Gateway Soars 52% on Takeover Bid

Elena
27 Aug, 2007
New York City

Wall Street opened Monday session in the negative ahead of existing-home sales report, expected to show continuous slow-down in the housing market. Dow member Home Depot agreed to sell off its wholesale-supply unit for $8.5 billion, which is $1.8 billion less than previously planned, signaling a harsh financing climate. The stock rose 1.8%. Another blue-chip stock, Altria Group, climbed 2% amid speculations that it is considering spinning off the overseas division of its cigarette business.

[R]09:45AM Wall Street opened lower ahead of housing data.[/R]

Wall Street opened Monday session in the negative ahead of existing-home sales report, expected to show continuous slow-down in the housing market.

Dow member Home Depot ((HD)) rose 1.8% on news that owing to a slashed price it managed to salvage the takeover of its supply unit. The home improvement retailer agreed to sell off its wholesale-supply unit for $8.5 billion, which is $1.8 billion less than previously planned, signaling a harsh financing climate.

Another blue-chip stock, Altria Group ((MO)), climbed 2% amid speculations that it is considering spinning off the overseas division of its cigarette business. At the same time, General Motors ((GM)) weighed, posting a decline of 1.3%.

A decline in crude oil prices also weighed on sentiment, dragging energy companies down. Exxon ((XOM)) declined 0.5%, leading both the Dow and S&P 500 down. Shares of oil giant Chevron ((CVX)) dropped 0.7%.

Merger-and-acquisition news was in the spotlight again, helping to offset some of the negative sentiment. Gateway ((GTW)) soared 52%, boosted by news that Taiwan's Acer will acquire the company for 710 million to create the world's No.3 PC maker. Further on the deal news front, Chicago Bridge & Iron Co. ((CBI)) agreed to buy Lummus Global from engineering-services company ABB ((ABB)) for $950 million.

The Dow Jones industrial was down 40.64 points, or 0.30%, at 13,338.23. The Standard & Poor's 500 fell 6.02 points, or 0.41%, at 1,473.35. The Nasdaq Composite dropped 6.41 points, or 0.25%, at 2,570.28.


[R]09:00AM U.S. stock futures pointed to flat opening ahead of housing data.[/R]

U.S. stock futures were trading near the unchanged mark on Monday, reflecting positive mood generated by takeover activity and cautiousness ahead of housing data. Acquisition deals were announced in the steel and personal computer sectors. U.S. Steel ((X)) agreed to buy Canada''s Stelco for about $1.1 billion, while Taiwan''s Acer said it will acquire Gateway ((GTW)) for $710 million, creating the world''s No.3 PC maker.

Among other pre-market highlights, Home Depot ((HD)) rose 1.8% on news it tentatively agreed to sell its wholesale distribution business to a private equity group for $8.5 billion, which is $1.8 billion less than previously planned. The news suggested that struggling credit markets had tightened control over financing of deals. In deal speculations, Wal-Mart ((WMT)) is reportedly interested in acquisitions in the U.S.

In economic news, investors will focus on existing-home sales report, searching for clues on whether the Fed will cut interest rates in the short term. Existing-home sales are expected to have fallen to 5.70 million in July from 5.75 million in June. S&P 500 futures fell 2.3 points. Dow Jones industrial average futures slipped 11 points, and Nasdaq 100 futures fell 5 points.


[R]8:15AM U.S. Steel agreed to acquire Canada’s Stelco for $1.04 billion.[/R]

United States Steel Corp. ((X)) announced an agreement to acquire Canada''s Stelco, continuing the global consolidation in the steel industry. The deal is worth C1.1 billion ($1.04 B), or C$38.50 a share. The transaction represents 43% premium over Stelco''s Friday close of C$26.93. The deal is expected to strengthen U.S. Steel’s position as a supplier of flat-rolled steel products in North America.

Under the terms of agreement, the U.S. steelmaker will assume Stelco''s $730 million of net debt. U.S. Steel expects that the deal will generate more than $100 million of pre-tax synergies by the end of 2008 and will contribute to earnings increase on an adjusted basis for 2008. The deal, which is expected to complete this year, is subject to antitrust review in the U.S. and Canada. J.P. Morgan is a financial advisor of U.S. Steel, while CIBC and UBS advised Stelco.