U.S. and Europe Gain on $80 B Deals

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

Merger news in New York and Europe lifted stocks. S&P 500 briefly crossed its earlier peak reached in March 2000. June futures of crude price jumped more than 2% or $1.33 on expected summar demand for gasoline. Energy and tech stocks drove market averages higher at the opening but failed to keep the momentum near the close. Brazil and Mexico advanced. Two separate mergers were reported in Italian banking sector. Chinese stocks continued to rally. Canadian dollar rose to a 20-year high.

[R]4:15PM NY; 10:15PM Frankfurt; 2:15AM Mumbai - GLOBAL MARKETS[/R]

Record deal making elevated oil prices lifted S&P 500 near its seven-year high. GE rose on $11.5 billion deal to sell plastics division to largest chemical company in Saudi Arabia. Goldman Sachs agreed to pay $24.7 billion to purchase Alltel, fifth largest mobile telecom company in the U.S. Logistics company EGL rose 2% on revised bid from Apollo Management and home improvement retail chain Lowe’s reported lower than expected earnings.

June crude oil futures rose as refineries raced to produce more gasoline to meet summer travel demands. The jump of 2% or $1.32 per barrel in crude oil price lifted stocks of refiners, explorers and oil service companies.

Italian banking mergers news dominated trading in the region but failed to prevent nearly 1.5% loss in market index in Milan. UniCredit had agreed to purchase Capitalia for 22 billion euros and Popolare Banca will purchase Banca Popolare dell’Emilia for 5.7 billion euros. Banks in Italy are expected to keep merging and create few national giants to compete at European level. In the U.K. music record label company EMI, subject of takeover, received an offer for 2.4 billion pounds from buyout firm Terra firma. Higher offers are expected by the market.

Merger activity bolstered stocks in Brazil and Mexico. Markets in Chile, Venezuela and Colombia were closed for a holiday. Prospect of acquisition by European banks kept banking stocks at record level. Bradesco and Banco Itau closed at a record level. Recent bank earnings have been supported by retail demand for consumer loans and expanding mortgage market. Mexico continued its rally for the fourth day in a row on election results and merger news. Yucatan state election predicted win of the opposition party PRI and raising hopes that the much talked about national tax reform will be finalized soon.

Yield on 10-year U.S. bond closed at 4.789% and the 30-year U.S. bond closed at 4.942%.

Gold gained $1.80 to close at $663.80 a troy ounce, silver increased 12.7 cents to end at $13.130 a troy ounce and copper advanced $25.000 to close at $7315.000 per metric ton.

Oil gained $1.33 to close at $66.270 a barrel and heating oil advanced 3.570 cents to finish at 195.090 cents a gallon. Natural gas decreased 3.1 cents to close at $7.913 per MMBtu. Gasoline went down 0.640 cents to end at 240.130 cents a gallon.

Asian markets closed higher on strong cues from Wall Street. The advancers were led by China with a gain of 1.80%, Taiwan with an increase of 1.34% and South Korea with an advance of 0.99%. The decliners were Malaysia with a decline of 0.70% and Thailand with a decrease of 0.07%. Australia gained 0.84%.

European markets finished lower after a sharp drop in shares of GlaxoSmithKline after a negative study and concerns that the Italian banking consolidation story has run its course. The decliners were led by Italy with a decline of 1.96%, Belgium with a decrease of 0.44% and Switzerland with a loss of 0.21%. The advancers were Norway with an increase of 0.98%, Netherlands with an advance of 0.31% and Germany with a gain of 0.15%.

Latin America markets finished higher. The advancers were led by Argentina with an increase of 1.06%, Brazil with a gain of 0.53% and Mexico with an advance of 0.31%. There were no decliners. Stock markets are closed today in Canada for the Victoria Day holiday.

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

Alltel Corp.''s ((AT)) is being taken private for $24.8 billion by TPG Capital and GS Capital Partners. As a result shares rallied 6.5%.

Anadarko Petroleum Corp. ((APC)) said that it would sell its interest in two Qatari operations to Occidental Petroleum Corp. ((OXY.N)) for $350 million, the latest in a line of divestments by the company to trim debt. Shares surged 1.5%.

Amgen ((AMGN)) rose 0.44%, after U.S. government approval of a potential rival anemia treatment was delayed.

Cytyc ((CYTC)) added 21.54%, after Hologic ((HOLX)) agreed to buy it for $6.2 billion in cash and stock. The deal combines two major players in women''s health care. Hologic fell 6.8%.

Lowe''s ((LOW)) fell 3.89%, after the company said that its first-quarter net dropped 12%, as the country''s second-largest home-improvement retailer missed both internal and Street expectations and cut its fiscal-year earnings guidance.

American Superconductor ((AMSC)) added 7.5%, after the company received a $1.7 million contract from Consolidated Edison for work on new technology for New York City''s power-delivery system as part of an initiative funded largely by the Department of Homeland Security.

EGL ((EGL)) gained 3.3%, after Apollo Management LP affiliate CEVA Group PLC added $1.50 per share to its buyout offer for Houston logistics concern, hoping its $2.01 billion bid seals the deal in its battle with EGL Chief Executive James Crane to acquire the company.

Salesforce.com ((CRM)) shares rallied 4.3% on reports that the developer of customer-relationship management software is in partnership talks with Google Inc. ((GOOG)).

Yahoo ((YHOO)) is working on a takeover offer for Bebo, the U.K.''s top social-networking site, and might be willing to pay $1 billion for it. Shares slipped 0.3%.

[R]1:00PM NY, 5:00 PM Frankfurt European stocks closed down, dragged by GlaxoSmithKline.[/R]
European stock markets closed mostly in the negative territory Monday, dragged lower by a steep decline in the shares of GlaxoSmithKline and weakness in the bank sector. Strength among resource stocks and a takeover bid for EMI failed to lift the sentiment. Shares of pharmaceutical giant GlaxoSmithKline dropped 5% after research showed that diabetes drug Avandia significantly increased cardiovascular risk. Banking group UniCredit dropped 5.7% as it announced it was buying Italian peer Capitalia for 21.8 billion euros.

On the positive side, mining giants Anglo American and Kazakhmys rose more than 3.2%. EMI shares soared 9.3% after the British music group recommended a 2.4 billion-pound cash offer from private equity group Terra Firma. Elan surged 18% after the Irish biotechnology firm and development partner Wyeth said they would start a Phase 3 trial of Bapineuzemab for trading patients with mild to moderate Alzheimer''s disease. The German DAX Xetra 30 added 0.2% at 7,619.31, the U.K. FTSE 100 slipped 0.1% at 6,636.80 and the French CAC-40 lost 0.2% at 6,089.91.


[R]11:30AM Market averages traded in a tight range. China''s $3 billion investment in Blackstone Group gave a boost.[/R]
U.S. stocks traded in a tight range on merger Monday, reflecting profit-taking. Tech stocks were some of the most notable gainers amid merger speculation in internet shares. Sirius Satellite ((SIRI)) rose 3%. News of a $25 billion takeover deal for mobile phone company Alltel Corp. ((AT)) supported the telecommunications sector. Shares in Alltel advanced 7%. Big-cap stocks were trading lower. Alcoa ((AA)) was a leading decliner on the Dow, falling 1.5%.

In other corporate news, Blackstone confirmed an agreement under which the Chinese government will buy $3 billion of non-voting common units at a purchase price equal to 95.5% of the IPO price. The deal signals China''s determination to earn higher returns on reserves. Blackstone said it hopes to raise as much as $7.75 billion from its IPO as well as China.

In earnings-related news, Campbell Soup Co. ((CPB)) rose 2.5% after it posted higher-than-expected quarterly profit and lifted its full-year earnings forecast. Lowe''s Cos. ((LOW)) fell 3.2% after it posted Q1 earnings that missed estimates by a penny and cut its 2007 profit outlook. The Dow Jones was up 8.94 points, or 0.07%, at 13,565.47. The Standard & Poor''s 500 Index was up 3.96 points, or 0.26%, at 1,526.71. The Nasdaq Composite Index was up 21.46 points, or 0.84%, at 2,579.91.


[R]9:45AM U.S market averages opened mixed on consolidation of recent gains.[/R]
Wall Street opened mixed Monday, as investors turned to profit-taking after the strong market performance last week. However, a flurry of merger deals generated some positive sentiment. Alltel ((AT)) rose 7.3% after agreeing to be acquired by TPG Capital and a Goldman Sachs unit for $27.5 billion, or $71.50 a share. In another multibillion-dollar deal, General Electric Co. ((GE)) said that it will sell its plastics division to Saudi Basic Industries Corp. in a deal worth $11.6 billion. GE added 0.5% in early trading.

Further in M&A action, Atlas Energy Resources ((ATN)) jumped 14% as it agreed to buy 2,150 natural gas wells from DTE Energy for $1.23 billion. On the earnings news front, Lowe''s ((LOW)) dropped 3% after reporting a 12% profit drop, citing the housing market and last year''s hurricane rebuilding activities. In midmorning trading, the Dow Jones industrial average fell 6.91, or 0.05%, to 13,549.62. The Standard & Poor''s 500 index rose 1.72, or 0.11%, to 1,524.47, and the Nasdaq composite index gained 9.40, or 0.37%, to 2,567.85. Bonds were little changed Monday, with the yield on the benchmark 10-year Treasury note at 4.81%, the same as late Friday.


[R]9:00AM Stock futures pointed to a flat opening, with merger activity in the spotlight.[/R]
U.S. stock market futures indicated a flat market opening on Monday after a week of solid gains, followed by a weekend of deal making. Among pre-market highlights, Alltel ((AT)) rose 7% as it agreed Sunday to be taken private by investment firms TPG Capital and GS Capital Partners for $27.5 billion, or $71.50 a share. In other corporate news, General Electric ((GE)) agreed to sell its plastic business to Saudi Basic Industries in a $11.6 billion deal. Hologic ((HOLX)) agreed to acquire Cytyc ((CYTC)) for $6.2 billion, or $16.50 a share in cash and 0.52 of Hologic shares. The deal represents a 33% premium to Friday''''s close.

Further in merger-and-acquisition news, Atlas Energy Resources ((ATN)) agreed to buy 2,150 natural gas wells producing from the Antrim Shale from DTE Energy ((DTE)) for $1.23 billion in cash. Yahoo ((YHOO)) is expected to offer $1 billion to buy Bebo, a leading U.K. social networking site. Virgin Media ((VMED)) jumped 9% amid speculations that private-equity groups may try to buy the U.K. cable operator. On the earnings-news front, Lowe’s ((LOW)) posted a 12% profit drop, citing the housing market and last year''''s hurricane rebuilding activities. There is no major economic news due out today. Statistics on housing sales and durable-goods orders are due out later in the week. S&P 500 futures rose 0.2 of a point at 1,528.10 and Nasdaq 100 futures rose 2.75 points at 1,908.50. Dow industrial futures rose 16 points.


[R]8:15AM Alltel agreed to be taken private for $27.5 billion.[/R]
Alltel Corp. ((AT)) announced an agreement on Sunday to be taken private by investment firms TPG Capital and GS Capital Partners in a deal worth $27.5 billion. The buyout of the nation''s largest U.S. cell-phone provider by geographic area will be the biggest in the U.S. telecommunications industry.

Alltel has 12 million subscribers, the fifth-largest among major cell-phone companies. It has 15,000 employees. Alltel''s CEO Scott Ford said no changes are planned in staffing, and he will still be chief executive. The offer values the company at $71.50 per share in cash, a premium of 10% over Friday''s close. The deal is subject to Alltel''s shareholders’ approval. The deal, which is expected to close by March 2008, must also be approved by regulators.


[R]7:30AM NY-6:30 PM Mumbai Sensex gains Monday on strong banking, metal and oil stocks.[/R]

The Sensex on BSE ended Monday 115.19 points, or 0.81%, higher at 14,418.60.

The market-breadth was positive as 1,395 stocks advanced, 1,194 declined and only 74 stocks remained unchanged. Of the 30 stocks in the Sensex, 16 advanced, while the rest declined. The turnover on BSE was Rs 5,559 crore, compared to Rs 4,696 crore on Friday. On NSE, the turnover was Rs 9,918 crore, much lower than Rs 9,810 crore on Friday.

Economic news

The rupee advanced to a fresh nine-year high on Monday as investors were inclined to think the Reserve Bank of India would not interfere with the gains of the rupee against the dollar after China widened the yuan''s trading band against the dollar.

The government announced that wheat purchasing in the ongoing Rabi marketing season has crossed 100 lakh tonnes, including more than six lakh tonnes bought by Punjab Government for its own use.

Trading highlights

Reliance Energy was the most active stock with a turnover of Rs 732.30 crore followed by Adlabs and Reliance Capital.

Advancers

Reliance Energy led the gainers, surging 8.5% to Rs 555. Three block deals of 44.10 lakh shares were traded in the stock at an average price of Rs 513 per share in opening trade. Tata Steel soared 5.6% to Rs 624 on fresh buying tracking strong fourth-quarter results announced late last week. Tata Steel had rallied over the past few weeks after the company last month announced attractively priced (Rs 300) rights issue in the ratio of 1:5, and also on hopes of strong fourth quarter results.

Index heavy Reliance Industries surged 3.7% to Rs 1,762. It struck an all-time high of Rs 1,780, on market rumors that it is likely to come out with rights issue. Reliance rejected media reports that the company is likely to miss the June 2008 deadline for commercial production of gas from the Krishna Godavari basin.

ONGC and HDFC Bank rallied over 2.5% each to Rs 933 and Rs 1,100, respectively. ONGC gained after Brent crude oil rose 28 cents to $69.70 a barrel on Monday, May 21 2007, while US benchmark crude gained 20 cents to $65.14, boosted by concerns over supplies from major exporters Iran and Nigeria.

ITC advanced over 2% to Rs 171, and Maruti advanced nearly 2% at Rs 823. Reliance Communications ended up 1.7% to Rs 505, and SBI added 1.5% to Rs 1,345. HDFC was up over 1% at Rs 1,720.

Decliners

Auto makers were lower today. Tata Motors declined 2.5% to Rs 725. During trading hours on May 18 2007, Tata Motors posted a 25.57% increase in consolidated net profit to Rs 2,169.99 crore in the fiscal 2007 compared with Rs 1,728.09 crore in the fiscal 2006. Bajaj Auto slid 1.7% to Rs 2,248 and Hero Honda was off nearly 1% at Rs 680.

Bajaj Auto shares plunged 16% in the past two sessions after the surprise revelation that Allianz — Bajaj partnership in its two insurance ventures has a call option to buy up to 74% at a nominal price. This was the greatest disappointment in the demerger plan Bajaj is considering.

IT stocks declined on a strong rupee. Wipro and Satyam shed 1.7% each to Rs 535 and Rs 448, respectively. TCS and Infosys lost over 1% each to Rs 1,237 and Rs 1,961, respectively.


[R]6:30AM European stocks are mixed Monday with M&A at the center of attention.[/R]

European markets were mixed Monday. In Germany the Xetra Dax added 15.6 points or 0.2% to 7,623.06 but in Paris, the French CAC 40 fell 16.5 points, or 0.3%, to 6,084.6 and the U.K. FTSE 100 index inched down 0.2% at 6,628.90.

Advancers

Acciona was also in focus, adding 5.9% as Citigroup said the Spanish construction company transformation was being overlooked by the market as they upgraded their recommendation from hold to buy and raised their price target.

German conglomerate Siemens contributed to the industrial sector gains by rising 1.6% in Frankfurt after it turned to an outsider, Merck & Co. executive Peter Loescher, to become its next chief executive.

Bayer rose 5.1%, helped by UBS raising its price target and a buy recommendation reiterated.

Decliners

In Italy, UniCredit fell 1.6% after sealing on Sunday its 22 billion euros acquisition of Capitalia, in an all-paper deal which will create the second largest bank in Europe.

Shares in retail bank Lloyds TSB edged down 0.3% after it stated that it has agreed to sell its registrars business to the investment group Advent International for 550 million pounds.

Banca Popolare di Milano and Banca Popolare dell'' Emilia Romagna approved a merger deal that will create the seventh largest bank in Italy by branch number with a market capitalization of around 12 billion euros. Banca Popolare di Milano shares slid 4%, while Banca Popolare dell'' Emilia Romagna shares were unchanged.

Commodities

Crude oil for June delivery rose 44 cents, or 0.7%, to $65.38 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for July settlement gained 87 cents, or 1.3%, to $70.29 a barrel on the ICE Futures Exchange. Gold traded in London at $662.40, up from $660.90 late Friday. Silver opened in London at $12.94, down from $12.96.

Currencies

The U.S. dollar was mostly higher against other major currencies in European trading Monday. The euro traded at $1.3481, down from $1.3505 late Friday in New York. The British pound traded at $1.9701, down from $1.9745. The dollar fetched 121.38 Japanese yen, up from 121.15.