Merger News Lift Select Stocks

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

Market averages in New York and Europe turned negative ahead of U.S. inflation and housing report and earnings from Wal-Mart and Home Depot. A total of more than $20 billion deals were reported in the U.S. and Europe today lifting deal realted stocks. Hong Kong closed up 2.5% on the news that Chinese banks will be permitted to invest in international markets.

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

Merger news in Europe and the U.S. lifted deal driven stocks but general tone of markets on both continents was bearish. Tomorrow the U.S. is scheduled to report on inflation and housing market and earnings are scheduled from Home Depot and Wal-Mart. Hong Kong market surged to a record level on the news that Chinese pre-approved banks will be permitted to invest up to $8 billion in international markets, majority of which is likely to end up in Hong Kong. Japan reported 11% rise in current account surplus, a record level reaching 21 trillion yen for the year ending March. Two former Siemens executives were convicted on bribery related charges. Telefonica agreed to sell its controlling stake in Dutch TV content producer Endemol for a loss of 3 billion euros to a consortium led by its founder, Mediaset and Goldman Sachs.


Yield on 10-year U.S. bond closed at 4.679% and the 30-year U.S. bond closed at 4.849%.

Gold lost $2.20 to close at $670.10 a troy ounce, silver decreased 7 cents to end at $13.235 a troy ounce and copper advanced $8.000 to close at $7935.000 per metric ton.

Oil gained 9 cents to close at $62.460 a barrel and heating oil lost 1.550 cents to finish at 186.680 cents a gallon. Natural gas increased 5.3 cents to close at $7.952 per MMBtu. Gasoline went down 6.010 cents to end at 229.200 cents a gallon.

Asian markets closed higher, leaving the effects of Friday's losses on strong gains in Japanese exporters. The advancers were led by Hong Kong with an advance of 2.50%, Singapore with an increase of 1.57% and India with a gain of 1.23%. The only decliner was Taiwan with a decrease of 0.01%. Australia gained 0.78%.

European markets finished lower on weakness in the metals sector. The decliners were led by France with a decrease of 0.40%, Spain with a loss of 0.34% and Germany with a decline of 0.26%. The advancers were Norway with an increase of 0.30% and Italy with a gain of 0.09%.

Latin America markets finished lower on first-quarter earnings results and profit-taking. The decliners were led by Brazil with a decrease of 0.90%, Mexico with a decline of 0.77% and Argentina with a loss of 0.21%. There were no advancers. Canada lost 0.59% on a weak materials sector.

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

Kreisler Manufacturing ((KRSL)) shares fell 17.5% after the company announced a three-year deal with United Technologies for F119 engine components. The deal will bring in about $12 million in revenue, $2 million of which will be paid in advance.

TeleTech Holdings Inc. ((TTEC)), which offers call center and customer management services, shares declined 9.69% after a SunTrust Robinson Humphrey analyst cut a rating on the stock, citing a recent share price rise.

Nokia ((NOK)) shares climbed 3.6% after the company lifted its market-share outlook for mobile devices for the second quarter, now expecting its market share to improve from the first-quarter's 36%. The world's leading mobile phone handset maker previously expected second-quarter market share to be steady.

Massey Energy Co. ((MEE)) shares fell 14% after the U.S. filed a civil lawsuit against the fourth-largest U.S. coal producer, accusing the company of 4,633 violations of the Clean Water Act over the past six years. Based on 69,000 days of non-compliance, Massey could face $2 billion in potential fines, he said.

21st Century Holding Co. ((TCHC)), which underwrites insurance, said that it is buying back up to $5 million of company’s common shares. The company also said that its full-year earnings outlook in a range of $2 to $2.50 per share and second-quarter profit will come in higher than the first quarter's 11 cents per share. As a result, shares of the company rose 8.7%.

Cellcom Israel Ltd. ((CEL)) shares climbed 8% after the company reported its first-quarter net income rose 43% to 208 million shekels, or 2.13 shekels per share, equaling US$0.51 per share. Revenue climbed to 1.44 billion shekels, or about $346 million.

Inforte Corp. ((INFT)) said that it agreed to be acquired by Business & Decision Group for $50 million, or $4.25 per share, in cash. The deal is worth about $22 million, the companies said in a statement. Shares climbed 29.7%.

Magic Software Enterprises Ltd. ((MGIC)), which engages in the development, marketing, and support of application development and deployment platforms, said that its first-quarter net earnings increased to $1 million, or 3 cents per share, compared with a profit of $30,000, or breakeven per share, in the year-ago period. The company said revenue climbed to $16.35 million from $16.19 million last year. Shares climbed 8%.

Republic Property Trust ((RPB)), real estate investment trust, said it is going to evaluate strategic alternatives, including a possible sale of the company. Republic Property Trust formed a special committee to assess the alternatives. This month, the company reported a net loss for the three months of $2.8 million and funds from operations for the same period of $2.8 million. During the same period in 2006, Republic Property reported net income of $61,000 and funds from operations of $4.5 million. Shares climbed 11.6%.

Active Power Inc. ((ACPW)), which makes backup power supply systems, said that errors related to its accounting for stock options grants amounted to about $3.4 million. Active Power recorded an expense of $1.5 million, or 3 cents per share, in first quarter related to the review. Shares fell 5.5%.

Optimal Group Inc. ((OPMR)) shares of payment processor plunged 10.6% after an analyst downgraded the stock on fears of legal action by federal prosecutors in New York, who are conducting an ongoing investigation of the online gambling industry. Attorney's Office for the Southern District of New York issued seizure warrants for certain company funds. The warrants cover about $4.2 million Optimal affiliate FirePay Ltd. has on deposit in a reserve account and about $15 million Optimal Payments has on deposit in a money market account.

Source Interlink Cos. ((SORC)) shares fell 13.4% after the company said it will buy magazine publisher Primedia Inc. enthusiast media division for about $1.2 billion in cash. The unit, which Primedia said in February it would consider selling, includes more than 70 magazine titles and 90 web sites. It leaves Primedia with its Consumer Source business, which publishes free consumer guides.

[R]1:00PM NY, 5:00 PM Frankfurt European stocks ended lower, dragged by weak mining stocks.[/R]

European stock markets finished in the negative territory on Monday, dragged by weakness in the metals sector. Rio Tinto shares fell 3.5% and Lonmin dropped 3.4%. Notable gains for DaimlerChrysler and Nokia failed to offset losses. German automotive giant DaimlerChrysler advanced 1.8% boosting the autos sector after private-equity firm Cerberus agreed to buy 80% of Chrysler Group from DaimlerChrysler for $7.4 billion. Rival Peugeot gained 1.1% and Renault gained 2.5%.

Tech shares also stood out among gainers, led by Nokia which rose 4.8% after lifting its Q2 financial outlook. Competing phone- maker Ericsson advanced 2.5%, while microchip supplier STMicroelectronics gained 1.2%.By region, the German DAX Xetra 30 lost 0.3% at 7,459.61, the French CAC-40 declined 0.4% at 6,026.42, and the U.K. FTSE 100 slipped 0.2% at 6,555.50.


[R]11:30AM Market turned mixed on profit-taking ahead of data.[/R]

The three major averages pulled back off their highs for the session as buying interest diminished ahead of the release of some key economic data, including a closely watched report on consumer price inflation. Profit-taking helped offset news that DaimlerChrysler AG ((DCX)) agreed to sell 80% of Chrysler for $7.45 billion news. The automaker advanced 1.4%, while Ford Motor Co. ((F)) rose 4.7%. Magna International ((MGA)) one of the last bidders for Chrysler dropped 1.6%.

The tech-heavy Nasdaq was even dragged lower by weakness among disk drive, networking, and internet stocks. Dell ((DELL)) dropped 2.1%, Yahoo ((YHOO)) lost 1.7%, and Cisco ((CSCO)) fell 1%. At the same time, telecom stocks advanced, boosted by 3.5% gain for Nokia ((NOK)) after it lifted its outlook for the second-quarter.

In morning trading, the Dow Jones industrial average rose 33.56, or 0.25%, to 13,359.78. The Standard & Poor's 500 index was up 1.00, or 0.07%, at 1,506.85, and the Nasdaq composite index lost 5.28, or 0.21%, to 2,556.94. Bonds were little changed, as many investors stayed on the sidelines ahead of Tuesday's economic data. The yield on the benchmark 10-year Treasury note was at 4.68%, unchanged from late Friday.


[R]9:45AM U.S. markets opened higher on merger activity.[/R]

Wall Street opened in the positive amid strength in the automotive sector, generated by news that DaimlerChrysler AG said it will sell 80.1% of struggling Chrysler to Cerberus Capital Management LP for $7.4 billion. Among blue-chip stocks, General Motors Corp. ((GM)) jumped 5.7%, while Ford Motor Co. ((F)) gained 4.5% on reports that the Ford family is planning to sell part of its controlling stake in the company. Again on the Dow, Johnson & Johnson ((JNJ)) rose 1%, following a court ruling that Teva Pharmaceutical ((TEVA)) infringed on a patent for Aciphex, an anti-ulcer drug co-marketed by Johnson & Johnson. Dow member Home Depot Inc. ((HD)) gained 1) ahead of earnings release on Tuesday.

In other deal news, Mylan Laboratories ((MYL)) fell 11% after it agreed to pay $6.7 billion for the generic drug-making arm of Merck KGaA. Cardinal Health ((CAH)) said it would pay $1.5 billion for Viasys Healthcare ((VAS)) in a deal representing a 35% premium to Friday's close. Dow Jones industrial average rose 48.68, or 0.37%, to 13,374.90. The Standard & Poor's 500 index was up 4.33, or 0.29%, at 1,510.18, and the Nasdaq composite index gained 6.25, or 0.24%, to 2,568.47. Bonds were little changed, as many investors stayed on the sidelines ahead of Tuesday's heavy schedule of economic data. The yield on the benchmark 10-year Treasury note was at 4.67%, slightly lower than 4.68% late Friday.


[R]9:00AM Stock futures pointed to a steady opening.[/R]

U.S. stock market futures were indicating a steady opening on Monday, reflecting cautiousness after Friday's big rally sparked by hopes for rate cuts. Investors were also awaiting tomorrow's release of Consumer Price Index for April, as well as data from the National Association of Home Builders.

Merger-and-acquisition activity attracted little attention in pre-market trading. DaimlerChrysler ((DCX)) rose 3.7% after a private-equity fund agreed to buy 80.1% of its Chrysler Group for $7.4 billion. The Big Three automakers will also be in focus, with General Motors ((GM)) rising 1.9% in pre-market trading and Ford Motor Co. ((F)) gaining 3.6%. According to a report, Ford''s founding family is planning to sell a controlling stake.

In other deal news, Mylan Laboratories ((MYL)) fell 2.2% in the pre-open after it agreed to pay $6.7 billion for the generic drug-making arm of Merck KGaA. Further in M&A action, Cardinal Health ((CAH)) said it would pay $1.5 billion, or $42.75 a share for Viasys Healthcare ((VAS)) in a deal representing 35% premium to Friday's close. S&P 500 futures declined 1.6 points at 1,510.60 and Nasdaq 100 futures eased 0.75 of a point at 1,909.75. Dow industrial futures declined 9 points.


[R]8:45AM Asian markets close higher Monday on Japanese exporters.[/R]

Asian markets ended mostly higher Monday. The Nikkei 225 index in Tokyo closed 0.7% higher to 17,677.94. Among the main advancers in Japan, Toyota added 4.7%, Eisai surged 13% after announcing Friday that it won a patent infringement lawsuit in the U.S. over its Aciphex ulcer treatment. Sanyo Electric stated it will strengthen its product quality control and implied its solar and battery operations will be a major focus this fiscal year. Sanyo Electric ended flat in Tokyo.

Hong Kong Hang Seng ended 2.5% higher to 20,979.24, after the Chinese government announced it was allowing banks for the first time to invest in overseas stocks and structured equity products. HSBC Holdings and its 62%-owned Hang Seng Bank have issued internal memos setting a target of a 10% increase in pretax operating profit this year. HSBC rose 1.3% in Hong Kong.

Shanghai Composite Index gained 0.6% to end at 4,046.39. Australian S&P/ASX 200 closed 0.8% higher to 6,345.10, Singapore Straits Times Index gained 1.6% to 3,501.10 and Taiwan Weighted index closed nearly flat at 8,030.56. South Korean Kospi finished 0.1% to 1,605.77.


[R]8:15AM DaimlerChrysler agreed to sell 80% of Chrysler for $7.4 billion.[/R]

DaimlerChrysler AG ((DCX)) agreed to sell 80.1% of its struggling Chrysler Group to private equity firm Cerberus Capital Management LP in a deal worth $7.4 billion. The deal is a reversal of the 1998 $36 billion merger of Chrysler with Daimler-Benz AG that aimed at creating a global auto giant. The automaker said that an affiliate of Cerberus will hold the majority stake in a new Chrysler Holding LLC while DaimlerChrysler will keep a 19.9% stake. Chrysler would keep its heavy obligations for pensions and health care costs.

DaimlerChrysler CEO said that the two companies would continue to work together, reaping the mutual benefits of cooperation. The deal is expected to complete by Q3 and that it would reduce its overall profit by some $4.05 billion to $5.39 billion for 2007. As for the name of the new company, Daimler AG will replace DaimlerChrysler. The deal is subject to shareholders’ approval. The company's stock rose more than 7% in European trading and gained 3.7% in U.S. pre-market trade.


[R]8:00AM NY-7:00PM Mumbai Sensex surges on Monday on a rally in SBI, Reliance.[/R]

The Sensex Index closed on Monday 169.70 points, or 1.23%, higher at 13,965.86.

The market-breadth in the session was strong with three advancers for every two decliners. For 1,641 stocks that advanced, 916 declined and 85 remained unchanged. Of the 30 stocks in the Sensex, 21 advanced, while the rest declined. The turnover on BSE was Rs 4,117 crore compared to Rs 4,446.79 crore on Friday. On NSE, the turnover was Rs 8,472.51 crore compared to Rs 9,404.94 crore on Friday.

Economic news

The annual monsoon rains will arrive at Kerala a week early on May 24, but there is no guarantee farmers would benefit from their arrival ahead of schedule. The monsoon rain is crucial to the health of the nearly one trillion dollar economy of India as it determines farm output and subsequent rural demand for a range of consumer products.

The rupee reached last week nine-year peak on Monday, following gains in other Asian currencies against the dollar, with dealers trying to test the RBI resolve to curb inflation by limiting the rise of the rupee. The rupee advanced to 40.92 per dollar on Monday up 0.7% from the close on Friday.

Trading highlights

Index heavy Reliance Industries was the most-active stock with a turnover of Rs 142 crore followed by Indiabulls Real Estate and ICRA.

Advancers

SBI gained nearly 5% to close at Rs 1,206. On Saturday, May 12 2007, the largest public sector bank of India reported a 75% growth in net profit to Rs 1,493.19 crore in Q4 March 2007, from Rs 853.29 crore in the same period a year earlier. Net interest income rose 22% to Rs 4,320 crore. Net profit was up 3% to Rs 4,541.31 crore in the year ending March 2007.

Index heavy Reliance Industries moved up nearly 2% to Rs 1,621. ONGC was up 2% at Rs 907. ICICI Bank moved up 2.5% to Rs 870. Tata Steel added nearly 4% to Rs 591. The stock has gained on renewed buying at lower level on expectation of strong Q4 March 2007 results. Tata Steel reports Q4 results on May 17.

Hindustan Lever advanced 4% to Rs 192.95 buoyed by expectations of early arrival of monsoon.

Cement shares, too, got a lift from favorable reports of monsoon. Gujarat Ambuja Cements gained 4% to Rs 124.05, Grasim 2.5% to Rs 2,490 and ACC 2% to Rs 867. Cement firms derive a large portion of their revenue from rural housing.

Decliners

Dr. Reddy's slipped over 4% to Rs 655, as a U.S. court on Friday, May 11 2007, upheld a patent protecting Aciphex ulcer drug of Eisai Company. Bajaj Auto dropped 2% at Rs 2,660, and Hero Honda also declined 2% to Rs 690. Wipro lost 0.3% to Rs 544 and TCS dipped almost 3% to Rs 1,249.


[R]6:30AM European markets gain on Monday on deals involving DaimlerChrysler, Merck.[/R]

European markets are higher on Monday morning. The German DAX Xetra 30 index added 0.5% at 7,516.24, the French CAC-40 index rose less than 0.1% to 6,052.92 and the U.K. FTSE 100 index increased 0.2% at 6,578.80.

Advancers

In merger-and-acquisition news, DaimlerChrysler, the world fifth-largest carmaker, rallied or 7.8%. The Stuttgart, Germany-based automaker said private-equity firm Cerberus Capital Management LP will buy 80.1% of the U.S. Chrysler Group for 5.5 billion euros, or $7.5 billion.

Elsewhere in the sector, Porsche rose 1% and Volkswagen gained 0.4%. Over the weekend, Volkswagen recommended rejecting a takeover offer from Porsche, as many had expected.

Merck KGaA jumped 3.9% after it agreed to sell its generic drug unit to Mylan Laboratories Inc. Deals were also a focus for other sectors. Shares in U.K. catering firm Compass Group gained 1.7% after Compass agreed to sell its European vending business, Selecta, to a company managed by Allianz Capital Partners for 772.5 million pounds, or $1.5 billion.

Decliners

Rio Tinto, the world third-largest mining company, declined 2.1%, while HSBC, the region largest bank by market value, fell 0.9%.

Commodities

Crude oil for June delivery rose as much as 70 cents, or 1.1%, to $63.07 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement gained as much as 67 cents, or 1%, to $67.50 a barrel on ICE Futures exchange. Gold opened in London at $672.70, up from $671.90 late Friday. In Zurich, the bid price was $670.95, up from $668.30. Silver opened in London at $13.19, down from $13.22.

Currencies

The dollar was mixed against other major currencies in European trading Monday morning. The euro traded at $1.3539, up from $1.3535 late Friday in New York. The British pound traded at $1.9808, down from $1.9829. The dollar stood at 120.29 Japanese yen, up from 120.23 yen.