Four Seasons Accepts $3.8 B Bid

Elena
12 Feb, 2007
New York City

U.S. stock markets continued to post losses amid disappointment over the collapse of several acquisition deals and cautiousness ahead of key economic data. Bristol Myers dropped 5% on news that Sanofi-Aventis ended deal talks amid a disagreement over price. At the same time, Four Seasons Hotels dropped 3% after it agreed to be taken private by Cascade Investment, Kingdom Hotels and Isadore Sharp for $3.8 billion, or $82 a share in cash.

[R]11:30AM U.S. stock markets extended losses amid collapsed merger deals.[/R]
U.S. stock markets continued to post losses amid disappointment over the collapse of several acquisition deals and cautiousness ahead of key economic data. Bristol Myers ((BMY)) dropped 5% on news that Sanofi-Aventis ((SNY)) ended deal talks amid a disagreement over price. Another disappointment came from Nasdaq Stock Market ((NDAQ)) which slipped 5.4% as its shareholders refused to support its planned takeover of the London Stock Exchange. At the same time, Four Seasons Hotels ((FS)) dropped 3% after it agreed to be taken private by Cascade Investment, Kingdom Hotels and Isadore Sharp for $3.8 billion, or $82 a share in cash. On the positive side, the UK's Vodafone ((VOD)) rose 2.4% after it agreed to buy Hutchison Telecom International Ltd.'s ((HTX)) 67% stake in Indian mobile operator Hutchison Essar for $11 billion, including the assumption of $2 billion in debt. Further in deal news, Aluminum producer Novelis Inc. ((NVL)) jumped 13.7% after it agreed to be bought by India's Hindalco Industries Ltd.

Losses posted by American Express Co. ((AXP)), Intel Corp ((INTC)) and United Technologies Corp. ((UTX)) weighed on the Dow. Another drag on the blue-chip average was Walt Disney Co. ((DIS)) which fell 1.2% although CIBC upgraded the stock to sector performer from underperform, and raised its price target on the stock to $40 from $35. Exxon Mobil Corp. ((XOM)) also weighed, losing 0.6% on falling oil prices. Some support to the Dow was provided by shares of Home Depot Inc. ((HD)), which rose 1.3% after the company said it is evaluating strategic alternatives for its HD Supply business, including a possible sale, spinoff or IPO. In the tech sector, Apple ((AAPL)) rose 1.4% after Citigroup upgraded the stock to buy from hold, while Adobe Systems Inc. ((ADBE)) rose 1.2% after Oppenheimer upgraded the stock to buy from neutral. However, heavy losses for Cisco Systems Inc. ((CSCO)) and Applied Materials Inc. ((AMAT)) weighed on the tech-heavy Nasdaq. In late morning trading, the Dow Jones industrial average fell 4.57, or 0.04%, to 12,576.26. The Standard & Poor's 500 index was down 2.11, or 0.15%, at 1,435.95 and the Nasdaq composite index retreated 7.20, or 0.29%, to 2,452.62. Bonds barely budged ahead of economic data due out this week, with the yield on the benchmark 10-year Treasury note unchanged from Friday at 4.78%.


[R]9:45AM U.S. stocks opened mixed amid disappointing deal news.[/R]
U.S. stocks opened narrowly mixed on Monday, as an upgrade of Apple failed to offset disappointing deal news and uncertainty ahead of key economic data due out later this week. Tech shares were supported by Apple ((AAPL)) which rose 1.3% after Citigroup upgraded the stock to buy from hold on expectations the company whould benefit from several key products and lower prices. The Dow got a lift from 1.7% gain for Home Depot Inc. ((HD)) after the company said it is evaluating strategic alternatives for its HD Supply business.

In deal news, two anticipated merger deals seemed to be on the verge of falling apart. Bristol-Myers Squibb ((BMY)) fell 4% following a report that Sanofi-Aventis ((SNY)) ended merger talks with the U.S. pharmaceutical group. The Nasdaq Stock Market ((NDAQ)) fell 1.6% after saying over the weekend that shareholders did not approve its bid to acquire the London Stock Exchange. On the other hand, the UK''s Vodafone ((VOD)) rose 2.4% after it agreed to pay $11 billion for Hutchison Telecom International Ltd.''s ((HTX)) 67% stake in Indian mobile operator Hutchison Essar. Four Seasons Hotels ((FS)) dropped 3% after it agreed to be taken private by Cascade Investment, Kingdom Hotels and Isadore Sharp for $3.8 billion, or $82 a share in cash.

In the first hour of trading, the Dow Jones industrial average added 3.53, or 0.03%, to 12,584.36. The Standard & Poor''s 500 index was down 1.26, or 0.09%, at 1,436.80 and the Nasdaq composite index retreated 9.02, or 0.37%, to 2,450.80. Bonds edged lower ahead of economic data due out this week, with the yield on the benchmark 10-year Treasury note rising to 4.79% from 4.78% late Friday.


[R]9:30 AM NY Vodafone wins the battle for Indian Hutch Essar.[/R]
Vodafone acquired 67% of Hutchison Essar in a deal struck last night that puts the fourth-largest Indian mobile operator value at $19 billion. Vodafone’s bid gave Hutchison Essar $18.8 billion and was the highest of all. The deal is expected to provide a much-needed respite and boost Vodafone stock in an otherwise luck-luster top-line growth at the British company, which is the largest mobile operator in the world. Still, Arun Sarin, Vodafone chief executive may be faced with question by some investor whether the group was overpaid. One bi shareholder has already said that the deal may get some resistance from shareholders of Vodafone on that premise. As part of the deal, the British company has signed an agreement for sharing its network with Bharti Airtel, which could give a lot of savings. Bharti was also granted an option to buy out Vodafone’s 5.6% stake in Bharti for $1.6 billion, which is double the acquisition price. The deal is expected to be executed in the second quarter. India is the world fastest growing mobile phone market with an additional 6.5 million net subscribers in the last quarter


[R]8:00AM NY-6:00PM Mumbai Sensex plummets on selling pressure.[/R]
The Sensex on BSE finished 348.20 points, or 2.39%, lower at 14,190.70. The market-breadth was very weak as there were seven decliners for each advancer. For 2,312 shares that declined on BSE, only 334 advanced and only 27 shares were unchanged. The turnover on BSE was Rs 3,266 crore, lower than Rs 4,332 crore on Friday. The turnover on NSE was Rs 8,908.45 crore, compared to Rs 9,175.13 crore on Friday.

Economic news

Industrial production in December 2006 advanced 11.1%, compared with 5.7% in the same month last year. The growth figure for November 2006 has also been revised upwards to 15.4%, from the earlier estimate of 14.4%. Growth in the manufacturing sector was 11.9% in December 2006, higher than 6.4% in December 2005, while electricity generation grew by 9.3% in December 2006, compared to 3.4% a year ago. The figures raised concerns that the Reserve Bank of India may hike the interest rates in order to curb inflation and to prevent overheating of the economy.

Vodafone won the battle for Hutch-Essar with a $19 billion bid. Vodafone will offer ultra low-cost handsets, and bring Vodafone live! to India. Hutch-Essar will aim at 20% to 25% of the market share. The company plans to keep the current management team.

India has been adding six million new subscribers for the last three months. Despite one of the fastest telecom market in the world only 15% of people in India have cell phone services and less than 50% of India can access telecom service through mobile phone. The subscriber growth in the current year is likely to exceed 30%.

Trading highlights

Global Broadcast was the most-active stock with a turnover of Rs 247 crore followed by Hindalco and newly-listed Technocraft.

IPO

Technocraft Industries India ended at Rs 100.90 on BSE on its first day on the market, with a volume of 98.63 lakh shares. It opened at Rs 125 on BSE, 19% over the IPO price of Rs 105 and reached an intra-day low of Rs 97.35 and high of Rs 130.

Decliners

Hindalco Industries, the aluminum large-cap, led the decliners, plunging 14% after acquisition of Novelis worried. Investors are nervous that the company may have overpaid and in the short term this will be a drag on the company financials. The stock closed at Rs 149.05. The total acquisition cost including assumed debt of $2.4 billion reached $6 billion. Novelis, registered in Canada but operating in the U.S. is the largest flat rolled products company in the world with a 19% share of the global market.

Reliance Communications also took a plunge of 4.63% to Rs 453.55, as it lost the bid to buy the Hutch Essar in a bid rivalry with Vodafone. Other large-cap decliners included BHEL, shedding 6.3% to Rs 2,348, Bharti Airtel, off 4.6% to Rs 718 and Gujarat Ambuja Cements, losing 4.54% to Rs 132.50.

Of stocks with representation in the Sensex index, Reliance Industries finished at Rs 1,354, losing 2.5%, Infosys dipped 0.5% to Rs 2,350 and oil leader ONGC slipped 2.1% to Rs 865. ICICI Bank ended at Rs 965 and TCS at Rs 1,254 each lower around 2.7%.


[R]7:30 AM Asia ends lower Monday with HK and South Korea leading decline.[/R]
Asian markets closed mostly lower on Monday. The Hong Kong Hang Seng Index closed 0.4% lower at 20,593. In Hong Kong, large-caps ended lower, led by China Mobile, which will have its weighting reduced in the Hang Seng Index and by property developers on worries about delays in U.S. interest rate cuts. China Mobile shed 1.6%. Hong Kong property developers declined after three U.S. Federal Reserve officials warned Friday they were ready to raise rates if U.S. economic growth was stronger than expected. Sun Hung Kai Properties dropped 1.7% and Cheung Kong Holdings fell 1%.

South Korean Kospi Index shed 0.9% to 1,414. Kookmin Bank dipped 2% after climbing 3.2% Friday, and Hana Financial Group fell 2%. Semiconductor makers settled lower, with Samsung Electronics off 2.2% and Hynix Semiconductor losing 2.2%. The Shanghai Composite Index soared 2.8% to close at 2,807. China Minsheng Banking gained 5.7%, China United Telecommunications rose 5.1% and China Petroleum & Chemical, known as Sinopec, advanced 4.8%. Australian S&P/ASX 200 dropped 0.1% to 5,924. All sectors of the market declined except for materials, energy and utilities. BHP Billiton rose 1.9% but Fairfax fell 1.2% as concern over advertising revenue outweighed the fact that its net profit topped market expectations. Lend Lease declined 4.7% after warning that its first half profit would be flat.


[R]6:30 AM Europe was lower on Monday on weakness in financial and tech stocks.[/R]
European markets were lower on Monday. In early trade, Frankfurt Xetra Dax shed 0.7 % to 6,862.36, the CAC 40 in Paris lost 0.7 % to 5,651.19 and London FTSE 100 slipped 0.3 % to 6,364.1.

Advancers

Infineon, German chipmaker, gained 1.7%. Infineon was best performing stock last week after announcing contract wins with Nokia and MasterCard. Share acquisition moves in the telecoms sector provided the market some succour. Spanish Telefonica said it had held talks with Italian Pirelli and was offered a small stake in Olimpia, which controls Telecom Italia. Telecom Italia shares gained 1.8 %, while Pirelli added 3.7% and Telefonica fell 0.6%. UK tour operator MyTravel Group bucked the lower travel sector trend, rising 26.4% after MyTravel and KarstadtQuelle-owned Thomas Cook agreed to merge to form an international leisure travel company. Vodafone Group rose 1.7% after the company agreed to buy a stake in India''''s Hutchison Essar for $11.1 billion.

Decliners

ASML Holding, maker of equipment for manufacturing memory chips, fell 2%, while Franco-Italian chipmaker STMicroelectronics shed 1%. Industrial groups took a hit after recent strong sessions. MAN, the German truckmaker, fell 2.1 % after questions were raised about its future following its failure to acquire Swedish Scania. Airline Air France-KLM and cruise ship operator Carnival Corp each trading down more than 1.2%.

Oil

U.S. crude oil for March delivery fell 82 cents in electronic trading. The contract was down 74 cents at $59.15 a barrel, while London Brent crude was off 67 cents at $58.34 a barrel in early trade in London.