U.S. Movers: Simclar, Books A Million, Allot

123jump.com Staff
02 Apr, 2007
New York City

U.S. market after more than four hours trading lacked a firm direction despite steady flow of deals. Weaker than anticiptated report on manufacturing took toll in the morning trading. Books-A-Million reported a 35% rise in profit. Simclar rose on five-fold jump in earnings. Allot Communications fell on lowered revenue guidance and First City Financial fell on news that it will delay its annual report filing.

[R]2:30PM NY, U.S. Market Movers[/R]

Automatic Data Processing ((ADP)) shares fell 6.9% after the company completed the spin-off of its brokerage services group by distribution of a special tax-free dividend to its shareholders, consisting of roughly 138.5 million shares of common stock of Broadridge Financial Solutions Inc.

Books-A-Million Inc. ((BAMM)) shares rose 20.2% after the book retailer reported fourth-quarter profit rose 35%, despite a drop in sales at established stores. The company said that its fourth-quarter net earnings increased to $15.1 million, or 90 cents per share, compared with $11.2 million, or 66 cents per share, in the year-ago period. The book retailer said revenue rose 8.4% to $174.6 million versus $161.1 million in the comparable period last year. Same-store sales declined 2.4%.

First Data Corp. ((FDC)) shares climbed 20.6% after Kohlberg Kravis Roberts & Co. agreed to take it private in a $29 billion deal. This is one of the largest private equity deals of the year, coming in second only to KKR''s deal to buy energy company TXU Corp. for $31.8 billion.

Georgia Gulf Corp. ((GGC)), chemicals maker, said it swung to a fourth-quarter loss as a jump in costs and one-time charges offset revenue growth. The company posted a loss of $47.2 million, or $1.38 per share, compared with a profit of $18.7 million, or 55 cents per share, a year ago. Revenue rose 31% to $681.5 million from $518.9 million in the year-ago period. Shares of the company climbed 6.5%.

Global Imaging Systems ((GISX)) shares jumped 46.9% after the company agreed to be acquired Xerox ((XRX)) for a cash price of $29 per share. The deal carries a total purchase price of about $1.5 billion and represents a premium of about 49% over Tampa-based Global Imaging''s Friday closing price of $19.50.

Novavax ((NVAX)) shares surged 23.1% after the biopharmaceutical company said preclinical research showed its flu vaccine candidate triggered an immune response and provided protection against avian influenza.

Simclar Inc. ((SIMC)) shares jumped 17.9% after the company said that its fourth-quarter earnings increased to $949,000, or 15 cents per share, compared with a year-ago profit of $192,000, or 3 cents per share.

Allot Communications Ltd. ((ALLT)), network technology company, said that it is lowering its first-quarter and fiscal 2007 outlooks due to weaker sales from some distributors. The company said it now sees its first-quarter revenue between $8.2 million and $8.3 million, down from its prior guidance for a level similar to its fourth-quarter sales of $9.6 million. First-quarter earnings are expected to decline on the lower revenue. Shares fell 23.7%.

FirstCity Financial Corp. ((FCFC)) shares fell 9.9% after the company said it will delay the filing of its 2006 annual report beyond the extended filing date of April 2, due to an ongoing independent investigation by its audit committee. The financial services company said it does not know whether the outcome of the investigation will have a material effect on its financial condition or prior results.

Focus Enhancements Inc. ((FCSE)) shares fell 15.5% after the company wrote in its 2006 audit report that it is uncertain of the company''s ability to continue as a going concern.

M&T Bank Corp. ((MTB)) shares fell 8.8% after the company said trouble in its subprime residential mortgage segment will reduce first-quarter net income from $1.50 to $1.60 per share. The company was expected to earn $1.86 per share in the first quarter, according to average Thomson Financial estimate. First-quarter profit will be cut by $7 million, or 7 cents per share, as a result of a $12 million reduction in the carrying value of M&T''s so-called Alt-A mortgage portfolio held for sale.

Pope & Talbot Inc. ((POP)), forest products company said it swung to a profit in the fourth quarter, as refunds from a long-running soft lumber dispute between the U.S. and Canada offset the effect of a weakening lumber market. The company posted a profit of $83 million, or $5.09 per share, compared with a loss of $33.6 million, or $2.07 per share during the same quarter in 2005. Revenue fell 16% to $190 million, versus $226.8 million during the same period a year earlier. Shares declined 7.6%.


[R]1:45PM NY – 6:30PM Frankfurt – Telecoms in Italy, banks in Germany and retailers in the UK drive major exchanges higher across Europe.[/R]

Indexes across the European markets rose on deal news. Italian index gained 0.44% at close on an offer from AT&T and American Movil to buy an indirect controlling stake in Telecom Italia. The bid may come under resistance from Italian government indicated by Communications Minister Paolo Gentiloni. He said that the government deems the telecom company as strategic asset and will encourage local banks to bid for the asset.

TeleocoM Italia ((TI)) rose 9.2% and Pirelli gained 9.4%.

The news lifted other telecom stocks across the region. Telefonica in Spain jumped 1.3%, Vodafone ((VOD)) in the UK rose 2.1%, France Telecom in Paris added 2.8% and Deutsche Telekom in Germany advanced 3% at close in respective markets.

Stocks of telecom equipment makers fell on the news of possible global consolidation. Nokia dropped 1.3%, Ericsson lost 1.4% and Siemens edged 0.1% lower.

Italian national carrier Alitalia stocks were halted from trading on the news that Aeroflot and Mediobanca have teamed up be the third bidder for the airline. The airline is expected to report its annual profit statement in the third week in May.

Daimler Chrysler ((DCX)) rose to a six months high on the hopes that sale of its Chrysler unit will bring more than expected by analysts.

Germany’s online stock broker Comdirect Bank rose 10% on rumors that Commerzbank is likely to buy the company.

Spanish airline Iberia gained 1% on the news in the UK media that British Air is likely to consider bidding for the Spanish airline. The British carrier own 10% of Iberia.

Supermarket retailers in the UK rose on the media report that J Sainsbury plc is likely to receive a bid of 10 billion pounds from a private equity group. Sainsbury rose 0.6%, William Morrison Supermarkets gained 2%, and Marks & Spencer Group advanced 2.4% on the news.

[R]12:00PM NY – 5:00PM Milan – Telecom Italia may not pass government scrutiny.[/R]

AT & T and Mexico based American Movil each has agreed to offer 1.35 billion euros for one third stake in holding company Olimpia. The holding company owns 18% of Telecom Italia, which is 80% controlled by Pirelli & C.SpA.

Shares of Telecom Italia ((TI)) jumped in trading in Milan and in New York. In Milan trading the shares of Telecom Italia jumped 12% to 2.40 euros and Pirelli jumped 16% 95.6 euros. In New York trading Telecom Italia shares rose 9.4% or $2.69 to $31.35.

Italian Communications Minister Paolo Gentiloni said that the telephone company is a strategic asset and urged Italian industrial companies and banks to counter the bid. The government is likely to urge insurance company Generali and other local companies to take the stake.

The former Chairman of Telecom Italia, Marco Tronchetti Provera, resigned after the Prime Miniser Prodi scuttled his plan to split the mobile company from the fixed-line business and restructure the company.


[R]11:30AM NY – KKR is in a deal to acquire First data Corporation for $29 billion.[/R]

First Data Corp has agreed to be acquired by buy out firm KKR for $29 billion of $34 per share. The deal includes assumption of nearly $3 billion in debt. The deal values the 2007 earnings at 14 times and nearly 19 times the earnings before interest, taxes and depreciation.

The deal is priced at a premium of 26% to the March 30 closing price. The largest credit card and bank payment processing company was put on the sale by its CEO Henry Duques after spinning off its money transfer division Western Union. First Data stock jumped 20% or $5.60 to $32.48 after rising to $32.90.

Low interest rate environment has kept buyout companies busy with deals and larger deals are becoming norms in these transactions. In the last six months KKR has raised close to $100 billion to complete several buyout that it plans to finish this year. Several industry estimates suggests that more than $2 trillion deals can be completed this year if stock market remains lackluster and interest rate environment does not change. In the first quarter alone more than $175 billion of deals have been completed.

[R]10:15 AM NY - Tribune agrees to a takeover offer of $8.2 billion from Sam Zell.[/R]

Tribune Co. agreed to be acquired by Sam Zell led offer for $8.2 billion topping the bid by Ron Burkle and Eli Broad. After a six month drawn out battle, the Tribune board agreed to sell the company to its preferred bidder Zell. Chandler family owns 20% of the company will be selling its shares in the transaction.

In a two step deal, during the fist step the company will purchase at $34 per share 50% of its outstanding shares or 126 million shares before the end of the second quarter. The company will purchase the remaining shares by the end of third quarter. The first step purchase will be funded by $260 million from Zell and rest by borrowings of $4 billion. In the second step Zell will invest additional $65 million. The Employee ownership plan will be merger with the company and Zell will have warrant worth 40% of the company.

Under the terms of agreement the company is allowed to entertain other offers with a breakup fee of $25 million.

The newspaper industry has suffered a significant decline in readership and loss of advertising revenue in the last five years. Tribune reported a decline of 5% in February advertising revenue led by a sharp drop in classified ad sales. The much anticipated synergy between print, TV broadcasting, and Internet publishing has been hard to harvest for most publishing firms. The year 2000 merger between Los Angeles Times and Chicago based Tribune generated constant management headache, employee turnover, and a failed plan to integrate two properties.

Sixty five year old Zell recently sold his real estate company for $39 billion to private equity company Blackstone Group LP.

[R]9:20AM NY – Buyout news support a mild rise in U.S. Indexes at the opening.[/R]

U.S. market averages are expected to open higher, but only by a fraction on several buyout deals. Oil is trading higher and metals are likely to advance in the early morning trading.

First Data is in a deal to sell the company to private equity group KKR for more than $28 billion. Several bankers close to the deal confirmed that the likely price for the company is near $28 billion to $29 billion or for $34 per share. The stock in the pre-market trading jumped $6 or 23% to $33 on the news.

Tribune has agreed to be acquired by Sam Zell and Employee Stock Ownership Program for $34. Analysts had speculated that the company can be sold as high as $53 per share.

Xerox has agreed to acquire Global Imaging Systems Inc for $1.5 billion. The deal will allow Xerox to reach small and medium size businesses and home office based customers. The stock of Global Imaging rose $9 to $28.55 on pre-market trading.

AT&T and Mexico based American Movil, each has offered to buy one third of Telecom Italia SpA, largest Italian telecom company, from Pirelli & C. SpA for 2.82 euros valuing the company at near $10.5 billion.


[R]8:30AM NY-7:30PM Mumbai Sensex down over 600 points on sell-off in banking stocks[/R]
The Sensex on BSE finished 616.73 points, or 4.72%, lower to 12,455.37. The market-breadth was very weak as there were more than two decliners for each gainer. As 1,771 stocks declined, 702 stocks advanced and only 73 remained unchanged. Of the 30 stocks in the Sensex, there were no gainers, as all 30 stocks declined. The turnover on BSE was Rs 2,910.51 crore, lower than Rs 3,011.09 on Friday. The turnover on NSE was Rs 6,866.85 crore, compared with Rs 7,517.79 crore on Friday.

Economic news

A surprise rise in the repo rate and the cash reserve ratio announced by Reserve Bank of India after trading hours on Friday surprised the market. The RBI hiked its short-term lending rate, the repo rate, by 25 basis points to 7.75%. The central bank also lifted the cash reserve ratio by half a percentage point. The CRR will rise to 6.50% in two tranches, the first on 14 April 2007 and the other on 28 April 2007, and will drain Rs 15,500 crore from the banking system.

Trading highlights

Reliance was the most-active stock with a turnover of Rs 164 crore followed by Indiabulls Real Estate and Infosys.

Decliners

Maruti and Tata Motors led the decliners, plunging 8% each to Rs 753 and Rs 669, respectively. Hero Honda slumped over 7% to Rs 635, and Bajaj Auto shed 5% to Rs 2,301. Interest rate sensitive auto stocks were hit on concerns that an increase in lending rates will hurt demand. Adding to the problems of auto shares, were weak March 2007 sales report by Bajaj Auto, Hero Honda and TVS Motors.

SBI tumbled over 6% to Rs 930. ICICI Bank dropped nearly 6% to Rs 805, and HDFC Bank declined 5% to Rs 902. ICICI Bank raised the benchmark-lending rate by 100 basis points to 15.75%, coming into effect from April 1 2007. It also hiked its floating reference rate for consumer loans, including home loans, by 100 basis points to 12.75%, with immediate effect.

Interest rate hike also caused realty stocks to dip. Indiabulls Real Estate, Parsvnath Developers, Sobha Developers, Anant Raj Industries, Unitech, and Mahindra Gesco Developers were the decliners for today.

Wipro declined over 7% to Rs 518. Larsen & Tourbo and HDFC were down nearly 6% each at Rs 1,525 and Rs 1,433, respectively. Satyam shed 5% to Rs 446, and BHEL lost 4.7% to Rs 2,154.

Reliance Industries declined 4.01% to Rs 1,313.50, despite signing an agreement for transporting natural gas with Gujarat State Petronet from Bhadbhut in Bharuch to Reliance’s refinery in Jamnagar, Gujarat.

[R]6:30AM European market gained on Monday on M&A activities.[/R]
European markets were higher on Monday. By mid morning, Frankfurt Xetra Dax was 0.2% higher at 6,933.3, the CAC 40 in Paris added 0.1% to 5,641.31 and London FTSE 100 gained 0.3% to 6,328.7. National benchmarks rose in 11 of the 17 markets in western Europe that were open.

Advancers

Telecom Italia rose 11.2 % as the prospect of a bid war for the telecom group parent company Olimpia increased after interest from AT&T of the US and Mexico America Movil.

Pirelli, the Italian company which owns 80% of Olimpia, announced it was in talks with AT&T and America Movil, who are jointly bidding for a third each of Pirelli controlling stake in TI.

The news excited the rest of the sector, lifting Dutch peer KPN 4.1%. France Telecom climbed 2.8 %, while Britain BT Group added 2.1% and Germany Deutsche Telekom rose 2.7%.

Merger speculation keeps driving shares in DaimlerChrysler as the German carmaker was imminently expected to announce the sale of its US Chrysler unit. Weekend press reports suggested the division may fetch between 6 eurosbillion to 9 billion euros, driving DaimlerChrysler shares 1.4% higher.

Decliners

U.K. mortgage bank Northern Rock lost 0.4% after performing strongly since the middle of March. The company stated that it continues to trade strongly in the first quarter of 2007, putting it on track to meet its asset and profit growth strategy targets. Siemens declined 0.2%, while Nokia dipped 0.9%. Alcatel-Lucent shares were down 0.1% in Paris, while Ericsson shares declined 0.8% in Sweden.

Currrencies

The dollar was down against most other major currencies in European trading Monday. The euro traded at $1.3350, up from $1.3305 late Friday. The British pound traded at $1.9726, up from $1.9593. The dollar fetched 117.78 Japanese yen, down from 118.27.