Markets & Finance

P&O Nedlloyd Rises on Merger Talks


The Netherlands

Container-shipping company P&O Nedlloyd was up ??8.92 to ??50.45, after the company confirmed it is in talks with Danish peer Moeller Maersk's container unit Maersk Sealand regarding a possible combination of the two companies. However, the company said there is no certainty that these talks will result in an offer being made. This morning, Lloyd's List said that, should the negotiations turn out to be successful, the deal would be the biggest and most challenging ever undertaken in the container trades and would create the world's largest line. The merchant bank Kempen clearly sees the rationale for a deal like this, saying that it would create significant costs savings. The bank maintains a neutral rating and ??39 price target on the stock.

Britain

Retailer Marks & Spencer was down ??0.09 to ??3.22, after Standard & Poor's Equity Research noted that the latest piece of bad news for retailers is the BRC survey for April, which shows a 4.7% month-on-month decline in same-store sales. The firm thinks the company will be among the stocks finding conditions tough.

P&O, the ports, container, and ferries business that owns a 25% stake in P&O Nedlloyd, was up ??0.10 to ??2.77, following the announcements made earlier today by Royal P&O Nedlloyd that it is in talks with Dutch firm Moeller-Maersk regarding a potential merger.

Engine maker Rolls-Royce was up ??0.06 to ??2.52, after Credit Suisse First Boston said that the company hosted a dinner last night with a small group of sell-side analysts. The broker said that the discussions focused on longer-term issues for the company rather than short-term trading. The broker found the evening reassuring and supportive for its thesis that the embedded value in the installed based is not reflected in the current share price. One of the key notions through the evening was to highlight that the company's business model has now matured enough to remain robust through the cycle, which has not yet been reflected in the share price performance.

Barclays bank was down ??0.12 to ??5.43, after Standard and Poor's Equity Research upgraded the company to hold from sell and increased its target to ??5.70 from ??5.50. The research group said growth from the acquisition is worth the temporary decline in core capital ratio. Credit Suisse First Boston is also upbeat on the move, saying it makes sound strategic and financial sense for the bank. Separately, the bank is to integrate its existing African operations into Absa after it agreed yesterday to buy a majority stake in the South African bank for ??2.9 billion, the Financial Times reported. The UK's third-largest bank said Absa would purchase Barclays' other 11 African operations after the deal completes in July. The combined businesses will then be folded into Absa within the next six to 24 months. These include three quoted businesses in Kenya, Botswana, and Zimbabwe.

France

Steelmaker Arcelor was down ??0.52 to ??15.52, after Credit Suisse First Boston said the latest steel inventory data continues to confirm its view of an unsynchronised inventory cycle in the world. The bank noted that U.S. inventories remain high, but are falling. In Europe, it said that the latest data shows inventories at record levels, higher than it had thought. For now, the broker said Asia looks in relatively good shape. While the broker's forecasts still suggest that the top-level macro supply demand balance will likely remain relatively robust heading into late 2005, it sees the risk of an ongoing fundamentals (and news flow) imbalance between the West and the East in the coming

months. It rates the company an outperform with a ??23 target price.

Aerospace company Eads, the parent of Airbus, was down ??0.39 to ??22.45, after Deutsche Bank lifted its target to ??27 from ??26, and rated the company a buy, following its results. Meanwhile, S&P Equity Research kept its sell recommendation. Separately, the company is teaming up with Raytheon to bid on a Pentagon contract for U.S. Army

transport aircraft. The stock is still weighed down by a management wrangle, ahead of tomorrow's annual general meeting. According to the newspaper Le Figaro, Noel Forgeard will refuse to stand down as head of Airbus when he takes the reins of the company together with Thomas Enders.

Utility Veolia Environment was up ??0.53 to ??30.30, after the company posted first-quarter sales of ??6.157 billion, up 10.7% or 9.6% like-for-like. Operating profit came in at ??529 million, up 20.2%. The results were better than the consensus forecast expecting operating profit between ??441 million and ??479m. Net debt came in at ??13.3 billion compared with ??13 billion. The company reiterated fiscal-year 2005 outlook of sales growth of 5-7% and double-digit operating profit growth.

Advertising group Havas was down ??0.16 to ??4.78, after the company reported first-quarter organic revenue growth of 1.4%, double the organic growth achieved in the first quarter of 2004, but weaker than peers. Citigroup had expected organic growth of 2.7% as rivals WPP and Omnicom had reported nearly 6% growth. First-quarter revenues totalled ??330 million, down 7.5% on an unadjusted basis compared with the first quarter of 2004 due to a 4.5% negative effect from the U.S. dollar and net consolidation. Broker ETC Pollak Prebon reiterated its reduce rating, after the results, noting the loss of Intel budget (which makes up between 2.5% and 3% of yearly budget).

Germany

Sporting goods company Puma was up ??9.28 to ??191.87, after German billionaires Guenter and Daniela Herz say they own a 16.91% stake in the company. Mayfair Vermoegensverwaltungsgesellschaft, the company through which the Herz family made its investment, still must get regulatory approval for 9.78% of the stake, according to a statement issued by the company.

Truckmaker Man was down ??1.14 to ??32.42 after the company reported that its first-quarter net more than doubled to ??56 million, compared with a restated ??26 million previously. Estimates were for profit to rise to ??48.5 million. Sales rose 11% to ??3.2 billion. The company said that in light of the positive first-quarter performance, it is confident the company will continue to increase order intake in 2005. The broker Kepler said, however, that first-quarter earnings should not be overinterpreted due to the low seasonal importance. That being said, ongoing cost reductions give large credibility to the sharp earnings rise in the current year, said the broker, which put its too cautious earnings estimates under upward revision as it is confident that Man's commercial vehicles division, in particular, along with its diesel and printing machines unit will improve fiscal-year profits significantly.

Chipmaker Infineon was down ??0.17 to ??6.88 after a report published by the Dramexchange said that DRAM prices could rise strongly from May lows of $2.56 to $2.92 in October. This viewsupports comments made recently by chipmakers Samsung and Hynix.

Insurer Munich Re was down ??2.32 to ??84.47, after Morgan Stanley cut its price target to ??111 from ??115, with an overweight rating. The broker said the company remains its preferred play amongst the reinsurers, and it trades at a discount to 2005 embedded value, which is inconsistent with peers such as Swiss Re and Hannover Re. Separately, the bank UBS cut its target to ??95 from ??100, with a neutral rating. WestLB downgraded the company to neutral from outperform. Exane BNP Paribas downgraded the company to neutral from outperform. Kepler cut it target price to ??100 from ??106 to reflect the disappointing fiscal year 2004 figures and the persistent uncertainty regarding the American Re division's reserve position.

Spain

The bank Santander was down ??0.17 to ??9.07 after the company reportedly said that a ??12.5 billion offer for telecom group Auna is clearly insufficient. The bank, which owns a 32% stake in the group, said it would would be willing to sell Auna as a whole or in parts. The bank also reported first-quarter net attributable profit up 38.5% to ??1,185 million. Without Abbey National, which was acquired in November, net profit would have been 20.6% higher. S&P Equity Research said the top line is a bit weaker than expected but benefiting from lower bad debtors. Regarding Abbey, the group said that numbers look good, while the cost cutting appears to be in track. For Abbey, the question remains if revenues can hold up if the mortgage market slows down and how long it could benefit from low provision. The group rates the company a sell. Reuters consensus pointed to net attributable profit of ??1.1 billion, up 28.5%, and operating income of ??2,041 million, up 26%.


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