Temple-Inland Up on Spin-offs

123jump.com Staff
26 Feb, 2007
New York City

Stocks traded lower in financial and industrial shares and expectations of a big downward revision in gross-domestic product, as merger news, including a buyout deal for utility giant TXU failed to push the major indexes higher. Apax Partners agreed to purchase Chicago insurance brokerage Hub International for about $1.7 billion. Financial companies declined. American Express dropped 1.4%. Among Dow components, Home Depot was 1.2% lower; while AT&T was up 1.2%.

Abraxis BioScience ((ABBI)), biopharmaceutical company, recorded a 47% increase in its revenue to a record $765.5 million from $520.8 in 2005. Revenue for company-wide, hospital-based products reached a record $584.4 million in 2006, a 52% increase from the prior year. The company said that its fourth-quarter adjusted earnings climbed to $46.7 million, or 29 cents per share, compared with a year-ago equivalent profit of $14.8 million, or 9 cents per share. Shares of the company went up 4.1%.

Dow Chemical Co. ((DOW)) shares climbed 5.4% as investors snapped on a report that a group of private equity firms might make a $54 billion bid for the company.

GulfMark Offshore Inc. ((GMRK)), transportation services to the offshore energy industry provider, said that its fourth-quarter net income increased to $30.6 million, or $1.42 per share, compared with $8.2 million, or 39 cents per share, a year earlier. Revenue jumped 34% to $69 million, due to higher rates and the addition of new vessels. The firm said profit also benefited by around 17 cents a share from a previously announced sale. Shares climbed 4.8%.

Hub International Ltd. ((HBG)) said it will be acquired by private equity firm Apax Partners, together with Morgan Stanley Principal Investments, for about $1.7 billion. Shares of the company climbed 13.9%.

Itron Inc. ((ITRI)) rose 5% after the technology provider agreed to acquire Actaris Metering Systems for roughly $1.6 billion. The acquisition of the company is expected to add about 20 cents to 30 cents per share to adjusted earnings and between $720 million and $730 million in revenue to 2007 results. The deal is expected to close during the second quarter.

Jakks Pacific Inc. ((JAKK)), which sells toys, writing instruments and other consumer products, said that its fourth-quarter net income increased to $23.2 million or 73 cents per share from $9 million, or 30 cents per share, a year earlier. Excluding stock-based compensation and other charges, earnings increased to $26.9 million, or 84 cents per share, from $12.7 million, or 41 cents a share a year ago. Quarterly sales rose 43.3% to $238.3 million, as traditional dress-up and role play dolls and action figures sold well. Shares jumped 13.8% as company’s fiscal 2007 earnings outlook topped Wall Street estimates.

Temple-Inland ((TIN)) said it would spin off two businesses and sell its timberland operations, sending its shares up 14.2%. The company said the spin-offs would include its financial services operations in Guaranty Bank and more than 236,000 acres of real estate operations. Temple-Inland''s timber holdings consist of about 1.8 million acres in Texas, Louisiana, Alabama and Georgia, as well as the mineral rights to nearly 740,000 acres in those states.

TXU Corp. ((TXU)) goes private through what will be the largest leveraged buyout in history. A group led by Kohlberg Kravis Roberts and Texas Pacific will pay $69.25 per share for the company; including assumed debt, the transaction is worth $45 billion. The newly privatized company said it will deliver price cuts valued at more than $300 million annually, price protection benefits to electric customers through 2008, strengthen environmental policies, make significant investments in alternative energy and institute corporate policies tied to climate stewardship. Shares climbed 13.2%.

Arris Group ((ARRS)) shares tumbled 10.1% after the company''s bid to acquire Norway''s Tandberg Television was trumped by Ericsson ((ERIC)). Telecom equipment maker Ericsson offered 9.8 billion crowns ($1.38 billion) for Norway''s Tandberg Television, topping an earlier accepted bid from Arris Group Inc.

Moody''s Corp. ((MCO)) fell 5.3% after Credit Suisse cut company’s rating on the debt rating firm to underperform and reduced its price target to $64 per share from $79 per share.

New York Times Co. ((NYT)) shares fell more than 2% after A Lehman Brothers analyst cut his rating on New York Times Co., citing a recent rise in share price and a negative outlook on the newspaper publishing sector. The company''s newspaper saw its advertising revenue slip 9.7% in January, while the regional newspapers segment took a turn for the worse, falling 6.5%.

[R]1:00PM European markets closed higher, led by insurance and metals stocks.[/R]
European stocks finished Monday trading session in the positive, with several indexes hitting new highs, boosted by gains for insurance, oils and metal stocks. Earnings-related gains from companies such as Associated British Foods and insurer Old Mutual also contributed to the upward move. Insurers were leading gainers in Germany, with Allianz rising 3% and Munich Re adding 2.5%. The German DAX 30 rose 0.5% to 7,027.59, after the stocks benchmark hit a fresh multiyear high of 7,040.20 in the session. The French CAC-40 climbed 0.8% to 5,762.54, after hitting a high not seen since February 2001 of 5,771.69 during the session. The index was helped by 3.9% from steel giant Arcelor-Mittal. The U.K.''s FTSE 100 rose 0.5% to 6,434.70, helped by continued gains from mining shares such as Kazakhmys and Vedanta Resources, up 1.9% and 1.3% respectively, boosted by higher gold prices. Old Mutual rose 3.3% after the Anglo-South African insurer said 2006 adjusted operating profit climbed 16%. Shares of Associated British Foods, food ingredients and retail group, rallied 4.6% on better operating profit.


[R]11:30AM U.S. stock averages traded mixed. Arris weighed on the tech sector.[/R]
U.S. stock market averages turned mixed in late morning trading, as oil prices jumped above $62 offsetting merger activity, including the $45 billion acquisition of UTX, the biggest private-equity deal ever. Stocks failed to sustain earlier gains amid concerns of a market correction. The Dow remained in the positive, helped by 3.8% gain for drug maker Merck ((MRK)) and 1.3% for Coca-Cola ((KO)) on the back of brokerage upgrades. The tech sector was weighed down by Arris Group ((ARRS)), falling 11% after Ericsson bid $1.4 billion for Tandberg Television, topping Arris'' offer. The downward move by the tech-heavy Nasdaq reflected weakness among computer hardware, networking, and software stocks, due to profit taking after recent strength. Among other companies in focus, XM Satellite Radio Inc. ((XMSR)) rose 2.3% after it said its Q4 loss narrowed from a year ago on 45% higher revenue and lower subscription acquisition costs.

On the merger-and-acquisition front, UTX Corp. ((UTX)) soared 13% after it agreed to be purchased by a private-equity group. Dow Chemical ((DOW)) climbed 7% on bid speculation. Station Casinos ((STN)) rose 4.2% after it agreed to go private in a $5.4 billion deal, which is an 8% premium over its closing price on Friday. Temple-Inland ((TIN)) spiked 14% after it agreed to spin off its real estate and financial services arms. In late morning trading, the Dow rose 9.70, or 0.08%, to 12,657.18. The Standard & Poor''s 500 index was up 2.06, or 0.14%, at 1,453.25, and the Nasdaq composite index fell 7.81, or 0.31%, to 2,507.29. Bonds continued to rise from last week''s sell-off, with the yield on the benchmark 10-year Treasury note falling to 4.65% from 4.68% late Friday.


[R]9:45AM U.S. stocks opened higher, lifted by UTX, Station Casinos.[/R]
U.S. stocks opened notably higher Monday on well-received deal news, including the $45 billion takeover of TXU Corp. ((TXU)). The shares of the utility jumped 13% after agreeing to be bought by a consortium led by Kohlberg Kravis & Roberts and Texas Pacific Group. If approved, the deal would be the biggest private buyout ever. Further boost to the market sentiment was provided by Station Casinos ((STN)) which gained 4.2% after Company Management and Colony Capital agreed to buy the casino-operator for $8.8 billion. Among other notable gainers in morning trading, Temple-Inland Inc. ((TIN)) surged 13% after it announced plans to separate itself into three standalone public companies. The conglomerate agreed to spin off its real estate and financial services arms, and sells its timberland business.

Dow component Merck ((MRK)) rose 2.7% after being upgraded to buy at Citifroup on its outlook for a diabetes drug that will compete with Novartis''s Galvus. At the same time Novartis ((NVS)) fell 1.8%. Among companies driven by analyst comments, Brightpoint ((CELL)), cell phone distributor, gained 2.1% on brokerage upgrade, while shares of Moody''s ((MCO)) dropped 3.6% after Credit Suisse downgraded its rating on the credit services provider. By sector, utility, housing and energy stocks posted strength in early trading, while the oil-sensitive transportation sector declined. In the first hour of trading, the Dow rose 13.06, or 0.10%, to 12,660.54.The Standard & Poor''s 500 index was up 4.03, or 0.28%, at 1,455.22, and the Nasdaq composite index dipped 0.71, or 0.03%, to 2,514.39. Bonds continued to recover from last week''s sell-off, with the yield on the benchmark 10-year Treasury note falling to 4.64% from 4.68% late Friday.


[R]9:30AM London is higher Monday on Persimmon and AB Foods.[/R]
The UK market was higher on Monday. By late morning, the FTSE 100 gained 43.7 points at 6,446.4.

Advancers

AB Foods rose 5.1% as it reported a strong performance from its sugar businesses and a 4% rise in sales at the Primark fashion chain. Strong full-year results boosted housebuilder Persimmon, 3.6% higher, and Old Mutual, the life assurer, up 2.8%.

As the crude price rose a further 28 cents to $61.42, oil stocks were again stronger. BP rose 2.1% and Cairn Energy gained 1.8%. Miners also traded higher after a strong session in Asia overnight. Kazakhmys, the copper miner, gained 2.4%.

Decliners

William Ransom has warned profit growth for the full year to March 31 would come in below its own previous expectations due to a slower than expected recovery in a key export market. William Ransom declined 20.6%. Alfred McAlpine crashed as it warned it had discovered signs of a systematic fraud at its Slate subsidiary. The stock fell 19.6%.

BSkyB declined 0.6% on continued worries about its dispute with Virgin Media. BSkyB announced discussions with Virgin Media about the carriage of Sky basic channels were ongoing and there was a real possibility that agreement would not be reached before expiry of the current contract at midnight on February 28. The higher crude price dragged Carnival, the cruise operator, 0.3% lower.


[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 private-equity group will make a takeover bid valued nearly $54 billion. Another 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]8:45AM Asian markets finished mixed Monday with Japan higher and HK lower.[/R]
Asian markets closed mixed on Monday. The Nikkei ended 0.15% higher at 18,215.35. Sony edged 0.8%, after Merrill Lynch upgraded its rating to buy"""" from sell and raised its target price. Softbank gained 3.1%. Resona Holdings fell 2% but shares of Nikko Cordial gained 13% on reports U.S.-based Citigroup Inc. is seeking to substantially boost its 4.9% stake in the company. Sanyo Electric gained 3.9%, following a 21% plunge Friday after the Osaka-based electronics maker announced it was being investigated.

Hong Kong Hang Seng Index fell 0.98% to 20,507.95 and Australian leading share index rose 0.13% to 6,044. In Australia, Rio Tinto led gains among the resources sector after prices for industrial commodities and precious metals rose. Rio Tinto rose 2.1%, while BHP Billiton added 0.5%.

Other benchmarks around the region also gained. South Korea Kospi index closed up 0.15% at 1,470.03 and Taiwan Weighted Price Index closed 1.16% higher at 7,900.20, lifted by gains in construction companies on reports that regional investors are starting to take an active interest in Taiwan real-estate market. China Shanghai Composite Index swung from early losses to jump 1.67%. However, Singapore Straits Times Index fell 0.08% to 3,307.92.


[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.