Florida Rock Soars 42% on Buyout Offer

Elena
20 Feb, 2007
New York City

Wall Street opened lower on Tuesday, pressured by falling energy shares and disappointing earnings from Home Depot, which offset merger news and positive quarterly results from Wal-Mart Stores. Blue-chip company Home Depot fell 1% after the retailer reported 28% profit drop in Q4 due to a slowing activity in the home-building sector. However, Wal-Mart supported the Dow, rising 2.3% amid better-than-expected quarterly profit.

[R]9:45AM U.S. stocks opened lower on weaker energy shares and Home Depot profit drop.[/R]
Wall Street opened lower on Tuesday, pressured by falling energy shares and disappointing earnings from Home Depot, which offset merger news and positive quarterly results from Wal-Mart Stores. Crude-oil futures declined amid forecasts for warmer weather in the northeastern U.S. Falling oil prices weighed on energy shares like Exxon Mobil ((XOM)) and BP ((BP)), both losing 1.1%. Blue-chip company Home Depot ((HD)) fell 1% after the retailer reported 28% profit drop in Q4 due to a slowing activity in the home-building sector. Oher companies weighing on the Dow included Intel Corp. ((INTC)), down 1.4% and American Express ((ADXP)), down 1%. However, Wal-Mart ((WMT)) supported the Dow, rising 2.3% amid better-than-expected quarterly profit.

In merger-and-acquisition news, Vulcan Materials ((VMC)), a producer of construction aggregates and materials, agreed to buy Florida Rock Industries ((FRK)) in a $4.6 billion cash-and-stock deal. Shares of Florida Rock soared 42% on Tuesday morning. News of a merger deal between Sirius Satellite Radio ((SIRI)) and XM Satellite Radio ((XMSR)) failed to provide a lift to the sentiment. Sirius Satellite jumped 7%, while XM Satellite surged 11%. In early trading, the Dow Jones industrial average fell 37.41, or 0.29%, to 12,730.16. The Standard & Poor's 500 index was down 4.74, or 0.33%, at 1,450.80, and the Nasdaq composite index was down 10.18, or 0.41%, to 2,486.13. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.70% from 4.69% late Friday.


[R]9:30AM NY-2:30PM London FTSE dips on Tuesday in a day of corporate news.[/R]
The UK market was lower on Tuesday. The benchmark index FTSE 100 in London dipped 0.36% at 6,421 in mid-afternoon trade.

Advancers

Intelligent building control systems outfit company Polaron soared 20.3% on Tuesday after it agreed a recommended cash offer from Cooper Controls of UK. Still on bid talk, Hanson rose 4.2% as news that Vulcan Materials of the US had agreed to buy Florida Rock Industries for $4.6 billion raised hopes of further bids to come in the aggregates sector. EMI also rose 6.7% after the music group confirmed it was in talk that could lead to another potential bid approach from Warner Music of the US. In broker comment, Drax Group gained 3.9% as Goldman Sachs upgraded the power generator from neutral to buy. Goldman also upgraded mid-cap nuclear power group, British Energy, and its shares surged 5.1%.

Decliners

Scottish & Newcastle fell 4.2% despite reporting stronger profits as investors focus on news of margin pressure on higher energy costs. News of a further decline in profits at Barclayscard took the shine off the record annual profits at Barclays. The bank stated that growth in bad debts rose in the second half of the year, helping limit downside. Barclays shares fell 0.3%. Rexam shed 3.6% after the largest packaging group in the world reported a 1% decrease in annual profit of 303 million pounds, missing consensus forecasts. Cadbury Schweppes lost 1.1% after profits last year were hit by product recalls in the UK.


[R]9:00 AM Market futures traded down, hurt by Home Depot earnings.[/R]
U.S. stock futures pointed to a lower market opening Tuesday after the long holiday weekend. The pre-market sentiment was hurt by disappointing quarterly results from Dow component Home Depot which helped to offset news of possible merger of the nation''s two big satellite radio stations Sirius Satellite Radio and XM Satellite Radio Holdings.

Home improvement giant Home Depot ((HD)) reported a 28% drop in Q4 profit, hurt by a weak housing market and a charge taken to cover executive severance costs. Net profit fell to $925 million, or 46 cents a share, down from $1.29 billion, or 60 cents last year. Quarterly sales rose 4% to $20.27 billion, while comparable-store sales fell 6.6%. Shares of the Dow component slipped 2% in pre-market trading. On the other hand, Wal-Mart ((WMT)) posted a Q4 net income increase of $3.94 billion, or 95 cents a share, compared with $3.59 billion, or 86 cents last year, beating estimates for earnings of 90 cents. Shares rose 2.7% in the premarket.

Two rival companies in the radio satellite industry were in the spotlight after Sirius Satellite Radio ((SIRI)) agreed to combine with XM Satellite Radio ((XMSR)) in a deal, billed as a merger of equals, that will value the combined company at around $13 billion. Shares in Sirius Satellite climbed 13% in pre-market trade, while shares in XM Satellite surged 27.5%. In other deal news, Vulcan Materials ((VMC)) said it agreed to buy smaller construction aggregates company Florida Rock ((FRK)) in a cash-and-stock deal worth $4.6 billion. Among stocks driven by analyst comments, Jetblue Airways ((JBLU)) dropped 3% in premarket trade after Morgan Stanley downgraded the stock. S&P 500 futures were last down 0.90 points at 1,457.90 and Nasdaq 100 futures fell 2.25 points at 1,825. Dow futures were down 2 points at 12,785.


[R]8:30AM NY-7:30PM Mumbai Sensex declines Tuesday on profit-booking in large-caps.[/R]
The Sensex on BSE lost 149.52 points, or 1.04 %, to settle at 14,253.38 points. The market-breadth was weak with three stocks declining for every one stock advancing. As 1,892 stocks declined on BSE, 684 advanced and 54 remained unchanged. Of the 30 stocks in the Sensex, only five advanced, while the rest 25 declined. The turnover on BSE was Rs 3,885.54 crore, lower than Rs 4,204 crore on Monday. On NSE, the turnover was Rs 7,800.66 crore, compared with Rs 7,762.21 crore on Monday.

Economic and corporate news

Steel billionaire Lakshmi Mittal has entered the oil refining sector, buying a 49% stake valued at $728 million in a new Indian unit rejected by BP almost a year ago, Petroleum and Natural Gas Minister Murli Deora announced on Tuesday.

Traders in India are worried that the government is likely to hike short-term capital gains tax on sale of shares from the current 10% in the budget. The Government also announced that it does not intend to subsidize sugar exports and is considering building a buffer stock to help alleviate the pressure on mills from falling prices.

The Indian rupee declined against the dollar, traders showed lack of interest in buying the currency. Traders believe that the Reserve Bank of India is wants the rupee not to rise above 44 per dollar. In early trade, the partially convertible rupee was at 44.150/44.160 per dollar, dropping from February 19 close of 44.135/44.140.

Trading highlights

Indiabulls was the most-active stock on BSE with a turnover of Rs 241 crore followed by Global Broadcast and Reliance Industries.

Advancers

Ranbaxy was the leading advancer in the Sensex stocks, finishing with a gain of 1% at Rs 395.5. The other advancers included ITC, up 0.7% at Rs 175.8, Cipla 0.2% higher, at Rs 254.6, NTPC, rising 0.2%, at Rs 142.1 and Tata Steel, inching higher 0.1% at Rs 444.2.

Decliners

Oil exploration leader, ONGC, led the decliners, plunging 3.5% to Rs 875.6 on news that the Directorate General of Hydrocarbons had disallowed gas discovery to proceed in the Krishna-Godavari basin. ONGC may contest Directorate General of Hydrocarbons views. Cement stocks declined on concerns that the government could impose a ban on cement exports in the budget to control cement prices. Grasim shed 3% to Rs 2,570.9, and Gujarat Ambuja Cements lost 1.8% to Rs 130.1.

The State Bank of India plunged 2.2% to Rs 1,106.3. The State Bank of India on Tuesday joined other state-run banks in lifting the benchmark prime lending rate, which is linked to interest rates on working capital loans. Thus, borrowing cost of working capital loans for corporates is increased. ICICI Bank fell with SBI and dipped 0.7% to Rs 971, while HDFC Bank dropped 0.7% to Rs 1,025.35. Housing finance large-cap HDFC declined 2.3% to Rs 1,652.9, as investors were worried that rising interest rates may impact demand for housing loans.

Telecom stocks also dipped. Reliance Communications lost 2.3% to Rs 452.15, and Bharti Airtel shed 1.1% to Rs 788.10. Hindustan Lever lost 2.7% to Rs 199.65. Index heavy Reliance Industries shed 0.3% to Rs 1,412.85. Reportedly, Chevron Corporation may help Reliance in developing an exploration block in the fertile Krishna-Godavari basin. Auto stocks declined as well. Maruti Udyog shed 2% to Rs 895.20 and Bajaj Auto slipped 1.1% to Rs 2,991.


[R]8:00 AM Sirius Satellite Radio and XM Satellite Radio Holdings agreed to merge.[/R]
Rivals in the satellite radio industry Sirius Satellite Radio Inc. ((SIRI)) and XM Satellite Radio Holdings Inc. ((XMSR)) announced an agreement to create a $13 billion combined company led by Sirius'' CEO. The $13-billion merger deal, including a debt of about $1.6 billion, is subject to regulatory and shareholders’ approval. Winning shareholder approval is seen as the easy part for the struggling satellite radio companies, whereas winning approval from the Federal Communications Commission and the U.S. Department of Justice''s antitrust division will be the challenging part. FCC Chairman Kevin Martin said that the companies have to prove that the deal would be in the public interest, with consumers having more choice and affordable prices.

On condition that the deal is approved by shareholders and regulators, shareholders of both companies will own 50% of the combined entity. However, Sirius will give $4.57 billion of its stock to XM shareholders, a substantial premium to the value of their shares. Investors in XM will get 4.6 shares of Sirius common stock for each XM share they own.The companies believe that the merger will boost the long-term financial success of satellite radio. Analyst estimates of the present value of cost synergies range from $3 billion to $7 billion.


[R]7:30AM Japan finished flat on Tuesday while South Korea advanced.[/R]
Asian markets ended mixed on Tuesday. Japanese benchmark index Nikkei 225 closed almost flat, down 0.01% at 17,939.12. Trading was wary ahead of a closely watched decision on interest rates by the Bank of Japan, expected Wednesday. Mitsubishi UFJ Financial Group led decliners in banking shares on concerns the Bank of Japan may hold off on making any changes to its key interest rate at this time. Shares of Mitsubishi UFJ shed 1.3%, while Mizuho Financial Group dipped 0.2%.

Nippon Steel advanced 2.4%, however, on hopes of additional consolidation within the sector after the company announced on Monday it had raised its stake in a smaller steel maker. Sapporo Holding declined 1.6%. The third-biggest beer maker in Japan is facing a $1.3 billion takeover approach from U.S. equity fund Steel Partners.

South Korean Kospi index rose 0.29% to 1,452.96. Steel maker Posco finished up 2.4% on a share buyback and reports late in the session that Standard & Poor''s lifted its credit rating on the company. Australian benchmark index S&P/ASX 200 fell 0.01% to 5,989.70.


[R]6:30AM European markets were lower on Tuesday on weak real estate stocks.[/R]
European equity markets declined on Tuesday. By mid morning, Frankfurt Xetra Dax shed 0.1% to 6,978.84, the CAC 40 in Paris lost 0.3% to 5,723.81, while London FTSE 100 was flat at 6,444.3.

Advancers

EMI added 7.3%. EMI announced it received an approach from Warner. EMI said there was no certainty the approach would lead to a takeover offer. Some auto makers gained. Volkswagen, the German carmaker, gained 3.5% as expectations were raised that the company would lift its dividend when it posts its full-year numbers later in the session. Volvo added 1.8% after it agreed to buy Nissan Diesel to add production in Asia, the world fastest- growing economic region. Shareholders in Nissan Diesel, fourth-largest truck maker in Japan will receive 540 yen a share. That is 22% higher than the closing price yesterday. Volvo already owns 19% of Nissan Diesel.

Decliners

Real Estate companies dipped after Land Securities of the UK posted a 2.2% increase in its net asset value per share, but said higher interest rates were beginning to have a cooling effect on the property market. Shares in Land Securities shed 2.3%, while Unibail of France lost 1.7% and Rodamco Europe, listed in Amsterdam, dropped 0.5%. Oil companies retreated after crude prices fell by around 1% overnight. Total of France was down 0.5%, while Norwegian Statoil lost 0.6%.

Crude oil and gold

Oil prices gained on Tuesday after shedding 1% a day earlier as traders were torn between supply anxieties in Nigeria and the nearing end of winter oil demand in top consumer the United States. Crude oil also recovered some of the losses on Monday, trading at $58.67 a barrel on the Globex electronic platform. London Brent crude rose 31 cents to $58.45 a barrel. The New York Mercantile Exchange did not issue a settlement price on Monday as its trading floor was closed for the Presidents Day holiday. Gold for immediate delivery fell $1.90, or 0.3%, to $668.85 an ounce in early trade in London.

Currencies

The euro bought $1.3141 in morning European trading, slightly up from its level of $1.3135 in New York late Monday, hitting six-week highs on worries about nuclear issues and Iran. The British pound rose to $1.9489 from $1.9453. The dollar bought 119.94 yen, compared with 119.56 yen Monday.