Market to Rise on Deals

albena
22 Aug, 2005
New York City

With only a few earnings reports due to be released and no economic news on the calendar, fresh merger and acquisition activity is in the spotlight Monday. CNPC Intl. said it has agreed to buy PetroKazakhstan for $4.18 billion. SBS Broadcasting agreed to be acquired for $2.6 billion by two private equity companies. Germany's TUI AG has reached a deal to buy CP Ships Ltd. in a $2 billion deal to create the world's No.5 container shipping company.

U.S. AVERAGES

Crude-oil futures were lower but still above $65 a barrel.

China's CNPC International announced it has agreed to acquire PetroKazakhstan for $4.18 billion, topping an offer from an Indian rival.

SBS Broadcasting ((SBTV)) agreed to be acquired for $2.6 billion, or $56 a share, by two private equity companies.

Germany's TUI AG has reached a deal to acquire CP Ships Ltd. in an all-cash deal valued at $2 billion, or $21.50 a share, to create the world's No.5 container shipping firm.

OSI Pharmaceuticals Inc. ((OSIP)) is buying Eyetech Pharmaceuticals Inc. ((EYET)) in a cash-and-stock deal, valued at $935 million, that pays Eyetech shareholders a 43% premium over Friday's closing price of $13.99.

Trader Classified Media climbed 8.9% in afternoon Paris trade after a report that Yahoo ((YHOO)) and Google ((GOOG)) showed interest in acquiring the publisher of 575 print titles. Both Internet search engines have made approaches for the company, according to reports.

On the earnings front, H.J. Heinz Co. said fiscal first quarter earnings fell 19.2% to $157.3 million, or 45 cents a share, with sales up 5.3% to $2.11 billion. Excluding reorganization-related charges and other items, Heinz would have earned 52 cents a share for the latest quarter. Analysts had expected earnings of 49 cents a share on revenue of nearly $2.08 billion.

ECONOMIC NEWS

No economic reports are due Monday.

Existing home and new home sales, weekly jobless claims, durable goods orders and monthly consumer sentiment are on economic calendar for the week.

On Tuesday the National Association of Realtors is expected to report that July existing home sales have declined to 7.25 million from 7.33 in June and 7.14 million in May. National median price on housing in June was $219,000. On Wednesday, Commerce Department is expected to report new home sales of 1.325 million from 1.374 million in June.

On Wednesday the Commerce Department is also scheduled to report July durable goods orders declined by 1.2% after rising 1.4% in June, 6.4% in May, and 1.5% in April. If the orders do decline then this will be the first decline since March 2005.

On Thursday Labor Department is to report weekly unemployment for the week ended August 20 to rise to 320,000 from 316,000 in the previous week. The initial claims after peaking in March 2005 at 455,000 have been on steady decline.

On Friday Fed’s Chairman is scheduled to report on the health of the economy at the Fed’s annual meeting in Jackson Hole, Wyoming. Final read on August consumer sentiment from the University of Michigan is expected to match the initial estimate of 92.7.

INTERNATIONAL MARKET NEWS

Asian markets closed higher Monday as Japanese shares reached their highest level since July 2001, led by gains in banking and oil companies. The Nikkei 225 index rose 160.78 points, or 1.3%, to 12,452. Among advancers, Hong Kong's Hang Seng index closed 1.2% higher, Sydney's All-Ordinaries index rose 0.7% to 4,462, Singapore's Straits Times index closed 0.6% higher to 2,300 and the Shanghai Composite index added 0.7% to 1,158.

Japanese stocks climbed to a new 4-year high Monday as continued confidence in the nation's economic recovery encouraged traders to buy issues sensitive to domestic demand. On the Tokyo Stock Exchange the Nikkei 225 index gained 160.78 points, or 1.30% to 12,452.51 points, its highest level since July 5, 2001 when it reached 12,607.30 points.

European stocks edged higher in the early trading Monday as oil and mining stocks advanced, while pharmaceutical sector was under pressure. The German DAX 30 added 0.24% to 4,941 points, the French CAC 40 gained 0.09% to 4,491 points and the British FTSE 100 index advanced 0.15% to 5,320 points.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices dropped in early trading but were still above $65 a barrel. The September light crude futures contract for NYMEX lost 27 cents to $65.08 a barrel in electronic trading early Monday, while the October contract for Brent crude shed a penny at $64.35.

The dollar dropped vs. the euro and the yen Monday, after the greenback had rallied last week on positive U.S. economic reports and expectations of higher interest rates. The euro was quoted at $1.2180 in European trading, up vs. $1.2163 late Friday in New York. The British pound climbed to $1.7991 vs. $1.7961 on Friday. The dollar fell to 109.85 yen from 110.45 yen as stocks in Tokyo reached a new four-year high.

Gold closed at $437.55 an ounce on Monday in Hong Kong, down $1.2 an ounce versus Friday's close of $438.75.

Treasury prices were lower, raising the yield on the 10-year note to 4.23% vs. the 4.20% level late Friday.

EARNINGS NEWS

Heinz Company ((HNZ)) posted earnings for 1Q 2006, excluding special items, of 52 cents per share vs. 55 cents per share in the same period a year ago. Analysts expected earnings of 49 cents per share for the quarter. Sales for the first quarter totaled $2.110 billion vs. 2.003 billion prior in the year.

J. M. Smucker Company ((SJM)), jams, jellies and preserves producer, announced that its earnings per share from continuing operations for 1Q of 2006 were 51 cents, up vs. 50 cents the year-ago period with sales climbing some 23% in 1Q of fiscal 2006.The analyst estimate was for 63 cents per share.

LanVision Systems Inc. ((LANV)) posted 2Q net income of 6 cents per share vs. a net loss of 5 cents per share in the same quarter last year. Revenues for the quarter were up 59% to $4.06 million from $2.56 million in the year-ago quarter.

Benihana Inc. ((BNHN)) posted 1Q net income of 44 cents per share vs. 20 cents per share in the year-ago period. Total revenues rose 13% to $74.1 million vs. $65.4 million last year.

CORPORATE NEWS

PetroKazakhstan Inc. ((PKZ)) said it has entered into an arrangement agreement according to which a wholly-owned subsidiary of CNPCI would offer $55.00 per share in cash for all outstanding common shares of PetroKazakhstan. The aggregate value of the transaction is about $4.18 billion. The Board of Directors of PetroKazakhstan has recommended that its shareholders accept CNPCI's offer. The transaction is expected to be completed October 2005.

OSI Pharmaceuticals ((OSIP)) has agreed to buy Eyetech Pharmaceuticals ((EYET)) in a deal worth about $935 million. Under the agreement, each Eyetech share would be exchanged for $15 in cash and 0.12275 of an OSI share. The companies said that they expect to complete the transaction by the end of 2005.

Northwest Airlines Corp. is put to the test as it will try to keep planes flying on heavier weekday levels Monday with its mechanics still on strike. In anticipation of the strike, the nation's fourth-biggest carrier switched to its fall schedule Saturday, a week earlier than planned, making the schedule lighter by about 17%. No talks are scheduled between Northwest and the union, which is refusing to take pay cuts and layoffs that would have reduced their ranks almost by half.

SBS Broadcasting S.A. ((SBTV)) revealed that it has entered into a definitive deal for its business to be bought by funds advised by Permira and affiliates of Kohlberg Kravis Roberts & Co. in a transaction valued at about $2.549 billion, on an enterprise value basis. An acquisition company jointly held by Permira and KKR has agreed to pay SBS 1.691 billion euro in cash for substantially all of SBS's assets, and to assume substantially all of its liabilities, resulting in a total transaction value, excluding minorities, of approximately 1.864 billion euro. SBS's business activities would be continued under ownership of Permira and KKR.

German travel company TUI AG revealed Sunday it plans to acquire Canadian firm CP Ships for $2 billion in a deal to bolster the company’s container shipping business. According to TUI, the Canadian company's board of directors unanimously recommended that its shareholders accept the all-cash offer of $21.50 per share - a premium of 9.7% over CP Ships' closing share price on Friday.

Freescale Semiconductor Inc. ((FSL)) announced that it has acquired the assets of Seaway Networks Inc. The company said that Seaway Networks is a fabless semiconductor supplier of content processing technology and solutions for the data networking industry. The company did not reveal the financial terms of the deal.

OTHER NEWS

Iraq's oil exports were shut down Monday by a power cut that left parts of central and southern Iraq dark, including the country's only functioning oil export terminals. Sabotage was also blamed for Monday's blackout, which prevented oil from being pumped into tankers waiting at berths, according to Iraqi officials. There was no electricity Monday morning in Basra and in the port city of Umm Qasr, too. Exports through the country's other main route, the northern export pipeline to Turkey, have long been halted by incessant sabotage.