Markets & Finance

Still Avoid Enron


Enron (ENE):

Still 2 STARS (avoid)

Analyst: John Kartsonas

As part of the reorganization process, Enron is suing Dynegy, alleging breach of contract in connection with Dynegy's termination of its proposed merger, and seeks damages of at least $10 billion. Enron's reorganization filings include 14 affiliated entities with total assets of close to $50 billion, excluding its pipeline businesses. Look for Enron to shortly obtain debtor-in-financing to meet immediate administrative obligations. Enron also seeks further credit support to restore confidence in its wholesale trading business.

Aviron (AVIR):

Upgrading to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Frank DiLorenzo

Aviron is to be acquired by MedImmune (MEDI ) for 1.075 shares of MEDI per AVIR share. At the current price, S&P feels the deal is still attractive assuming AVIR's FluMist flu vaccine is approved. MEDI good partner due to expertise in infectious disease treatments and manufacturing capabilities. AVIR should submit a formal response for FluMist to FDA by the end of 2001. S&P also notes investors can expect a 6 month review by the FDA if response accepted. So on current valuations and potential of combined firms, S&P says the shares are attractive.

Tyco International (TYC):

Still 5 STARS (buy)#

Analyst: Michael Jaffe

Tyco has agreed to buy diaper maker Paragon Trade Brands for total of $650M in cash, debt assumption. The acquisition will expand Tyco's portfolio of disposable personal care products, and provide greater manufacturing efficiencies. Like all Tyco's acquisitions, S&P expects Paragon Trade to immediately add to EPS. Tyco's business model, which stresses recurring and economically insensitive operations, has truly proven itself during current economic downturn. And at only 17X $3.45 fiscal year 2002 (September) estimate, the stock is well undervalued.


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