France Telecom Falls on Probe

ABN Amro lower on possible acquisition; plus more of Thursday's European stocks in the news

From Standard & Poor's European MarketScope


France Telecom was down €0.45 to €24.48 after France's finance minister Thierry Breton nominated his deputy Francois Loos to be head of the investigation into allegations that the company, Bouygues and Vivendi Universal's mobile operator SFR colluded. Breton was a former chairman of the company between October 2002 and February, when he was appointed minister. The company fell more than 2% yesterday after the weekly Le Canard Enchaine reported that France Telecom's Orange, Bouygues Telecom and SFR agreed to share the French mobile phone market at meetings between 1997 and 2003. The accusation could land the different telecom groups fines amounting to 10% of their revenue. Vivendi Universal was down €0.34 to €25.31, and Bouygues €0.48 to €35.84.

Air France-KLM was down €0.30 to €13.33 after Spain's El Pais reported that Brussels is expected to draft a "black list" of airlines on mounting concern over safety in the civil aviation sector. The list could include not only unsafe airlines, but also bankrupt groups or unreliable airline carriers. The plan could force travel agencies to inform users of the airlines they use by fiscal 2006.

Societe Generale was down €1.40 to €86.10 after announcing that it has sold its remaining 2% stake in Spanish bank Santander for €100 million. The brokerage Cheuvreux said that the disposal is the final confirmation of the absence of benefits from the link-up. The broker kept its "underperform" rating and €97 target price.

L'Oreal was down €0.90 to €63.85, as a report in the Spanish newspaper Cinco Dias said that the company is interested in acquiring part of Sara Lee's Delian sun-cream business.


ABN Amro was down €0.27 to €19.20 after the newspaper Het Financieele Dagblad reported that the company is seriously considering the fact that it may win the takeover battle for the 30% stake in Italy's Antonveneta being sold by Banca Populare Italiana. Though Populare Italiana made a higher bid than ABN Amro, Milan prosecutors later suspended the bid. Note that yesterday advisers to ABN Amro and Populare Italiana met to discuss the possible sale. Italy's La Republica newspaper said yesterday that the company is not willing to pay more than €26.50 per share.


Chemical maker Lanxess was up €0.85 to €23.10 after the company posted a 42% rise in second-quarter core earnings to €163 million, beating expectations. The company sees fiscal 2005 earnings before interest, taxes, depreciation and amortizaton before exceptional items at €550 million to 560 million. The bank said that further restructuring measures aimed at saving €60 million per year. The brokerage Cheuvreux said that this is positive newsflow, but thinks the valuation is too high. Thus, the broker's recommendation remains "underperform."

Deutsche Bank was down €1.35 to €70.11 after confirming that it is target of the Italian dairy group Parmalat's lawsuit, but said that the complaint is without foundation.

Volkswagen was down €0.71 to €43.22 as the brokerage Cheuvreux said that its confidence in the carmaker's ambitious cost-cutting programme and the €4 billion pre-tax improvement has further improved. The broker points out that a reduction in German labor costs beyond the latest wage agreement seems to be the key focus of the company's ForMotionPlus program. Meanwhile, Lehman Brothers lifts its target on the company's stock to €40 from €36 as it sticks to its "equalweight" rating.


Lloyds TSB bank was up £0.10 to £4.64 on renewed speculation of a takeover bid, according to brokers. Wells Fargo is mentioned as a possible candidate.

Hotel and gambling group Hilton was down £0.05 to £3.01 after giving a positive outlook, but reporting weak betting results. The company reported first-half total revenue of £6.6 billion, up 17.1%, while profit from betting came in at £143.60, down 6.3%. Adjusted pre-tax profit was £192.1 million. The company said looking forward the trends at its Hilton hotels and Ladbrokes betting shops remain positive.

British Airways was down £0.04 to £2.81 on fuel-cost concerns, as benchmark crude oil trades above $67.00 per barrel.


Fiat was down €0.12 to €7.26 even after Citigroup increased its target to €8 from €6, saying that the launch of the company's new "Grande" Punto marks the end of an eventful summer. The company's second-quarter results and group development plan on August 3 indicated progress on cost and balance sheet basics. The broker highlighted that upside may be greater than downside at this point, but it is still a share for the brave. The broker kept its "hold" rating.

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