Merger Activity Lifts Pre-Market Mood

Elena
26 Feb, 2007
New York City

U.S. stock market futures moved higher on Monday, boosted by a multi-billion takeover of utility giant TXU which raised consolidation hopes. Shares of TXU jumped 13% in the pre-open after agreeing to be bought by a private-equity group for $45 billion, including $13 billion in debt. In another deal, Company management and Colony Capital agreed to buy Station Casinosfor $8.8 billion, including $3.4 billion in debt.

[R]9:00 AM Market futures pointed to a higher opening, helped by merger activity.[/R]
U.S. stock market futures moved higher on Monday, boosted by a multi-billion takeover of utility giant TXU which raised consolidation hopes. Shares of TXU ((UTX)) jumped 13% in the pre-open after agreeing to be bought by a private-equity group for $45 billion, including $13 billion in debt. In another deal, Company management and Colony Capital agreed to buy Station Casinos ((STN)) for $8.8 billion, including $3.4 billion in debt. Dow Chemical ((DOW)) rose 8% on bid speculation that a rivate-equity group will make a takeover bid valued nearly $54 billion. Anither pre-market highlight was Ericsson ((ERIC))with a $1.4 billion offer for Norway's Tandberg Television. S&P 500 futures rose 4.4 points at 1,458.20 and Nasdaq 100 futures rose 7.5 points at 1,852.50. Dow industrial futures improved 39 points.


[R]8:30 AM Microsoft must pay $1.52 billion to Alcatel-Lucent.[/R]
TXU Corp. ((TXU)), the biggest electricity producer in Texas, announced an agreement to be acquired by a group of private-equity firms in a deal worth about $32 billion, including the assumption of $13 billion in debt. If the deal completes, it would be the largest private buyout in U.S. corporate history. It would top the previous biggest buyout of $25.1 billion set in 1988 when RJR Nabisco was bought by Kohlberg Kravis. Kohlberg Kravis Roberts & Co. and Texas Pacific Group led a consortium that included Goldman Sachs & Co. and three other Wall Street firms that will pay $69.25 per share for TXU.

The firms said they will support limits on power-plant pollution that causes global warming. They won support for the buyout from environmental groups which have consistently criticized TXU. Environmentalists agreed to sharply scale back TXU''s controversial $10 billion plan to build 11 new coal-fired power plants that would produce tons of new greenhouse gas emissions. The group also agreed to reduce electricity prices by 10% and limit prices until September 2008.Shares of TXU Corp. climbed 13% in pre-market trading. TXU shares have almost doubled in value over the last two years, rising from $37.35 to Friday''s closing price of $57.64.


[R]8:00AM NY-7:00PM Mumbai The Sensex gains Monday on cement and metal stocks.[/R]
The Sensex on BSE finished 16.99 points, or 0.12%, higher at 13,649.52. The market experienced extreme volatility today as it traded within a range of 339.52 points. The market-breadth improved in late trading but remained negative at close with 1,315 stocks declining 1,229 advancing and 50 stocks were unchanged. Of the 30 stocks in the Sensex 18 advanced while the rest declined. The turnover on BSE was Rs 3,956.87 crore, lower than Rs 4,563.10 crore on Friday. On NSE, the turnover was Rs 9,046.18 crore, lower than Rs 10,337.47 crore on Friday.

Economic news

Railway Minister, Lalu Prasad Yadav presented Railway Budget 2007 in the Parliament today. The general tone of the budget reflected the rising revenue from freight traffic benefiting from the growing economy. The railways continue to increase freight handling capacity, add more passenger trains and provide better reservation facilities. The Minister also said that the rail network will expand by 500 kilometers during the next fiscal year and a small percentage of tracks will be converted to broad tracks from medium tracks.

The railways saw an increase of 14% in revenue and operating ratio of 78.7%. The railways are expected to have cash surplus before dividend of Rs 20,000 crores. The Minister also cut the freight rates for diesel, petrol and ammonia by five percent and lowered second class passenger fares on long distance trains by one rupee.

In the budget Mr. Prasad proposed to increase locomotive production to 200 from 150 and also increase wagon production. Indian Railways plan to grow container traffic five-fold to 100 million tons by the year 2012. Mr. Prasad also said that railways plan to study high speed passenger trains at 300 km per hour speed.

Reliance Industries Board has approved a $6 billion capital expansion plan for its petrochemicals, oil and gas projects. The board approved the issue of 12 crore preferential warrants to promoters, convertible after 18 months. The conversion will lead to an equity dilution of 8.6%, raising over Rs 16,750 crore rupees or $3.76 billion. However, the company has not released conversion price of warrants.

Nissan, Japanese automaker in Japan is to join Mahindra & Mahindra and Renault in an investment of $905 million in small car project in India. Auto sales have been growing at 30% for the last three years and sales are expected to double by the year 2010.

Trading highlights

Reliance Industries was the most-active stock with a turnover of Rs 235.50 crore followed by Reliance Communications and Power Finance Corporation.

Advancers

Cement shares were in focus as Gujarat Ambuja Cements gained 3.8% to Rs 127.6, ACC jumped 3.3% to Rs 945.9 and Grasim added 3.1% to Rs 2,341.2 Cement shares had declined over the past few days with the government keeping a close watch on cement prices.

Banks advanced after the Reserve Bank of India announced it will start paying interest again on eligible cash reserve ratio balances it held. State Bank of India advanced 2.9% to Rs 1,088.8, Punjab National Bank gained 5.5% to Rs 459, Bank of India jumped 5% to Rs 166, Canara Bank added 3.9% to Rs 218, and Bank of Baroda put up 2.5% to Rs 219.

The auto sector rebounded on hopes of an excise duty reduction on cars. Tata Motors advanced 3.1% to Rs 839.6 and Maruti Udyog rose 1.28% to Rs 874.3. Market expects excise duty on cars to be reduced to 16% from 24% in the Union Budget 2007-08.

Steel stocks advanced on hopes that steel makers will hike prices by Rs 1,000 per ton after the budget due to firm global prices. Tata Steel gained 2.3% to Rs 469.7, while SAIL gained 2% to Rs 114. Index heavy Reliance Industries lost 0.7% to Rs 1,402.20. The stock bounced back from the lower level after shedding 2.7%, to a low of Rs 1373.50 in early afternoon trade.

Decliners

Bharti Airtel led the decliners down 3.1% to Rs 732.4. Reliance Communications lost 1.5% to Rs 425.9, Wipro also shed 1.5% to Rs 614 and Ranbaxy dropped 1.5% to Rs 351, respectively. L&T and Bajaj Auto were down 1% each at Rs 1,592 and Rs 2,814, respectively.


[R]6:30AM European markets were higher on Monday on updates, bid talk.[/R]
European markets were higher on Monday. By mid morning, Frankfurt Xetra Dax added 0.5% to 7,024.35, the CAC 40 in Paris gained 0.9% to 5,766.96 and London FTSE 100 climbed 0.6% to 6,438.3.

Advancers

Dutch television production company Endemol gained 3.1% after French luxury goods group LVMH was talking with Endemol French management about a bid. Telefonica, the Spanish telecoms group which owns 75% of Endemol, is preparing an auction of the maker of Deal Or No Deal and Big Brother within two weeks, and may allow only two rival groups to bid for the company, valued at 2.74 billion euros. Shares in LVMH were up 0.9%, while Telefonica added 0.6%.

Allianz, the German non-life insurer, gained 3.4 % as its strong full-year results last week earned it a series of upgrades. Merrill Lynch raised its rating on the company to buy, while UBS, Bear Stearns and Credit Suisse all lifted their target prices on the stock. Axa, Europe second-biggest insurer after Allianz, gained 2%, riding on the positive momentum built up after it also reported stronger-than-expected results last week.

Decliners

Danish drugmaker Novo Nordisk fell 7.5% after the company said it was not seeking regulatory approval to treat bleeding on the brain with NovoSeven after negative results in clinical trials.

Oil and gold

Crude oil for April delivery rose 31 cents to $61.45 a barrel in electronic trading on the New York Mercantile Exchange. April Brent crude on London ICE Futures exchange rose 34 cents to $61.22 a barrel. Gold for immediate delivery advanced $5.20, or 0.8%, to $687.75 an ounce, and traded at $686.65 in early trade in London.

Currencies

The [euro was nearly unchanged against the dollar on Monday as German consumer sentiment fell for a second straight month and worries about Iran''s nuclear ambitions kept currencies on edge. The euro bought $1.3163 in morning European trading, nominally up from $1.3162 in New York late Friday. The British pound fell to $1.9628 from $1.9637 and the dollar also moved lower against the Japanese yen, dropping to 120.78 yen from 121.04 yen.