Markets & Finance

Royal Dutch Shell to Restructure


From Standard & Poor's European MarketScope

United Kingdom

Astrazeneca (UK) was down £0.45 to £25.92 Tuesday after a Times report that a U.S. study found that new drugs for schizophrenia are hardly more effective than an older, cheaper one. The study by the New England Journal of Medicine says the majority of patients in each group discontinued their assigned treatment owing to inefficacy or intolerable side effects or for other reasons. Olanzapine (Eli Lilly) was the most effective in terms of the rates of discontinuation, and the efficacy of the conventional antipsychotic agent perphenazine appeared similar to that of quetiapine (Astrazeneca's Seroquel), risperidone, and ziprasidone. The U.S. FDA has granted full approval status to the company's Arimidex for the adjuvant treatment of hormone receptor-positive early breast cancer (EBC) in postmenopausal women.

Cairn Energy gained £1.17 to £20.31 after Merrill Lynch upped its price objective to £21.0, and kept its buy rating.

Royal Dutch Shell rose £0.17 to £19.33 on the news that the company will implement an internal restructuring and merger of certain of its subsidiaries. It says that as part of the restructuring, Royal Dutch would be merged into a subsidiary, Shell Petroleum N.V., and the remaining shareholders in Royal Dutch would receive cash or, at the option of UK resident shareholders who so elect, loan notes exchangeable into A shares. RD says final terms will be determined and announced in the fourth quarter of 2005. Restructuring is expected to be completed by yearend.

Exel was up £0.04 to £12.37 after Citigroup raised its target price to £12.20 from £9.0, keeps hold. Exel admitted that some of its customers had expressed reservations over the £3.70 billion deal with Deutsche Post, the FT reports.

France

Total gained €0.90 to €223.80. The oil major's CEO, Thierry Desmarest, says the debate concerning an exceptional tax on oil prices (TIP) in France should not have even been tabled, says Le Figaro. Desmarest noted the company is already taxed once in the countries where it produces oil and added that Total did not deserve to be treated this way. In addition, Desmarest stated that "profit is not an easily acceptable concept in France", noting the merger between Total and Elf conferred the company with a global stature.

France Telecom gained €0.24 to €24.18. Tuesday is the closing date for offers to be made for a 35% stake in Tunisia's largest carrier, Tunisie Telecom. The Tunisian government hopes to receive c.€1.4 billion for the stake. Cinco Dias reports that Spain's Telefonica is finalizing its offer while Vivendi Universal, France Telecom, and Telecom Italia are also thought to be interested, as well as some local groups. A short list of candidates is to be drawn up by Sept. 28. Separately, the company is planning to sell €892 worth of new shares between September 20 and 21 to finance the takeover of Spain's Amena.

STM (FR) fell €0.08 to €14.19. Il Sole 24 Ore reports the company's CEO, Carlo Bozotti, saying that the company expects a difficult 2006 first quarter for the semiconductor sector. For the current year Bozotti sees some growth in the third quarter with a more consistent rise for the sector in the fourth, thanks to Christmas sales. Overall, Bozotti believes the second half of 2005 will be better than the first, the paper adds.

Pernod Ricard added €1.20 to €148.50 after ING increased its target to €138 from €133 and keeps hold rating. The broker says spirit players are best protected against the oil price impact, noting brewers and food players face a more negative impact on their bottom lines. SocGen upped its fair value on Pernod to €155 from €145 and keeps its buy rating.

Clarins added €0.35 to €54.75 after JP Morgan raised its target to €52 from €45 and kept its neutral rating.

Germany

Commerzbank rose €0.45 to €22.07 on M&A talk, once again. This time traders cite rumors emanating from London, noting that BNP-Paribas could be interested in the company.

BMW was up €0.92 to €37.87. The company announced it has begun buying back stocks, saying it is acquiring as much as 3% of its own capital. Separately, Lehman Brothers says western European (WE) registrations for August show the market has strengthened. Lehman notes the company looks to be benefiting from the ongoing success of its new 1 and 3 series.

VW added €0.74 to €46.54 after Lehman's comments about the strengthening of the WE market.

E.ON fell €0.88 to €76.78 after SocGen downgraded the shares to hold from buy and reduced its fair value estimate to €80 from €85 on the back of the inconclusive German election result. Although it believes that extension of German reactors operating life remains likely, the timing and the extent of such measures cannot be judged with confidence, according to SocGen. In addition, the broker is concerned that the company could bid over £6.00 for Scottish Power, a level when the boost from reduced strategic uncertainty would be outweighed by the price paid.

Man gained €0.48 to €42.54 after UBS raised its price target to €42 from €39 in a note where it describes the outlook for the truck market as more stable than investors think. It reiterated its neutral stance on the company.

Deutsche Post was up €0.15 to €19.67. The company is planning more acquisitions, according to CEO Klaus Zumwinkel, quoted in Handelsblatt. The executive tells the newspaper he wants to expand the mail business as well as the financial services division through a merger with BHW Holding. Separately, Dresdner KW upgraded the shares to add from hold, with a €22 price target.

DaimlerChrysler gained €0.75 to €41.86 after the company's Chrysler unit and the Canadian Auto Workers union reached a new three-year labor agreement Monday night, averting a strike.

RWE fell €0.47 to €54.77 after news that the company is to sell its 50% stake in solar-cell joint venture RWE Schott Solar to partner Schott. No financial details have been disclosed. Separately, SocGen downgraded the shares to hold from buy and reduced its fair value to €57 from €60 on the back of the inconclusive German election result.

Netherlands

ASML fell €0.20 to €13.86. The company expects shipments to fall in the third and fourth quarters. However, it says that profitability is still good.

Akzo Nobel rose €0.47 to €34.80 after announcing plans to buy Chinese coating business of the Chinese paint manufacturer Guangzhou Toide. Says the investment will increase its volumes of emulsion paint, which is the fastest growing segment on the Chinese paint market.

Nordic

Volvo gained SEK1.50 to SEK332.00. UBS upped its target to SEK340 from SEK400 and reiterated its buy rating.

Norsk Hydro added NOK6.00 to NOK742.50. Cheuvreux raised its target on the shares to NOK765 from NOK710 and reiterates outperform. Separately, Handelsbanken upgraded the stock to buy and raised its fair value to NOK850 from NOK724. In contrast, SocGen downgraded the shares to hold from buy as the broker believes the price for Spinnaker was too high, and keeps its target at NOK670.


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