Dow Jones better, Reuters rises; SunTrust lower; 21st Century up; Ingersoll-Rand gains; Biosite off

By Ronda Fears

Memphis, May 15 - Canadian publisher Thomson Corp. has agreed to buy Reuters Group plc for about £8.7 billion, or roughly $17.2 billion, to form a combined entity that will surpass Bloomberg as the world's largest financial data and news outfit.

In the United States, Reuters shares surged in tandem with the move in London, and one market source said the stock seems to still be trading at a discount to the deal on some concern about antitrust issues. "I'm a buyer up to $83," he said. Reuters (Nasdaq: RTRSY) shares gained $2.72, or 3.80%, to close Tuesday at $74.34. Abroad, the stock (London: RTR) advanced 20.50p, or 3.39%, to 626p.

The Reuters news was heartening for some Dow Jones & Co. Inc. holders, the source continued. Over the weekend, he said, there were reports that there might be a split in the Bancroft family, which controls 64.2% of Dow Jones class B voting shares, about whether to accept the $5 billion, or $60 per share, offer for the company, from Rupert Murdoch's News Corp.

On Tuesday, the buyside source said, there were rumors abounding that Murdoch had expressed to the Bancrofts he was willing to boost his bid by $10 per share. "Nothing is official on that [increased bid], so I am a seller in this one," he said. Dow Jones (NYSE: DJ) shares gained 15 cents, or 0.28%, to close at $53.92.

Sellers were prolific in SunTrust Banks Inc., also, on Tuesday, a sellside trader said, after it accelerated measures to boost stockholder value, essentially nixing speculation that the regional bank is a takeover candidate.

American International Group's buyout of 21st Century Insurance Group was approved Tuesday after AIG boosted its offer for shares not currently owned to $22 per share in cash from its $19.75 offer in January, which had met resistance. A trader said the market had expected the higher bid in that area. 21st Century (NYSE: TW) climbed 75 cents, or 3.57%, to end at $21.75.

Bidding for diagnostic testing concern Biosite Inc. also came to a close Tuesday as Beckman Coulter Inc. bowed out, saying it would go no higher than its last $90-per-share offer, leaving Biosite to determine that Inverness Medical Innovations Inc.'s boosted offer of $92.50 from last week was superior. Inverness already owns 4.9% of Biosite shares and launched a hostile bid after Biosite inked a deal with Beckman in late March.

Many Biosite players had anticipated Beckman Coulter would go a bit higher, however, so Biosite shares were pulling back, a trader said. Biosite (Nasdaq: BSTE) dropped $2.95, or 3.12%, to $91.71 on heavy volume of 4.2 million shares. The trader said there were plenty of Biosite buyers in the mix that established positions at much lower stock prices who wanted to add to their stakes.

Elsewhere, Ingersoll-Rand Co. Ltd. took a leap after confirming that it is exploring strategic alternatives for its Bobcat and construction-related businesses, including an outright sale or a spinoff to shareholders. Terex Corp. was mentioned among the potential bidders for Bobcat. And, since Ingersoll-Rand said it would be focusing more on the security market, traders said it might be looking to make a play for Flir Systems Inc.

SunTrust sellers find buyers

Bigger than previously cited expense cuts and stock buybacks at SunTrust coupled with comments from bank executives at a UBS Investment Bank conference Tuesday sparked selling in the stock by holders who had bought on speculation that it was a takeover candidate, a trader said.

Otherwise, the news would have spurred buying, which another trader said will probably result in a big spike in the stock "once the speculators get out of the way."

The stock (NYSE: STI) dropped $1.10, or 1.25%, to $86.76.

SunTrust also said it has monetized 9% of its holdings in The Coca-Cola Co., or roughly 4.5 million shares, and will decide by the end of the year what to do with its remaining stake. The sale was "peanuts," as the trader put it. SunTrust had owned 48.2 million shares, or 2.1%, of Coca-Cola shares on March 31; the sale cut the stake to 1.9%.

The acceleration and expansion of SunTrust's drive to enhance shareholder value essentially let the wind out of the sails of those who had been buyers in the stock in recent months on speculation that the Atlanta-based regional bank was a takeover target.

"You can look at the chart. The stock ran up rapidly as people were buying the rumor," the trader said. "Today, they are selling the news."

SunTrust plans to cut jobs but has not specified a number. In January, the bank unveiled what it called "E2 - Excellence in Execution," as an initiative to boost stockholder value. SunTrust on Tuesday said it now expects savings from E2 during 2009 to total $530 million, up from the original estimate of $400 million. SunTrust also revised its 2007 estimated cost savings to $181 million, an increase of $46 million from its original plan.

With some of the proceeds from the Coca-Cola sale, SunTrust plans to buy back up to $1 billion of its stock in 2007; other funding will come from balance sheet initiatives, such as asset sales, and internal capital generation. With that, along with a 20% dividend increase, SunTrust expects to return more than 90% of earnings to shareholders in 2007.

These measures brought in long-term buyers to scoop up shares sold by the speculators, the second trader said. "That's why there wasn't a huge collapse," he said.

Other banks may take cue

Several other regional banks that had been on speculators' lists as takeover candidates were easing Tuesday on the SunTrust development, a third trader said. Memphis-based First Horizon National Corp., Baltimore-based Provident Bankshares Corp. and Indianapolis-based First Indiana Corp. were among those.

Regional banks have been spot-lighted as takeover candidates for the past year or so, and the chatter heated up early in 2007 amid several high-profile international bank deals. But, the trader said many on those lists may follow SunTrust's example.

"We could see some smaller deals, I think, but those who can will take the steps necessary to avoid a takeover," he said.

Many players who were playing some of these regional banks on the takeover angle were shedding those positions Tuesday, he said.

"There was not a big exodus or anything like that," the trader said. "It's just that SunTrust gave pause to a lot of the buying in the group."

Many of the banks thought to be potential buyers of smaller regional banks were showing some weakness Tuesday as well, he pointed out, such as San Francisco-based Wells Fargo & Co., McLean, Va.-based Capital One Financial Corp. and Detroit-based Comerica Inc.

But another trader said stagnant interest rates will continue to put pressure on the banking sector for consolidation.

"I'm a buyer on any weakness in the group for the rest of this year, save any extenuating circumstances," he said.

Synovus may move now

Synovus Financial Corp., however, may be moved by the SunTrust event in another direction - to monetize its holdings in Total Systems Services Inc. - a measure anticipated for some time but yet to come to fruition, one trader said.

"I bet it makes Synovus pull the trigger on the TSS holdings," the trader said.

There has been anticipation that Synovus would sell its majority stake in Total Systems Services for several weeks, according to the trader.

Synovus shares (NYSE: SNV) slipped 14 cents, or 0.43%, to $32.09 on Tuesday.

Total Systems Services (NYSE: TSS) ended off by 29 cents, or 0.93%, at $31.02.

Ingersoll-Rand rallies

Ingersoll-Rand was cheered for making the move to separate from its Bobcat and construction-related businesses, which includes utility equipment.

"This move makes sense," one trader said.

"As I always said, the sum of the parts is greater than the whole. This is a difficult part of the business to run and most who know how it works are long gone."

The stock (NYSE: IR) traded as high as $51.14 before pulling back to close at $49.29 for a day's gain of $2.68, or 5.75%, amid whopping volume of 11.9 million shares versus the norm of 2.1 million shares.

The Bermuda-based machinery giant said that in addition to divesting Bobcat and the construction group, it plans to double its share buyback program to $4 billion from $2 billion. For 2006, the company noted that Bobcat and the construction group generated $2.6 billion in revenues.

Ingersoll-Rand said it expects to conclude the process in the second half of 2007.

Another trader said there was a rumor that Warren Buffett's Berkshire Hathaway Inc., which reported buying Ingersoll-Rand in fourth quarter, was interested in making a bid for the Bobcat business, but he was not putting a lot of stock in that chatter.

"Buffett may be buying the stock, but not the company," he said.

Terex, the Westport, Conn.-based farm and construction equipment giant, seems a more likely buyer, this trader said. Terex (NYSE: TEX) lost $1.25 on Tuesday, or 1.51%, to settle at $81.66.

He added that since Ingersoll-Rand said it wants to focus more on the security market, it may be looking to snap up Flir Systems, a Wilsonville, Ore.-based company that makes thermal imaging and infrared camera systems. Flir (Nasdaq: FLIR) was lower in the session by 77 cents, or 1.85%, to close at $40.83 but was seen higher in after-hours activity.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.