower 10.00%, giving a warning that its recent acquisition Abridean has turned out a disappointment and that it will now take longer than thought before for Abridean to make a profit.


[R]9:00AM Stock futures pointed to a strong opening on merger activity.[/R]
U.S. stock market futures looked ready to extend the year-end rally, boosted by takeover activity and upgrade for Citigroup. Harrah''s Entertainment ((HET)) is close to being sold to private equity firms Apollo Management and Texas Pacific Group for at least $90 a share. Two Norwegian oil companies agreed on a takeover deal. Statoil agreed to buy the oil and natural-gas division of Norsk Hydro in a deal that will create the world''s largest offshore operator. And in broker moves, Citigroup ((C)) was upgraded to buy from neutral at Merrill Lynch , citing expectations of accelerating growth in 2007.

In corporate news, Dell Inc. ((DELL)) said after Friday''s closing bell that it received a letter from Nasdaq pointing that the company is not in compliance with continued listing requirements due to delayed Q3 results. Three executives at Time Warner ((TWX)) are reported to consider quitting as part of a reorganization plan. On Monday software maker Oracle ((ORCL)) is expected to post higher quarterly profit and sales. Other companies scheduled to report earnings were Morgan Stanley ((MS)), Circuit City Stores Inc. ((CC)), and FedEx ((FDX)). Dow Jones futures were recently up 20 points, S&P 500 futures gained 3.3 points and Nasdaq futures rose 8.5 points.


[R]8:15AM Express Scripts to offer $26 billion for Caremark.[/R]
Pharmacy-benefit manager Express Scripts Inc. ((ESRX)) announced a $26 billion cash-and-stock acquisition bid for Caremark Rx Inc ((CMX)), making an effort to break up the already existing company''s takeover deal with drug chain CVS Corp. Pharmacy-benefit managers control the flow of medications through retail stores and health institutions.

Express Scripts is a small company with a market capitalization of $9.3 billion, and debt of around $1.6 billion. It said it would pay $29.25 in cash and 0.426 shares in Express Scripts for each share of Caremark. The deal would value Caremark at $58.50 a share. The transaction awarded no premium to Caremark''s shareholders. On Friday, Caremark''s shares closed at $50.30 on the NYSE. The offer could start struggle for Caremark at a time when the company''s deal with CVS was gaining credibility in the market. For the first six months of the year, Caremark reported net income of $483.9 million on revenue of $18.35 billion.


[R]7:30AM Asian markets rose on Monday, helped by gains in Japanese exporters.[/R]
Asian markets advanced on Monday. The Nikkei 225 Index in Japan advanced 0.3% to 16,962.11. Exporter Honda advanced 2.6%, while camera and chip-equipment maker Nikon gained 1.2%. Toyota also added 1.5% after the a newspaper report claimed the auto maker plans to build 9.45 million vehicles world-wide in 2007, a rise of 400,000 over 2006. Toshiba jumped 1.3% after a weekend announcement that its U.S.-based Westinghouse Electric unit cut a deal to build four nuclear power plants in China.

The Hang Seng Index in Hing Kong advanced 0.4% to 1919,2.91. China Mobile gained on speculation that China will soon issue 3G wireless licenses. It finished 1.9% higher. China Life, surged 10.2% after Merrill Lynch lifted its price target. Hutchison Whampoa restricted the market gains, shedding 0.8% as speculation it would sell its 3G wireless operations in Europe faded away.

Australia S&P ASX/200 gained 0.3% to 5,591.50, despite miners being broadly lower, tracking falls in industrial metals prices. Shares of BHP Billiton shed 1.4%, while the other large-cap Rio Tinto declined 1.1%. Share indexes in South Korea gained 0.8%, while New Zealand NZX-50 Index fell 0.01% to 3,991.88. Taiwan Weighted Price Index advanced 1.1% to 7,624.62, and Singapore Straits Times Index advanced 1.1% to 2,963.44. China Shanghai Composite Index also gained 2.6% to 2,332.43.


[R]6:30AM European markets gained on Monday supported by Norsk and Statoil deal.[/R]
European markets were broadly higher on Monday. By mid morning, the FTSE 100 in London was flat at 6,259.3, Frankfurt Xetra Dax gained 0.2 % to 6,599.51 while the CAC 40 in Paris retreated 0.1 % to 5,535.67.

Advancers

Norsk Hydro of Norway gained 24.2% and Statoil gained 3% after the companies agreed to merge their oil and gas activities, creating a national champion with combined production of 1.9 million barrels a day. The merged company would become the largest offshore energy producer in the world.

Italian carmaker and industrial group Fiat advanced 2.2% after official of the company stated that it would pursue international alliances. Volkswagen advanced 1.6% as the battle for control of the German carmaker heated. Press reports revealed the state premier of Lower Saxony is to meet leading institutional investors to gauge whether to oppose a likely decision by Porsche, largest shareholder of VW. Shares in Porsche rose 1%.

Atlas Copco rose 2.5% after Deutsche Bank announced it was resuming coverate of the stock with a buy. Dutch computer services company Getronics gained 4.2% after it was reported that Telefónica, the Spanish telecoms group, was considering a bid approach.

Decliners

BT Group declined 2.1% following its statement that under more conservative valuation standards, its pension scheme deficit at Dec. 31, 2005, was 3.4 billion pounds. Also, Tate & Lyle dipped 3% after it said that sugar pricing is unlikely to recover in Europe in 2007. Irish banks declined as investors took profits after a recent strong trading. Allied Irish shed 1.6%, while Bank of Ireland lost 1.4%.

Oil and gold

Oil prices declined from highs last week but was above $63 a barrel in early Monday trading. Light sweet crude oil for January delivery fell 29 cents to $63.14 as traders cashed in on gains last week. February Brent crude at London ICE Futures exchange retreated 24 cents to trade at $63.25 a barrel.

Gold traded in London at $617.50 per troy ounce, down from $622.83 late Friday. In Zurich, gold traded at $615.60, down from $621.70.

Currencies

The U.S. dollar was broadly down against other major currencies in European trading Monday morning. The euro traded at $1.3089, up from $1.3078 late Friday. The British pound traded at $1.9489, lower from $1.9503. The dollar bought 117.72 Japanese yen, down from 118.16.