Markets & Finance

Telefonica Ringing Up KPN?


From Standard & Poor's European MarketScope

France

SANOFI-AVENTIS gained €0.60 to €69.35 Monday. Deutsche Bank lifted its price target to €72 from €69, and keeps its hold rating despite the stock trading at a 15% discount to the pharma sector, given the impact of patent expirations and continued uncertainty surrounding Plavix, Lovenox and Accomplia. The broker thinks upside potential could be generated by the Charisma study and a more bullish than expected 2006 outlook based on synergy benefits. Elsewhere, five patients have suffered Guillain-Barre syndrome, a neurological disorder, after receiving Menactra, the company's meningitis vaccine. The cases have not resulted in a change to the U.S. Center for Disease Control (CDC) recommendation that children and adolescents be vaccinated. Kepler thinks the cases may result in more caution about vaccination, potentially lowering broker's peak sales estimate of around €600 million. For now, DB leaves its estimates unchanged but underlines that the news brings the risk of downward revisions. It rates the shares reduce.

PUBLICIS rose €0.47 to €26.95. Vincent Bollore, chairman and top shareholder in the company 's rival Havas, increases stake in the UK's Aegis to 11.38%, becoming its largest individual shareholder. The company is in preliminary discussions to acquire Aegis. Cheuvreux believes that a deal would make sense even if early focus were oriented towards small acquisitions in fast-growing countries.

RHODIA gained €0.13 to €1.83 on M&A speculation. Rumors that the group is preparing to sell one of its loss-making units, combine with talks that a major chemicals giant such as BASF is seeking to acquire the company, drove the shares higher. The company 's shares are up 41% since Sept. 23.

Germany

DAIMLERCHRYSLER aded €0.56 to €44.70. The company isn't interested, now or in the future, in owning a stake in VW, a spokesman reportedly said in response to media reports it may acquire one. Also, Chrysler Group's September sales volume rose 4% year to year and Mercedes-Benz USA saw a sales volume increase of 0.6%.

VW gained €0.21 to €51.41. Proton Holdings, Malaysia's state-run carmaker, will sell a stake to the company, Prime Minister Abdullah Ahmad Badawi said. Proton will reportedly complete talks this year to develop new car models with the German carmaker.

PORSCHE fell €8.75 to €631.00 as its North American car sales slid 9% in September.

METRO AG added €0.14 to €41.11. The company is in talks with Permira to sell the Praktiker DIY chain, sources reportedly tell Reuters. The company's supervisory board is to consider the future of the Praktiker chain on Oct. 18.

Italy

RCS Media rose €0.07 to €5.04. According to press reports, property developer Stefano Ricucci is near to sell his 20.6% stake in the company at €7.7 per share. Among potential buyers, the press cites Romain Zalewski and Salvatore Ligresti.

B. POP. ITALIANA was up €0.37 to €8.52. The company slid into the red in the first half of 2005 due to higher provisions after it failed bid for Antonveneta, but says its key Tier I ratio stood at a better-than-expected 8%. The company reported a consolidated loss of €119.9 million in the first half following adjustments and provisions of around €350 million. It says a new GM from outside the group will be appointed. The company's board will meet in the first ten days of October to examine a list of candidates.

Netherlands

KPN was up €0.52 to €7.98. Telefonica could bid about €20 billion for the company, the Wall Street Journal reports, citing people familiar with the talks. The paper adds that both the company and the Spanish telco are assembling advisers as a first stage of preparing for negotiations. The WSJ points out that any deal would have to be friendly as the Dutch government holds about a 20% stake in the company Separately, ING upped its target to €6.80 and maintains its sell recommendation. Meanwhile, Lehman Brothers tweaked its target higher to €9.2 from €9.0, keeping its overweight rating.

Unilever NV added €0.80 to €59.95 after starting its share buyback program of up to €500 million aggregate market value in both UK-listed and Netherlands-listed shares.

VNU added €0.26 to €26.41. Shareholder Knight Vinke Asset Management, which holds around a 2% stake in the company, also opposes the acquisition of IMS Health. Shareholders Fidelity Investments and Templeton Global Advisors have already expressed their opposition to the planned US$6.3 billion takeover.

Nordic

ASTRAZENECA (SE) was up SEK4.5 to SEK365.5. Deutsche Bank still prefers the company and Roche. It keeps its buy recommendation and £ 0.40 target, supported by a bullish outlook on margin expansion. This is driven by Seroquel and the oncology franchise which pushes the broker's 2006 EPS estimates about 11% above consensus, as well as the potential for positive pipeline news flow through the fourth quarter.

Statoil was up NOK0.50 to NOK163.00. CSFB upgraded the shares to outperform from neutral and lifted its target to NOK195 from NOK186. The broker maintains a positive stance on Norway Oil, and highlights both the company and Norsk Hydro as relatively resource rich, highly geared commodity plays on today's strong macro environment.

Norsk Hydro rose NOK1.00 to NOK734.00. The company has discovered a mid-sized gas deposit at the Stetind well in the Norwegian sea, Dagens Naeringsliv writes. It adds that the company's director in the petroleum directorate, Bente Nyland, says reserves of this size typically contain about 50 billion cubic meters of gas.

Spain

REPSOL YPF gained €0.31 to €27.27. The company has signed an agreement with Venezuela's state-controlled PDVSA covering joint production of reserves in Venezuela, and providing PDVSA with access to some of the company's crude output in Argentina. The agreement sees the formation of two new joint ventures. Elsewhere, the company and partners Total, OMV and the Libyan National Oil Company have made a fifth oil discovery in Libya's Murziq basin.

ENDESA shares rose €0.25 to €22.52. The company 's shares resumed trading following an earlier suspension. The company says that Gas Natural's offer is unacceptable as the price is insufficient, adding that Gas Natural shares are overvalued. Endesa also says that it is committed to making shareholder returns a priority and says it will pay out 100% of capital gains on disposals, promising dividends of more than €7 billion over the next 5 years, supported by the sale of non-strategic assets.

TELEFONICA was unchanged at €13.62. The company could bid around €20 billion for KPN, the Wall Street Journal writes, citing people familiar with the talks.

Switzerland

ROCHE added CHF3.80 to CHF183.60 after Deutsche Bank upped its target to CHF220 from CHF190 retaining its buy rating. DB notes its 2006 EPS estimates are around 15% ahead of consensus expectations and anticipates the potential for positive phase III data for MRA and Rituxan.

Novartis rose CHF1.35 to CHF67.00. Deutsche Bank upgraded the shares to buy from hold and lifted its price target to CHF72 from CHF67 on positive pipeline newsflow and EPS outlook.

United Kingdom

GLAXOSMITHKLINE added £0.18 to £14.595. Deutsche Bank raised its target to £14.80 from £13.30 and reiterates buy in a note on European pharmaceuticals, rating the sector overweight. DB says strong pipeline newsflow offsets patent risk concerns in the sector, and that its hold recommendation on the company is due to the company 's modest medium-term growth prospects and the largely unproven nature of its large but early-mid stage pipeline.

BOOTS rose £0.25 to £6.33 after the boards of the company and Alliance Unichem agreed the terms of a recommended merger to create Alliance Boots, an international healthcare group with combined sales of over £13 billion. The exchange ratio shall be calculated on the basis of the issued share capital of the company immediately prior to the posting of the merger documentation. Boots shareholders are to hold 50.2% of the new entity and Alliance UniChem holders will control 49.8%. It is intended that the company will return by way of the special dividend all post-tax disposal proceeds in excess of £400 million to the company 's shareholders prior to the determination of the exchange ratio for the merger. The groups aim to deliver annual pretax cost savings of at least £100 million by the fourth full year following completion of the merger. Alliance Unichem shares gained £0.13 to £8.81.

BAT was £0.06 to £11.96. UBS raised its price target to £13.70 from £12.80 and keeps buy recommendation as it has become much more positive about the short-to-medium term prospects for the consumer products industry in the emerging markets. As the broker raised its forecasts for emerging markets operations, it raised its targets on Nestle, InBev, and the company. Separately, JP Morgan recommends buying into weakness, following news the Canadian Supreme Court has dismissed the tobacco industry's appeal and upheld British Columbia's Tobacco Damages and Health Care Cost Recovery Act as constitutional.


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