Markets & Finance

Boots Rises on Buyout Talk


Britain

Boots pharmacy chain was up ?0.18 to ?6.34, after the Wall Street Journal reported that several private-equity firms are looking at a buyout of the company, which could top ?4.6 billion. At least four firms are exploring the idea: Blackstone Group and Texas Pacific Group of the U.S. and CVC Capital Partners and Cinven Group of the United Kingdom. None has decided yet to move forward with a potential deal, the paper said. Separtely, JP Morgan cut its fair value to ?5.70 from ?6.00 and earnings per share by 8%. The broker said the future sales of the Boots Healthcare International division and return of cash to shareholders will boost earnings per share by 6%, but thinks the company is now structurally weaker than before. Earlier, ING cut its target to ?5.00 from ?5.60 on lower profitability concerns and kept its sell rating. Meanwhile, UBS lowered its target to ?6.00 from ?6.50 and kept its neutral post results, saying that the company's top line is slowing and costs are increasing. The broker set its valuation on a 15% discount to the sector after assuming ?1.5 billion for Boots Healthcare International. Lehman Brothers also cut its target to ?6.45 from ?7.10 and kept its overweight rating.

Colt Telecom was up ?0.05 to ?0.55, on renewed takeover talk, with traders saying Danish telecoms operator TDC could be a possible bidder for the business telecom operator. TDC told S&P MarketScope it would not comment on rumor or speculation in the market. Earlier in the year, market talk focused on the UK's Cable & Wireless as a company who could be interested in making a bid.

Intercontinental Hotels was up ?0.08 to ?6.32, after ABN Amro recommended a switch into the company from the French hotel group Accor. The broker said Intercontinental Hotels has been oversold since the fiscal-year 2004 results on Mar. 10 and the disposal of the UK Holiday Inn portfolio. It added that the consensus 12-months forward price-to-earnings ratio multiple has de-rated by 15% to 17 from 20 over the quarter. The broker noted that, over the past 15 months, the company has bounced back in the following quarter each time it touched 17. It added that there is still more restructuring to come, and recommended a buy with ?7.75 target price.

Carnival was up ?0.37 to ?29.18, after ABN AMRO upgraded the cruise-ship operator and forecast strong earnings per share growth. The broker upgraded the company to add from hold and lowered its target to ?0.31 from ?0.33. The broker recommended a switch into the company from German travel group Tui, nothing that Carnival has fallen by 7% in the past two weeks and by 12% from its January peak of ?32.40. The broker said this has been a response to fuel price rises offsetting an improving yield environment. However, the broker said that the company is starting to look attractive again and notes it is at the bottom of its price-to-earnings range. The broker said a 2005 price to earnings ratio of 19.5 may not look cheap but it is forecasting 15 to 20% earnings per share growth through to 2008. Also, trading conditions remain strong, with industry capacity set to grow at 5% to 6% per year, the broker said.

British Airways was up ?0.04 to ?2.74, on lower oil prices.

France

Cosmetic maker Clarins was up ??1.20 to ??50.30 after posting consensus-beating fiscal-year 2004 results. After hours last night, the company posted fiscal-year 2004 net profit of ??81.9 million, compared with ??30.3 million, and ahead of expectations of ??77 million. The company's operating profit of ??124.4 million, was up 16%, and higher than forecasts of ??119 million. The cosmetics maker proposed a net dividend of ??0.80 per share, up 25%. It reported first-quarter sales of ??225.1 million, up 5% year on year, when the consensus was looking for ??224 million to ??230 million.

Retailer Etam was up ??1.58 to ??24.50, after British retail entrepreneur Philip Green has bought the British operations of the company, but declined to say how much he paid. Broker Seymour Pierce estimated that Green has paid ??10 million, but added that given that he is buying it lock stock and barrel, he may have paid less.

Accor hotel group was down ??0.65 to ??37.66, after ABN Amro downgraded the company to hold from add, with a target of ??37.00. ABN Amro noted that over the past quarter, the company has re-rated by close to 20. The broker said this has been a result of a more aggressive approach to its future expansion capital expenditure plans and news of rental cost renegotiations.

Germany

Deutsch Boerse was up ??1.71 to ??59.41, after the company proposed to buy back shares worth ??598 million this year and to increase its payout ratio significantly next year, either through higher dividends or further share buybacks. The shareholder value enhancement program' proposals were set out in a letter sent to the hedge fund TCI, a shareholder whose managing partner Christopher Hohn has been critical of the management. The company also proposed the formation of a shareholder committee that will communicate directly with management and the supervisory board on matters of importance. Credit Suisse First Boston increased its target to ??65 from ??55, saying the share buyback program will help underpin the exchange's valuation. Separately, the Financial Times reported that Britain's Office for Fair Trading concluded that Deutsch Boerse and Euronext, the two bidders for the London Stock Exchange, pose such considerable potential competition for its trading services that a merger with either could eliminate any incentive to cut costs for users.

Lufthansa was up ??0.12 to ??11.16, as U.S. peers also rose last night as oil prices receded. The Amex airline index closed up 1.9% at 51.33. The company is also ending special ticket prices for online bookings, raising the average price of a flight by around ??10. The company also wants to expand its operations at smaller airports due to capacity problems at its main hub in Frankfurt. A senior executive said it needs to grow more than is currently able in Frankfurt, although Frankfurt airport will remain Germany's primary hub.

Retailer Metro was up ??0.82 to ??44.20, after Reuters reported that the company is forecasting an improvement in German consumer spending and will continue expanding in emerging markets. In an interview with the news service, company chief executive Hans-Joachim Koerber said the company can be slightly more optimistic about the economy this year and intends to expand into markets with a sound legal frame work. The company gets about 50% of its sales from outside Germany.


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