From Standard & Poor's European MarketScope
Mobile-phone operator O2 was up £0.04 to £1.36 on rumors that a private equity group is weighing the merits of a bid for the company, which is presently valued at £11 billion, The Guardian reported. The newspaper said that a leveraged buyout of the company is by no means impossible. Although it would be an aggressive deal, the company generates enough cash to service a serious amount of debt.
Television broadcaster ITV was up £0.02 to £1.24 after Goldman Sachs raised its fair value target to £1.32 from £1.26, following the decision by regulator Ofcom to lower the group's license fees. The broker believes that the lower licence fees will provide a short-term relief for the share price, but do not improve fundamentals, and maintained an in-line rating. Societe Generale lifted its target price to £1.39 from £1.31, and kept its hold rating.
Online gambling group PartyGaming was up £0.03 to £1.42 after Citigroup launched coverage with a buy rating and a target price of £1.85, implying a 40% upside potential. The broker forecasts 40% pre-tax profit growth in the current year, 37% in 2006 and 22% in 2007 with solid growth remaining in prospect thereafter.
Online betting group Sportingbet was up £0.05 to £3.28 after Citigroup started coverage with a hold rating and a target price of £3.80.
Exploration company Cairn Energy was down £0.19 to £13.44 after the bank UBS downgraded the group to neutral from buy and raised its target to £15.80 from £15.00, after good performance.
France Telecom was up €0.50 to €24.30 after the brokerage Cheuvreux increased its target to €27.00 from €26.00 and kept its outperform rating. Citigroup also upgraded the company to buy from hold and raised its target price to €26.50 from €23.50, as concerns over competition are reduced. Morgan Stanley increased its target to €27.50 from €26.50 and reiterated an overweight rating. The company announced that it will phase out its Wanadoo brand as it unveils plans to use its Orange brand for all international mobile, broadband and commercial services, the Financial Times reported.
Liquor group Pernod Ricard was down €1.60 to €130.60, as shareholders approved the company's takeover of Allied Domecq, during an emergency general meeting held today. Brussels has approved the Allied Domecq bid, but the bank ETC Pollak Prebon remains cautious and noted that the company still faces U.S. and Canadian authorities, as well as shareholders of Allied Domecq. ING downgraded the group to hold from buy and hept its target at €132.53, saying that now that the company has almost succeeded in its Allied Domecq deal, attention will focus on whether it can deliver its guidance of high cost synergies.
Steelmaker Arcelor was down €0.21 to €16.24 after Morgan Stanley said that European steel shipments declined 8% year on year in May. The company remains the broker's top pick, offering the best balance between leverage to the steel cycle and low financial vulnerability. The broker remains overweight on the company, but retains a cautious view of the industry, forecasting a rise in raw material costs, vulnerable steel prices and declining margins from the second half of 2005 onwards.
Broadband Internet equipment provider Alcatel was down €0.14 to €9.18 after J.P. Morgan said that the company's contract with pan-African satellite service operator RascomStar-QAF to develop an optimised rural telephony network will allow telecom operators representing African countries to propose new services needed by isolated populations.
Broadcaster Prosieben was up €0.27 to €14.45 after the newspaperTagesspiegel reported that media group Axel Springer will start a due diligence process next week as it assesses the risks involved in a possible takeover.
The utility RWE was up €1.05 to €53.35 as Dresdner Kleinwort Wasserstein increased its share price to €64 from €54, saying, with oil prices reaching new highs, it is time to review general medium-term assumptions. Separately, the company announced it will pay around $4 million to buy Alliant Energy's water operations in Illinois.
Deutsche Telekom was up €0.26 to €15.35 after Red Electrica said it had reached an agreement to sell its telecoms unit Albura to Deutsche Telekom subsidiary T-Online. T-Online is to pay €35 million and assume €26.5 million of debt. T-Online says the takeover will cut EBITDA outside Germany by €15m this year.
BNL was up €0.06 to €2.87 after the bank BBVA has asked the Bank of Italy for permission to increase its stake in the bank to 30%. BBVA also says that the Bank of Italy approval its bid is not conditional on BBVA reaching more than 50%. BBVA has asked the Bank of Italy to recognise that a stake of over 30% in BNL would guarantee control. Separately, Italian insurer Unipol is expected to present a counter bid on BNL as soon as this week-end, the daily Finanza & Mercati writes. According to the paper, Unipol offer could be launched at €2.8 for each BNL share, but it could be raised up to €3.2 in case BBVA relaunches its offer to €3.
Telecom Italia was up €0.05 to €2.60 as the company will invest €200 million to relaunch the Olivetti industrial brand.
The bank BBVA was up €0.14 to €12.81 after the company asked the Bank of Italy for permission to increase its stake in BNL to 30%. The company also said that the Bank of Italy approval of the BNL bid is not conditional on its gaining a more than 50% stake. BBVA has asked the Bank of Italy to recognise that a stake of over 30% in BNL would guarantee control. Separately, the Italian insurer Unipol is expected to present a counter bid on BNL as soon as this weekend, Finanza & Mercati writes. The bank ING raised its target on BBVA to €13.60 from €12.50, and kept its hold rating.
Fashion retailer Inditex was down €0.28 to €21.28 as the company is to accelerate the repurchase of franchises in Italy, Mexico and Japan, Spanish sources said. This will allow the company to integrate all the sales from concessions in these countries into its accounts.
Electrical group ABB was down 0.67 Swiss francs to 8.28, after the company warned that its second-quarter net profit will be significantly lower than the first-quarter figure. The group also has cut its 2005 margin targets. This comes as the comapany launches a $240 million four-year consolidation programme, which aims to lift profitability in its transformer business. The group will close a small number of plants in high-cost countries and plans to cut some 1,300 jobs in the transformer business. Most of the profit warning is explained by the charge but the company also talks of the impact of higher raw material costs, asbestos and discontinued businesses. BankSarasin downgraded the group to neutral from buy.