Markets & Finance

Porsche Higher as VW Stake Rises


From Standard & Poor's European MarketScope

France

Danone fell €1.65 to €91.35 on Thursday. Numico tells European MarketScope that no discussions are taking place between itself and the company. This comes after reports suggesting the company could be eyeing Numico as an acquisition target in order to fend off hostile bids, Challenges magazine reports, mentioning Natexis analysts.

Arcelor was up €0.19 to €19.58. UBS lifted its target to €24 from €22 and keeps its buy rating. The broker raised its steel price forecasts.

L'Oreal fell €0.10 to €64.65. The company dropped out of race to acquire Japan's beauty product maker Kanebo after saying there are not enough synergies.

Air France-KLM declined €0.07 to €13.80. The company is hiking its fuel surcharge as of Oct. 4 to reflect higher fuel prices for the fifth time since May. The increase will add €1 to fares on French domestic flights, €2 on medium-haul flights, and €6 on long-haul flights. The company expects this charge to be removed when oil prices ease to US$55 per barrel for 30 consecutive days.

Publicis fell €0.04 to €26.61. The company signed an agreement to fend off a hostile bid. The company has signed a standstill agreement with Aegis that prevents the former from launching a hostile bid for its smaller UK rival, the FT reports. The daily notes the agreement, which is unusual in the UK, adds to evidence that the ongoing contacts between the two groups have been amicable. However, over the weekend The Business newspaper said the company is set to face competition this week in its bid discussions for Aegis, noting rival media groups are keeping a watching brief.

STM (FR) dipped €0.17 to €13.88. Rival Samsung is to spend US$33 billion on chip factories over the next seven years in order to meet increasing semiconductor demand. The South Korean group sees chip sales tripling to US$61 billion by 2012.

Germany

Porsche gained €6.70 to €648.99. The company now owns over 10% of VW. The shares were not bought from VW. The company is in the market to buy more VW shares.

VW fell €0.63 to €51.09. The company is in talks with Malaysia's Proton regarding a possible tie-up, reports Star Newspaper. Meanwhile, the company may sell its stake in Scania, worth SEK11 billion, according to Dagens Industri. The daily reckons that after Porsche bought 20% in the company , it seems likely to sell the stake to use the means to try to increase profitability, as the daily highlights that the company is under severe pressure with high manufacturing costs.

BMW added €0.57 to €39.47. CSFB lifted its target to €48 vs €40 as it sticks to outperform.

Schering rose €0.88 to €51.98. The company has won U.S. approval for its menopause drug Angeliq, competing with Wyeth's PremPro, which had sales up 17% in the second quarter to US$260 million. Angeliq is already used in Europe. In another development, the company has ended its pact with Praecis of making and distributing its prostate cancer drug as Praecis has won approval to do it itself.

Merck was up €1.22 to €68.97. The company is in a pact with Takeda to develop and market the cancer drug Matuzumab, also called EMD 72000. The company gets an upfront payment of €60 million from the deal, to be booked in the third quarter, and also milestone payments. On the broker front, Lehman raised its target to €67.0 from €62.0 as it sticks to equal-weight.

Italy

Telecom Italia gained €0.02 to €2.73. Local press has reported several rumors regarding changes to the company 's shareholding structure. Summing these up the line appears to be that Emilio Gnutti is looking to reorganize Hopa's 16% shareholding in Olimpia (which holds 21.8% in the company ) and that Spain's Telefonica is interested in buying a stake in Olimpia, from either Hopa or Pirelli (the latter holds a 57.66% stake in Olimpia). It is likely that such speculation has been triggered by the upcoming expiries of put options on Olimpia held by Hopa (May 2006) and Banca Intesa and Unicredito (October 2006). Telefonica has declined to comment on speculation, but a number of market sources feel it would make no sense for the Spanish operator to take an indirect stake in the company Part of the upside in share price is also attributed to the fact that fund managers are correcting generally underweight positions in the group.

Netherlands

ING Groep fell €0.12 to €24.53. The company is investigating several of its own employees over possible insider trading concerning a new perpetual bond, De Telegraaf writes, adding that the Dutch Securities Institute has taken 16 of the company 's employees off its register.

VNU rose €0.25 to €25.15. The company is mulling the divestment of its business-information unit, increasing share buybacks or changing its CEO in order to appease shareholders who are against the proposed IMS Health acquisition, the WSJ writes. The paper says the sale of the unit could fetch US$1.2 billion, or CEO Rob van den Bergh could be replaced by David Carlucci.

Numico was up €0.27 to €36.57 amid takeover speculation involving Danone, though the company tells MarketScope that no discussions are taking place between itself and the French food group.

Nordic

Vestas Wind was up DKK8.00 to DKK144.25. Fidelity Investments has increased its stake to 5.19% of total share capital in the company

Hennes & Mauritz added SEK4.00 to SEK275.50. UBS upgraded the shares to buy from neutral and lifted its target to SEK325 form SEK270. Separately, ING upgraded the shares to hold from sell, as third quarter results were better than expected. ING lifted its target to SEK260 from SEK240 and says at current multiples of 24 times 2005 PER broker continues to prefer Inditex (buy), which is still trading at a substantial discount. Separately, Lehman Brothers raised its target to SEK280 from SEK270 as the broker increases sales growth estimates for fiscal 2005 through fiscal 2007. Also, Morgan Stanley upped its target to SEK320 from SEK305 and reiterates overweight. Of note: Thursday's Lex column in the FT is quite bearish, citing the premium valuation and lackluster same-store sales growth.

Astrazeneca (SE) was up SEK3.50 to SEK366.50. Carnegie reiterated its outperform rating after yesterday's announcement from Teva, which filed for generic Seroquel. The broker was expecting a challenge to Seroquel as generic drug makers are increasingly aggressive when it comes to prematurely challenging patents. Carnegie says that the FDA is likely to delay a decision about the filing for around thirty months and then the matter is likely to go to court. Therefore, it notes that a verdict is unlikely for several years.

Nokia fell €0.12 to €13.48. Enskilda Securities downgraded the shares to reduce from accumulate due to weaker margins in mobile sales. Increasing competition and more focus on low-end handsets are reasons behind broker's insecure stance. Its says the company shows a marginal improvement in EPS during upcoming years, but says these derive from aggressive repurchases of its own shares. The broker says Nokia shares are heading towards €11. Recommends sell. Separately, Deutsche Bank raised its target to €15 from €14.7, and reiterates buy.

Spain

REE rose €0.55 to €23.60. SEPI has sold 11.5 million shares of the company via a placement by UBS. UBS says it sold the shares to institutional clients for €22.82 per share.

Telecinco fell €0.46 to €17.70. Urquijo ByV notes that for the company 's new FTA channel La Cuatro, Prisa is expecting audience share of 6%-10%.

TPI was up €0.11 to €7.16. Fortis comments that on Saturday, the company is to start its directory assistance business in Italy using the '1288', number. It says the effect on valuation is clearly accretive at around €0.49 per share. Fortis keeps its buy rating.

United Kingdom

Boots says sales growth in Boots The Chemists (BTC) in the first half is expected to be 1.1%, or down 1.3% on a same-store basis, hit by regulatory price deflation in Dispensing. Itsays difficult market conditions in the first half have led to same-store sales below the rate planned for the full year. It says the market is expected to remain similarly tough through the second half. However, the company adds that sales growth in Boots Healthcare International (BHI) is expected to be 7.6%. Reuters, citing sources close to the situation, reports that a group of bidders is set to submit final offers of upwards of £1.4 billion for BHI.

O2 was in focus on a Times report that Japan's NTT DoCoMo is contemplating buying a European operator and views the British market as the ideal testing ground for the entire continent. The report quotes Takeshi Natsuno, head of DoCoMo's multimedia business. The daily notes DoCoMo has a £4 billion acquisition war chest and highlights the fact DoCoMo's i-mode mobile browsing system is being launched in the UK by the company Note the company 's shares were higher Wednesday as brokers raised price targets.

ABN Amro raised its target on Hilton to £3.75 from £3.50 and reiterated its buy recommendation. The broker highlights the fact U.S. hotels are looking to expand in Europe and that more value can be released from hotel assets by splitting them into components: real estate, brand & management. The broker values the company 's hotel business in total at £3.2 billion and its Ladbrokes unit at £3.7 billion to derive an enterprise value (stock market capitalization plus net debt) of £6.9 billion or 10.7 times EBITDA. After deducting current net debt of £800 million and a pension deficit of £100 million this implies equity value of £6 billion, or £3.75 per share.


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