S&P Raises Ticketmaster Ranking on USA's Bid

Also: more opinions on Duane Reade and Elan

Ticketmaster (TMCS ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Mark Basham

Market action in shares of Ticketmaster and majority shareholder USA Interactive suggests a consensus that USA Interactive's offer to acquire the 34% minority interest in Ticketmaster, via a swap of 0.8068 USA Interactive shares per Ticketmaster share, will eventually go through. Tickemaster is at a slight 2% premium to its takeover value because some may still see a possibility that USA Interactive will raise its offer. S&P's view is that a single entity for investors, in the form of USA Interactive shares, is a better long-term strategy for increasing shareholder value. S&P expects the exchange offer will succeed.

Duane Reade (DRD ): Adds with 4 STARS (accumulate)

Analyst: Joseph Agnese

S&P sees 2002 sales of the largest metro New York drug store chain (a 31% share) rising 16% on solid pharmacy growth and strengthening non-pharmacy sales. Margins are pressured by a change in product mix to lower-margin pharmacy items and a rise in third-party prescription sales, which are partly offset by a shift to higher-margin generics. Despite the September 11 setback, including the loss of its most profitable store, Duane Reade continues its expansion goal of 35 new stores by year end. At 20 times S&P's 2002 earnings per share estimate of $1.67, with projected long-term growth of 17%, Duane Reade is attractive.

Elan Corp. (ELN ): Reiterates 3 STARS (hold)

Analyst: Herman Saftlas

Shares of the distressed Irish drugmaker are up modestly on news of its restructuring plan. The company is reorganizing in a bid to raise transparency and regain investor credibility. It plans to focus on its fully integrated drug business in neurology, pain management and autoimmune diseases, and will also create a stand-alone unit for outside R&D operations, sell non-strategic assets, and give more control to independent directors. However, the reforms are less than S&P anticipated. The financial impact of the restructuring plan has not been disclosed, and Elan remains under a cloud of SEC investigation.

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