Alpha Agrees to $10 B Offer; Wells Fargo Up

123jump.com Staff
16 Jul, 2008
New York City

U.S. stocks rise after $10 billion merger deal, losses fom American Air and Delta Air Lines and talks of dividend cut at Fanne and Freddie. Cleveland-Cliffs agreed to acquire coal miner Alpha Natural Resources for $128 a share or $10 billion. AMR, the parent of American Air reported quarterly loss of $1.45 billon and Delta Air Lines lost $1.04 billion. Wells Fargo rose afte it reported second quarter profit of $1.75 billion or 53 cents per shrare on reveue rise of 16% to $11.5 billion.

[R]10:45AM New York – U.S. stocks rise in the morning after Cleveland-Cliffs, steelmaker agrees to acquire Alpha Natural Resources, coal miner for $10 billion.[/R]

U.S. stocks struggled in the opening hour as investors await resolution on Fannie and Freddie. Two troubled lenders rose nearly 8% at the opening. Dividend from Fannie and Freddie appear to be in jeopardy as losses at both companies rise.

Cleveland- Cliffs agree to acquire Alpha Natural Resources for $10 billion or about $128 per share. The coal mining companies have been demand as demand for steel remain elevated, lifting prices of raw materials. The merged company will be named Cliff Resources and forecast revenue in 2008 of $6.5 billion and operating earnings of $1.9 billion. Alpha Natural ((ANR)) stock surged $16 to $110.93 and Cleveland-Cliffs ((CLF)) dropped $9.93.

Wells Fargo & Company ((WFC)) rose $4.15 to $24.65 after it reported revenue increase 16% to $11.5 billion. Net income in the quarter fell to $1.75 billion or 53 cents per share compared to $2.28 billion or 67 cents per share from a year ago quarter.

Second quarter 2008 net charge-offs were $1.5 billion 1.55% of average loans annualized compared with $1.5 billion 1.60% in first quarter 2008 and $720 million in second quarter 2007 0.87%.

Total nonperforming assets were $5.23 billion 1.31% of total loans at the end of the second quartet and included $4.07 billion of nonperforming loans $535 million of insured Government National Mortgage Association loan repurchases and $619 million of foreclosed and repossessed real estate and vehicles. This compares with $4.50 billion 1.16% at the end of March consisting of $3.26 billion of nonperforming loans $578 million of GNMA loan repurchases and $658 million of foreclosed and repossessed assets.

AMR, the parent of American Airlines jumped 45 cents to $4.86 after it reported second quarter net loss of $1.45 billion or $5.77 per share compared to profit of $317 million or $1.08 per share in the quarter a year ago. Excluding one-time charges to ground planes and eliminate staff, the quarterly loss would have been $284 million. AMR ((AMR)) stock in the last one year traded as high as $28.83 in July 2007 and as low as $4.41 this month.

Delta Air Lines Inc ((DAL)) rose 51 cents to $5.16 after it reported second quarter loss of $1.04 billion or $2.64 per share compared to income of $1.59 billion in the quarter a year ago. Revenue in the quarter rose 9.9% to $5.5 billion. Excluding one-time charges Delta would have earned $137 million in the quarter. Delta says that it has access to $4.3 billion in ‘unrestricted liquidity’ from its lender and additional $1.3 billion through its revolving credit facility.

The airline took a goodwill charge of $1.1 billion and $102 million for employee buyout in the quarter. Delta will lower its capacity by 13% by the end of the year and ground 20 large planes and 100 regional planes after the summer season.

Delta exited the bankruptcy court last year with goodwill asset of $12.3 billion and wrote down nearly half of the asset in the first quarter earnings.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 6.24 or 0.05% to 12,760.80, Hang Seng index in Hong Kong increased 48.73 or 0.23% closed to 21,223.50. ASX 200 index in Australia increased 54.90 or 1.14% to close 4,870.60. The KL Composite index in Malaysia decreased 8.18 or 0.73% closed to 1,119.42.

The Kospi Index in South Korea decreased 1.93 or 0.13% to close at 1,507.40, SET index in Thailand closed lower 23.44 or 3.38% to 669.97 and JSE Index in Indonesia increased 3.27 or 0.15% to 2,218.13. The Sensex index in India decreased 100.39 or 0.79% to 12,575.80.