Pernod Ricard Rises
From Standard & Poor's European MarketScope
Liquor group Pernod Ricard was up €3.20 to €116.40, a day after the UK's Allied Domecq said it is in discussion with the company and Fortune Brands ofthe U.S. regarding a potential offer. Lehman Brothers noted that Allied Domecq could command up to about £7.00 per share if all the estimated costs synergies are claimed. The broker estimated these synergies at £200 million. The broker said it would expect Pernod Ricard to focus on the premium bands of Allied's portfolio, with the rest going to Fortune or other interested parties. It thinks Pernod Ricard would most likely be interested in Stoli vodka, Sauzq tequila and Malibu Rum.
Tobacco group Altadis was up €0.47 to €33.00, after the company said it has raised the price of its main brands of cigarettes in Spain (including Virginia, Fortuna and Ducados) by between €0.10 and €0.15 a pack.
Luxury goods group LVMH Moet Hennessy Louis Vuitton was up €0.65 to €57.65, after Moet Hennessy president Christophe Navarre said his unit would invest $20 million to launch a luxury rum called 10Cane in the U.S. in the spring of 2005. The brand will be priced at $35 and will be launched in other countries soon after. This is the group's first rum beverage and is in keeping with its strategy to produce luxury spirits. The beverage is expected to achieve profit margins of 30% in the US market.
Aeronautical equipment maker Zodiac was up €1.17 to €38.87, after ING raised its target to €37 from €35 and kept its hold rating. The broker highlighted that the company is to acquire C&D Aerospace, a world leader in aircraft cabin equipment for $600 million. The broker expects that this transaction will be 8% earnings-accretive in fiscal-year 2006, and believes this acquisition is positive as it will strengthen the Airline equipment division, which is one of the company's main growth drivers.
Phone-book publisher Yell was down £0.15 to £4.08, after Credit Suisse First Boston cut its target to £4.10 from £4.40 and reiterated its neutral rating. The broker said yesterday's decision by the Office of Fair Trading to refer classified directory advertising services to the Competition Commission for investigation is a major negative surprise. ABN Amro also cut its target, to £4.30 from £4.45, and reiterated its hold rating. JP Morgan downgraded its rating to neutral from overweight but raised its target to £4.50 from £4.20. The broker said the downside risk is limited at current levels as the market is already discounting a worsening of the regulatory environment. It added that the higher target price reflects a lower long-term cost of debt.
The London Stock Exchange was up £0.06 to £4.62, after Citigroup lowered its target to £4.62 from £5.70 and kept its hold rating. The broker said a partial re-rating of the European stock exchanges has already occurred. It added that a full re-rating is possible with the abandonment of M&A and liquidity transfer policies and concentration on capital return. It noted that Deutsche Boerse has confirmed its withdrawal from bidding for the company and announced a modest share buyback program. The broker considers that Euronext must now decide whether to proceed with M&A or also withdraw. It pointed out that press reports indicate that the same shareholders who blocked Deutsche Boerse from proceeding are also shareholders of Euronext and will try do the same, and concludes that the likelihood of the company remaining independent and all three exchanges returning capital has increased considerably
Retailer Peacock Group was up £0.08 to £2.58, after the company said fourth quarter like for like sales were up 4.6% for the 13 weeks to April 2, with the group strong despite slowing consumer confidence. It added that Peacock's and the Fragrance Shops divisions continue to perform strongly. Like-for-like sales at Peacock's are up 9.3% for the 13 week period while Bonmarche fell 4.7% for the same period with trading remaining unsatisfactory. The company said it is too early to assess whether recently introduced new ranges at Bonmarche will lead to a sustained recovery. At Fragrance Shop, like-for-like sales moved up 4.2% for the 13-week period.
British Airways was up £0.05 to £2.68, after Dresdner Kleinwort Wasserstein said that the negative mix effect seen in the airline's March traffic figures released yesterday was a temporary effect caused by the timing of Easter. The broker noted that, after four months of premium volumes growing ahead of non-premium, March showed premium traffic up only 1.7% with non-premium up 5%. The broker said that this was due to both the timing of Easter - with two fewer working days - and tough year-on-year comparatives. The broker expects a resumption of strong premium growth in April and noted that Asian traffic growth has picked up after a slow period. The dominating factor for the shares remains the oil price, added the broker, which retained its buy recommendation and £3.30 target price.
Chipmaker Infineon was up €0.09 to €7.30, after Merrill Lynch upgraded several U.S. semiconductor stocks including Maxim, Altera, ATI, Broadcom and AMI Semi to buy.
Drugmaker Schwarz Pharma was up €1.30 to €35.20 after WestLB upgraded the company to outperform from neutral and raised its price target to €38 from €34. The broker said it expects good first-quarter results and that it anticipates Phase III data for the group's festerodine drug in the second quarter of this year.
Dialysis products maker Fresenius Medical Care was down €1.04 to €63.09, after the company said it was subpoenaed by the U.S. Department of Justice to produce a broad range of documents relating to its operations. The papers demanded include documents related to clinical quality programs, business development activities, medical director compensation and physician relations. The subpoena covers the period from December 31, 1996 to the present. In October, 2004, the same subsidiary and Spectra Renal Management received a subpoena from the U.S. Department of Justice, Eastern District of New York. For the time being, it is not known if both subpoenas are related to the same inquiries.
Man engineering group was up €0.48 to €36.35, after the German newspaper Suddeutsche Zeitung reported that the company's chief executive officer Hakan Samuelson plans to build a truck assembly plant in Poland to take advantage of lower labour costs. The report said the new plant will produce about 10,000 to 15,000 trucks per year, at an hour rate of €5 for Polish workers compared to the hourly rate of €31 received by German workers.