Markets & Finance

Danone Rises on Takeover Talk


From Standard & Poor's European MarketScope

France

Food company Danone was up €9.85 to €89.35 amid continued market talk of a takeover bid from PepsiCo, although neither side has offered comments. French legislator Patrick Ollier said that the possibility of having the company "snapped up by foreigners is scandalous," reported Les Echos. This follows French daily Le Figaro saying that Collier's comments have prompted French finance minister Thierry Breton to indicate the that government would support the company against a bid. The group posts first half results on Thursday.

Drug maker Sanofi-Aventis was down €1.20 to €69.25 after the company reported second-quarter net sales of €6.68 billion, up 5.6%, driven by 16.2% growth of the company's 15 star products. A MarketScope consensus pointed to second quarter sales of €6.72 billion. On the broker front, Oddo Securities said the figures were slightly lower than estimates, but likes the quality of figures, and kept the buy rating. The broker Fideuram Wargny kept its hold rating.

Steelmaker Arcelor was up €0.53 to €17.18 after the International Iron and Steel Institute said world crude steel production in June rose 5.2% compared to the same month last year. The growth was driven by China with Chinese production up 33% year over year, while production fell by 10% in France, 6% in Italy and 14.7% in Russia, according to the group. Elsewhere, Goldman Sachs said that it thinks steel stocks could offer up to 10% upside over the next quarter. The bank expects steel prices to pick up from recent lows due to further supply-side discipline in the third quarter and a stronger global industrial outlook, though it retains its cautious sector view.

Spain

BBVA was up €0.19 to €13.42 after the bank said that it will leave its bid for Italian bank BNL unchanged, following yesterday's higher offer from insurer Unipol. The Financial Times noted that Unipol now controls 41% of BNL. Dresdner Kleinwort Wasserstein commented that the shares should gain as the company honors its word and does not waste shareholders' money. The broke also notes that if BNL is not acquired, then the shares will not be diluted and adds that if the company sells its shares to Unipol, it could make €500 million in capital gains. It kept its buy rating.

Britain

Consumer staples and food group Unilever was up £0.08 to £5.64, as the company benefits from the continued talk of a possible takeover of French food company Danone. A takeover of Danone is seen raising the value of food assets in Europe.

Online gaming website PartyGaming was up £0.03 to £1.66 as Citigroup noted that the World Series of Poker broadcasts start next month and said that it would buy ahead of excellent potential newsflow.

British American Tobacco was down £0.13 to £10.50 after the Bush administration has asked the Supreme Court to revive its bid to force the tobacco industry to forfeit as much as $280 billion for allegedly hiding the risks of smoking and marketing cigarettes to children, according to media reports. Brokers anticipate some pressure on the company as a knee-jerk reaction to the news, which highlights the possibility, albeit slim, of a legal setback for the tobacco industry.

Mobile phone company O2 was up £0.03 to £1.40 after the company's O2 Airwave group won a contract to provide communications service to all Ambulance Trusts in England. The total value of the contract is approximately £390 million over 13 years. The company reports on its second-quarter key performance indicators tomorrow. The bank Societe Generale predicts a solid performance, with British average revenue per user at £281. Citigroup doubts that the company can raise its guidance. Dresdner Kleinwort Wasserstein predicts a solid report, with broadly stable average revenue per user.

Drugmaker Elan was up £0.16 to £6.25 after announcing that Sentinel, the Phase III add-on trial of the drug Tysabri with Avonex, achieved the two-year primary endpoint of slowing the progression of disability in patients with relapsing forms of multiple sclerosis. The company said that the addition of Tysabri to Avonex resulted in a 24% reduction in the risk of disability progression compared to the effect provided by Avonex alone.

Germany

Reinsurance group Munich Re was up €2.90 to €92.20, after the company said that it is to boost reserves at its AmRe unit by $1.6 billion to cover casualty claims in the U.S.. The group said that the additional reserves will cut second-quarter profit by €400 million. It is sticking to its target to boost return on equity to 12% this year. In addition, the company said that it will book €560 million gain from the sale of its Allianz stake sale in the third quarter.

Drugmaker Merck was up €0.74 to €67.86 after Morgan Stanley assumed coverage with an overweight rating and a €69 target. The broker said that it is forecasting for second-quarter earnings growth of 41.6% to €136 million. The growth will be driven by strong sales in liquid crystals and Erbitux, combined with improvement in operating margins, according to the broker.

Italy

Insurer Unipol was down €0.05 to €3.02 as Standard & Poor's Ratings Services kept its 'A-' long-term counterparty credit and insurer financial strength ratings on the company on CreditWatch with negative implications. The group said that if the company's €2.7 per share offer for 59% of the bank BNL's ordinary shares were to be fully subscribed, the company would acquire up to 73.58% of BNL's ordinary capital. The size and the financial structure of the offer give rise to significant uncertainties, such as the impact on the company's consolidated capitalization and financial flexibility, and considerable execution risk. Dealers feel that the company is overpaying for BNL and view the deal as value destructive.

Carmaker Fiat was up €0.17 to €6.67 a day group will present its latest industrial plan to the unions. Separately, the newspaper Il Sole wrote that if the company does not list Ferrari on the market, it could opt for a private share placement. The newspaper Il Giornale wrote that the company will present its industrial plan to the government today, with the focus being the launch of new models. Second-quarter figures are due for release on July 28.

Netherlands

Supermarket group Ahold was up €0.11 to €7.25 after Lehman Brothers raised its target to €7.00 from €6.60, as it raised forecasts on the back of partial International Financial Reporting Standards disclosures. The broker maintained its equal weight recommendation. Yesterday Dresdner Kleinwort Wasserstein said that the London presentation reassured on the near-term US retail margin outlook.

Nordic

Appliance maker Electrolux was up 4.50 Swedish kronor to 171.50 kronor, as the company posted second-quarter operating profit excluding special items of 1.89 billion kronor on sales of 33.97 billion kronor. Second-quarter net income came in at 1.2 billon, leading to an earnings per share of 4.11 kronor. The company said that the currency boosted second-quarter operating profit by about 93 million kronor. A Reuters poll expected the company to report second quarter pre-tax profit down 18% year on year, to 1.74 billion kronor on flat sales at 31.95 billion kronor, hit by tough competition and rising steel prices and the company's current major restructuring.


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