Vivendi Universal Falls on Stalled Deal

Reuters declines ahead of trading statement; plus more of Monday's European stocks in the news

From Standard & Poor's European MarketScope


Reuters news and information group was down £0.06 to £4.07, ahead of its Apr. 20 trading statement. Credit Suisse First Boston is expecting an underlying first-quarter recurring revenue decline of 1%, compared to the consensus and the company guidance of a 1.5% decline. The broker said that over the past few weeks, its above-consensus forecasts have found further support. Meanwhile, the Nasdaq stock market was yesterday poised to complete the purchase of the Instinet electronic marketplace and brokerage unit of the company for about $1.8 billion, according to people familiar with the matter, the Financial Times reported. The deal, which could be announced today, would see the second-largest U.S. stock market become a bigger threat to the NYSE by buying back order flow it lost in the late 1990s with the rise of electronic communications networks such as the Inet unit of Instinet. People familiar with the matter said Reuters accepted an offering price below the $6.46 closing price for Instinet stock on Friday, because the recent run-up in the shares amid merger speculation was perceived to have inflated the stock artificially

Royal Bank of Scotland was down £0.23 to £16.10, after the Financial Times reported that the bank will this week try to drive through a controversial new bonus scheme for the head of its U.S. business, in spite of protests from shareholders' groups. The groups have criticised the lack of transparency in the pay package of Larry Fish, head of the bank U.S. unit, Citizens Financial. Pensions Investment Research Consultants has urged shareholders to vote against the pay scheme at Wednesday's annual meeting. The Local Authority Pension Fund Forum, which is thought to hold about 3% of the company's shares, has also accused the bank of an "excessive" pay policy which "does not represent pay for performance".

Hedge-fund company Man Group was down £0.29 to £13.14, after Dresdner Kleinwort Wasserstein trimmed its target for the company to £17.50 from £17.80, reflecting the reduced fiscal-year 2006 and 2007 fund flow forecast. The broker retained a buy rating and said the firm is a growth company in value clothing. The broker amended its forecast of future sales to $10.5 billion for fiscal year 2006, with sales in the period between 2007 and 2010 remaining at this level. The forecast is based on Man Group's differentiated product and distribution network, rather than simply extrapolating the fourth-quarter's lackluster sales, the broker said, adding that it sees strong growth in underlying earnings per share with compound annual growth rate of 17% for the period 2005 to 2008, based on continued strong sales flows. The broker noted that the company exceeded performance fee forecasts for fiscal year 2005, highlighting the robust nature of its investment model. It upgraded the company's gross performance fees for fiscal year 2005 to $100 million.


Lufthansa was down €0.23 to €10.56, after the broker Kepler reinitiated coverage of the airline with a reduce rating, since it does not see upside above 10% for the next six to 12 months, without a sudden drop in oil prices. Without expectations of operating earnings growth in 2005 and significant uncertainties still hanging over the stock, the broker sees the company as almost fairly valued at current levels. The broker said that after the latest turmoil in demand, airlines have to deal now with the impact of high oil prices in addition to heavy structural competition on excess capacity. Deutsche Lufthansa cannot escape from a generally dull environment; in essence, the group's cost-cutting is only good enough to avoid deterioration of operating results in 2005 compared with 2004

Bayer was down €0.65 to €24.95, after interim data of the ongoing Phase III trial in advanced renal cell carcinoma showed that patients taking sorafenib (formerly BAY 43-9006) had a significant improvement in the progression-free survival. Thus, Bayer and Onyx recommended that all patients should be offered the access to sorafenib, which was endorsed by an independent committee. The broker Merck Finck sticks to its expectations of a filing for approval in the second half of 2005 and the launch of sorafenib in fiscal year 2006 and maintains a hold rating for the time being.

Siemens engineering group was down €1.65 to €58.90, after the German newspaper Frankfurter Allgemeine Zeitung reported that the company is still interested in strengthening involvement with Russian engineering company OAO Siloviye Mashiny despite Russian authorities blocking an acquisition.


Aerospace giant Eads, the parent of Airbus, was down €0.53 to €22.57, after Airbus said its new A380 plane will be very profitable and has rejected a study funded by its main rival Boeing, saying that the superjumbo will lose more than $8 billion over its commercial life. The Sunday Times cited a report by U.S. academics including Northwestern University Professor Aaron Gellman, saying that the A380 will lose $8 billion over its commercial life and never pay back state aid of $3.8 billion or more that helped fund it.

Liquor group Pernod Ricard was down €2.20 to €116.50, after Merrill Lynch upgraded the company to neutral from sell. The broker said it thinks it is very likely that the current discussions between Pernod Ricard, along with Fortune Brands, and Allied Domecq will lead to a full bid for Allied. The broker pointed out that such an acquisition would be materially value creative for the company, increasing the theoretical fair value for the company's shares to €109 from €93 per share. The Financial Times reported that the company is working towards announcing a formal takeover offer for Allied Domecq by Thursday, the day the UK group reports interim financial results. Negotiations on how much Pernod Ricard would pay are continuing, with the UK company understood to be looking for an offer of at least £6.50 a share, and preferably £6.70 to £6.75. Last week, the Wall Street Journal said a rival U.S. spirits company, Constellation Brands, was looking to gin up a competing bid.

Media group Vivendi Universal was down €0.65 to €22.97, after the newspaper La Tribune reported that negotiations between the company and media group Lagardere over Vivendi's pay-TV unit Canal Plus have stalled. The newspaper quotes a letter from Vivendi Universal's board saying that joint control of Canal Plus is out of the question.


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