Records in Emerging Markets, Alcoa $27 B Bid

123jump.com Staff
07 May, 2007
New York City

Higher commodity prices and cheap credit continues to fuel a wave of mergers. Alcoa launched a hostile bid for Alcan. ABN Amro said it had received a $24.5 billion conditional bid for LaSalle Bank from a consortium led by RBS. Liberty Mutual Groups agreed to buy competitor Ohio Casualty Corp. for $2.7 billion in cash, or $44 a share. Chilean government forecasted GDP growth rate of 5.7% in 2007. Brazil based Banco Bradesco earnings jumped 11%.

[R]4:30PM NY; 10:30PM Frankfurt; 2:00AM Mumbai - GLOBAL MARKETS[/R]

Yield on 10-year U.S. bond closed at 4.636% and the 30-year U.S. bond closed at 4.794%.

Gold gained 70 cents to close at $690.400 a troy ounce, silver increased 11 cents to end at $13.640 a troy ounce and copper gained $137.000 to close at $8370.000 per metric ton.

Oil lost 41 cents to close at $61.520 a barrel and heating oil declined 2.720 cents to finish at 180.370 cents a gallon. Natural gas decreased 15.4 cents to close at $7.784 per MMBtu. Gasoline went down 2.690 cents to end at 218.950 cents a gallon.

Asian markets closed higher helped by gains in the technology sector and on the expectations that weaker job growth in the U.S. will persuade the Federal Reserve to reduce interest rates. Market indexes in Hong Kong, Australia, Taiwan and Singapore closed at record. The advancers were led by Japan with an increase of 1.58% and Philippines with an advance of 1.57%. The decliners were India with a decline of 0.39% and Singapore with a loss of 0.23%. Australia gained 0.53%. DLF Ltd received its approval for listing in India and raise $2.5 billion from the local market, largest IPO ever. Bombay Stock Exchange sold 41% of its stake to India based financial institutions.

European markets finished a little higher with declines from automakers. The advancers were led by U.K. with an advance of 1.01%, Belgium with an increase of 0.43% and Norway with a gain of 0.37%. The only decliner was Italy with a loss of 0.06%. BAE, aerospace and defense British company, agreed to pay $4.1 billion for the U.S. based Armor holdings. EU revised its annual economic growth rate across 27-nation economic bloc to 2.9% from 2.9% forecast in February.

Latin America markets finished lower hurt by lower oil prices, while Canada gains on deal news. The decliners were led by Argentina with a decline of 1.67%, Brazil with a loss of 0.67% and Mexico with a decrease of 0.50%. There were no advancers. Second largest private bank in Brazil, Banco Bradesco reported 11% rise in earnings as it expanded its lending to consumers. Chilean economy expanded at 6.5%, fastest pace in two years, on record exports and Finance Minister projected a growth rate of 5.7% for the current year. Chilean government foreign exchange holding from copper exports rose by 40% to $14.2 billion.

Canada advanced 0.67% helped by Alcoa''s bid for Canadian aluminum giant Alcan, and Cemex''s bid for Rinker Group.

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

K-Tron International Inc.''s ((KTII)) shares climbed to 6.8% after the company said that its first-quarter net income more than doubled to $4.9 million, or $1.72 per share, 110.6% higher than the $2.317 million reported in the first quarter of 2006. Revenue climbed to $46.9 million versus $32.1 million in the same period a year earlier.

Ohio Casualty Corp. ((OCAS)) shares jumped 29.4% after the company agreed to be acquired for $44 per share, or $2.7 billion, by Liberty Mutual Group.

Rocky Brands Inc. ((RCKY)), footwear and apparel maker, said that its first-quarter net income fell 14% on lower Western footwear sales and a reduction in company''s inventory. Quarterly profit fell to $765,905, or 14 cents per share, compared with $893,230 million, or 16 cents per share during the year-ago quarter. Revenue grew 7% to $61.7 million, from $57.5 million last year, helped by growth in the company''s work and outdoor products, offset by lower sales of Western products.

8x8 Inc. ((EGHT)) shares fell 6.8% after the company reported its fourth-quarter net loss of $2.25 million, or 4 cents per share, compared with a net loss of $6.65 million, or 11 cents per share, in the year-ago period. Revenue climbed to $14.4 million versus $10.3 million a year ago.

Entegris Inc. ((ENTG)) shares slipped 9.1% after the provider of materials integrity products said that its first-quarter net earnings declined to $10.4 million, or 8 cents per share, compared with $11.4 million, or 8 cents per share, in the year-ago period. Revenue climbed to $161.1 million against $157.7 million a year ago. Entegris forecast second-quarter earnings of 8 to 12 cents per share, or 10 to 12 cents per share excluding items, on revenue of $155 million to $162 million.

Gray Television''s ((GTN)), TV stations operator, said that it posted a deeper loss in the first quarter on an early repayment of debt. During the first quarter the company lost $11.3 million, or 24 cents per share, versus a loss of $3.4 million, or 7 cents per share, in the year-ago period. Quarterly earnings included a charge of $6.5 million for paying off a debt early. Revenue climbed 2% to $69.7 million versus $68.2 million from the previous year. Shares fell 6%.

Alcoa ((AA)) said it would make a hostile bid for Alcan Inc. ((AL)) for nearly $27 billion, after talks between the rival aluminum producers failed to lead to a deal. If successful, the bid of $73.25 per share in cash and stock would create the world''s largest producer of the metal that is used for products ranging from beverage cans to airplanes, cars and heavy machinery parts. Shares of Alcan and Alcoa climbed respectively 32.5% and 6.4%.

Armor Holdings Inc. ((AH)) shares climbed 5.6% after the company agreed to be acquired by Britain''s BAE Systems Plc. for $88 per share, or $4.1 billion.

Usec Inc. ((USU)) shares climbed 7% after the company said that its first-quarter earnings increased to $39.3 million, or 45 cents per share, compared to the year-earlier period. The energy company reported quarterly revenue of $465 million against $361.3 million a year ago.

[R]1:00PM NY, 5:00 PM Frankfurt European stocks closed little changed.[/R]
European stock markets ended little changed on Monday, reflecting declines in the shares of automakers which offset gains for companies including Bouygues. Several European markets, including the U.K. stock market, were shut, keeping volumes on the low side. Shares of French conglomerate Bouygues rose 3.5%, on hopes that the new president would welcome a tie-up involving Bouygues, 21% held Alstom and nuclear plant operator Areva. Alstom rose 3.6%, while Areva gained 2.5%.

EADS shares added 1.1%. Shares in Gaz de France climbed 4.8% on hopes for a deal with Sonatrach, an Algerian energy company. Auto makers lost ground, with BMW falling 0.6% and Volkswagen losing 1.1%. Dutch bank ABN Amro lost 2.3% after rejecting a $24.5 billion offer for its LaSalle unit from a group led by the Royal Bank of Scotland.

The French CAC 40 ended virtually unchanged at 6,071.48. The election victory of conservative Sarkozy over Segolene Royal in Sunday''s final round presidential election gave market a boost. The German DAX 30 edged up 0.1% at 7,525.69.


[R]11:30AM U.S. stock averages traded higher, driven by takeover news.[/R]
U.S. market averages continued to post gains on Monday morning, boosted by merger activity. Dow component Alcoa ((AA)) led gainers with an advance of 6.6%. The aluminum giant offered $33 billion in cash and stock for Canada''s Alcan ((AL)). In other deal news, Liberty Mutual Group agreed to buy Ohio Casualty Corp. ((OCAS)) in a cash deal worth $2.7 billion, or $44 a share. The bid represents a 32% premium to Ohio Casualty''s closing price on Friday. The transaction is expected to close in Q3 of 2007. Shares of Ohio Casualty surged nearly 30%.

A continued decline by the price of oil also helped generate some buying interest. It also contributed to significant strength in the oil-sensitive airline sector. Crude oil for June delivery dropped $1.01 to $60.92 a barrel. Gold stocks also posted strong gains, benefiting from an increase by the price of gold. Gold for June delivery rose $1.30 to $691 an ounce.

In late morning trading, the Dow industrials rose 32.59, or 0.25%, to 13,297.21. The Dow rose as high as 13,310.70 Monday, topping a previous trading high of 13,284.53 set Friday. The Standard & Poor''s 500 index rose 3.64, or 0.24%, to 1,509.26. The Nasdaq composite index rose 3.55, or 0.14%, to 2,575.70. Bonds were little changed. The yield on the benchmark 10-year Treasury note remained flat at 4.64% from late Friday.


[R]9:45AM U.S. markets opened higher, boosted by merger activity.[/R]
Wall Street opened in the positive, boosted by merger activity. However, cautiousness ahead of Fed''s interest rate decision limited early gains. A $33 billion bid by Alcoa Inc. ((AA)) for Canadian aluminum rival Alcan Inc. ((AL)) helped the Dow Jones industrials pass 13,300 for the first time. Alcoa shares rose 6%, while Alcan surged 34%.

In other deal news, ABN Amro ((ABN)) turned down a $24.5 billion offer for its U.S. bank LaSalle from a consortium led by Royal Bank of Scotland because of the numerous conditions attached. Instead, the company opted for a $21 billion offer from Bank of America ((BAC)). Shares of ABN Amro fell 1.7%. Yahoo ((YHOO)) weighed on the tech-heavy Nasdaq, moving 2.5% down on reports that merger talks with Microsoft ((MSFT)) were terminated.

On the earnings news front, Berkshire Hathaway ((BRKA)) posted 12% increase in Q1 earnings helped by insurance gains. In the first hour of trading, the Dow Jones industrial average rose 33.81, or 0.25%, to 13,298.43. The Dow rose as high as 13,310.70, topping a previous trading high of 13,284.53 set Friday. The blue chip index has hit 19 record closes since the start of the year. The Standard & Poor''s 500 index rose 4.61, or 0.31%, to 1,510.23. The Nasdaq composite index rose 5.12, or 0.20%, to 2,577.27.


[R]9:00AM U.S. stock futures traded in a lackluster fashion ahead of Fed’s decision.[/R]
U.S. stock market futures were volatile in the pre-opening hours, as positive sentiment generated by optimism over a merger in the aluminum sector was offset by cautiousness before key interest rate decisions in the U.S. and Europe later in the week. The Fed and the European Central Bank are expected to keep the rate unchanged, while the Bank of England is seen raising rates by 0.25%.

Merger-and-acquisition news was in the spotlight after Alcoa ((AA)) said it is planning to launch a buyout bid for rival Alcan ((AL)) for $33 billion, or $73.25 a share in cash and stock. The deal represents a 32% premium to Alcan''s average closing price over the past 30 trading days. Alcan''s stock surged 25% in pre-open trading, while Alcoa slipped 2.4%.

Further in deal news, Britain''s BAE Systems agreed on Monday to acquire Armor Holdings ((AH)) for $88 a share, or $4.1 billion. Yahoo ((YHOO)) shares fell 1.1% ahead of the open following a report late Friday that merger talks with Microsoft ((MSFT)) have been terminated.

ABN Amro ((ABN)) dropped 1.7% in the pre-open after it turned down a $24.5 billion offer for its LaSalle operation from banks led by the Royal Bank of Scotland because of the numerous conditions attached. Instead, the company opted for a $21 billion offer from Bank of America. S&P 500 futures eased 0.40 of a point to 1,513.80 and Nasdaq 100 futures slipped 1.50 points to 1,907.00. Dow industrial futures gave up 6 points to 13,313.


[R]8:30AM Asian markets rally on Monday with Japanese stocks leading on export-related issues.[/R]
Asian markets ended higher on Monday. The Nikkei 225 Average in Tokyo closed 1.6% higher at 17,669.83, boosted by gains in export-related stocks as the yen is still weak against the dollar. Among Japanese tech and export-related shares, Canon surged 4.1%, Sony added 2.2% and Honda Motor ended up 2%.

Hong Kong Hang Seng Index closed 0.3% higher at 20,896.64, after earlier setting a record high of 21,070.21. PetroChina rallied 4.7%. The largest listed oil producer in China advanced after shareholders in Berkshire Hathaway rejected a proposal to cut its $3.31 billion stake in the company.

Australian S&P/ASX 200 gained 0.5% to end at 6,335.70. BHP Billiton and Rio Tinto advanced 2.7% and 3.2% respectively, buoyed by firmer metals prices and speculation the sector could become the next target for leveraged-buyout funds. Shares of construction materials maker Rinker Group advanced 1.8% after Cemex of Mexico enhanced its $14.25 billion bid for the company and extended the deadline by three weeks to June 9.

South Korean Kospi index gained 1.1% to an all-time high of 1,584.46. Shares of Hynix Semiconductor gained 4.9%, while Samsung Electronics added 1.4%. Among other record performances, Singapore Straits Times Index climbed 0.1% to 3,489.84 and Taiwan Weighted Price Index finished up 0.6% at 8,115.27.


[R]8:15AM Alcoa announced plans to launch a $27-billion bid for Alcan.[/R]
Alcoa ((AA)) announced on Monday plans to launch an acquisition bid for Canadian aluminum rival Alcan Inc. ((AL)) in a cash-and-stock deal worth nearly $27 billion, or $73.25 a share. The proposal carries an enterprise value of about $33 billion and represents a 32% premium to Alcan''s average closing price on the NYSE over the last 30 trading days. The offer includes $58.60 per share in cash and 0.4108 of a share of Alcoa common stock for each outstanding Alcan common share. The Dow component expects $1 billion in annual cost savings from the deal.

Alcoa is planning to begin its offer for Alcan on May 8 and finish the transaction by the end of 2008. It said that the two companies have been in talks to do a deal for almost two years. Alcoa decided to approach the shareholders directly as the companies failed to reach a negotiated deal. Shares of Alcoa slipped 4.4% in pre-market trading, while Alcan''s stock soared 23.7%.


[R]8:00AM NY-7:00PM Mumbai Sensex pares earlier gains Monday to finish lower.[/R]

The Sensex on BSE finished 55.02 points, or 0.39%, lower at 13,879.25. Trading was highly volatile as the index traded within a range of 206 points. The market-breadth was negative as 1,396 stocks declined, 1,192 stocks advanced and only 59 stocks remained unchanged. Of the 30 stocks in the Sensex, eight stocks advanced, while the rest declined. The turnover on BSE was Rs 4,474 crore, higher than Rs 4,268.39 crore on Friday. The turnover on NSE was Rs 8,657.72 crore, lower than Rs 9,399.66 crore on Friday.

Economic news

Financial institutions, led by LIC, UTI, SBI and the Bank of India are buying a major stake of the BSE of 41% which is being offered by the Bombay Stock Exchange. According to sources, LIC and UTI are buying between 8% and 9% equity.

European aircraft maker Airbus confirmed plans to invest $1 billion in India in the next decade as its superjumbo Airbus A380 arrived to raise the profile of Kingfisher Airlines for promotional flights, its only customer in the country. Airbus believes that airlines in India will place orders of 1,100 planes worth $105 billion over the next 20 years.

S. Sridhar, chairman of the National Housing Bank, said that mortgage defaults in India may rise as higher interest rates hit the fastest-growing segment of the banking industry of the nation. The Reserve Bank of India may be restrained from raising rates further to combat inflation as risk of bad debt rises with higher rates. Mortgage lending has never exceeded more than 2% of bank loan portfolio in the past.

The seventh and final phase of polls in Uttar Pradesh is scheduled on Tuesday, or May 8 and counting of votes is due on May 11 2007, with results expected the same day. The state vote is a barometer of the national political trends.

Trading highlights

ICRA was the most-active stock with a turnover of Rs 397.20 crore followed by Indiabulls and Indiabulls Real Estate.

Advancers

Ranbaxy surged 2% to Rs 390 on a volume of 3.12 lakh shares, touching an intra-day high of Rs 392.10. Index heavy Reliance Industries gained 1.5% to finish at Rs 1,605, and Hero Honda added 1% to Rs 704. Bharti Airtel gained 0.6% to Rs 823 and ACC added 0.4% to Rs 862 were among the other eminent advancers.

Decliners

Technology stocks exhibited weakness today. IT shares declined tracking a surge in the rupee to a new nine-year high against the dollar. In early trading, the partially convertible rupee was at 40.5450 per dollar, its highest level since May 1998, and stronger than Friday close of 40.8450. Wipro and Satyam led the decliners, losing over 2% each to Rs 555 and Rs 460, respectively. Infosys dropped 1.6% to Rs 2,039.

Dr.Reddy and Hindalco lost over 2% each to Rs 704 and Rs 145, respectively. Cipla lost 1.4% to Rs 214 and ICICI Bank dipped 1.3% to Rs 844.


[R]6:30AM European markets opened higher on Monday on strong U.S. close.[/R]

European markets traded higher in mid-morning on Monday. The French CAC 40 rose 0.2% at 6,081.78, while the German DAX 30 rose 0.2% at 7,533.35.

Advancers

Though markets were expecting Sarkozy to win, shares of Bouygues advanced 2.7%, on expectations that the new president would welcome a tie-up involving Bouygues, 21% held Alstom and nuclear plant operator Areva. Alstom rose 2.5% and Areva gained 0.5%.

EADS added 1.6%, as there were fears that the election of Royal would halt a restructuring program at the Airbus owner.

Reed Elsevier advanced 3.1%. Pearson, publisher of Penguin Group, agreed to buy Reed Elsevier Harcourt businesses for $950 million in cash to bolster its international reach in education publishing.

Rheinmetall added 3.2%. The German maker of car parts and military equipment announced first-quarter net income advanced by almost a third to 22 million euros because of higher sales at both the automotive and defense businesses.

Shares of Altana, the German chemical maker that sold its drugs unit in December, added 5.6%.

Decliners

ABN Amro lost 1.4% after calling a $24.5 billion offer for its Chicago-based LaSalle unit not superior from a group led by the Royal Bank of Scotland to the $21 billion bid from Bank of America.

Shares of PPR of France edged 0.2% lower after Puma which it has agreed to buy, lowered its profit and sales outlook for the year after reporting a 4% first-quarter profit rise. Puma stated sales and earnings should grow in the low single digits, against an earlier forecast that profit would grow at least 10% and sales to rise in the mid-to-high single digits. Shares of Puma weakened 0.3%.

Commodities

Crude oil was little changed, after falling 6.8% last week because of ample U.S. supplies and signs gasoline output is increased as refiners return plants from maintenance. Crude oil for June delivery was at $61.95 a barrel, up 2 cents, in after-hours electronic trading on the New York Mercantile Exchange. Gasoline for June delivery was at $2.2050 a gallon in after-hours trading.

Gold for immediate delivery rose 50 cents, or 0.1%, to $689.35 an ounce in early trading in London. Silver for immediate delivery added 9 cents, or 0.7%, to $13.52 an ounce. Platinum rose $19, or 1.4%, to $1,339.50 an ounce, the highest in almost six months, as some traders said U.S. demand for the metal, used in devices that curb car-exhaust pollution, may be stronger than previously anticipated. Palladium, also used in the pollution-control devices, gained $3, or 0.8%, to $378.5 an ounce.

Currencies

The euro rose above $1.36 against the dollar in European trading on Monday as markets looked toward interest rate decisions this week by European, U.S. and British central banks. In Frankfurt, the euro rose to $1.3610 before settling back to $1.3602, slightly higher than the $1.3593 it bought in New York late Friday. The dollar was down slightly against the British pound, trading at $1.9966 in Frankfurt, compared with $1.9929 late Friday. The dollar bought 119.89 Japanese yen, down slightly from the 120.13 it bought in New York late Friday.