10:30AM New York – Stocks in New York fell on the weakness in financial and real estate sector and worries on the rising inflation and a weakness in global markets.
News of three large deals in the early morning was overshadowed by the inflation worries and economic slow-down, and weak global markets.
In the overnight trading Asian market fell sharply led by nearly 4% loss in India and more than 3% losses in Australia, Singapore, and Hong Kong. Japan fell 1.7% on the weakness in financial stocks.
After 45 minutes of trading, Dow Jones Industrial Average declined 95.27 or 0.71% to 13,244.58, Nasdaq lost 26.96 or 1.02% to 2,608.78, and S&P edged lower by 11.68 or 0.8% to 1,456.27.
Three large deals dominated early trading hours Ingersoll-Rand agreed to purchase rival air-conditioning system maker for $10.1 billion.
Related Cos has agreed to a capital injection of $1.4 billion from the investment arm of Abu Dhabi, Goldman Sachs, and Saudi based Olayan Group. The fresh capital injection in the form of long term debt highlights the current credit market crunch working its way through the commercial real estate markets.
Several analysts have predicted that the current slow-down in the housing market is likely to spread to the commercial real estate market and ultimately slow down the construction industry.
National Oilwell Varco has agreed to purchase Grant Prideco for $7.5 billion. National Oilwell Varco will acquire all of the outstanding shares of Grant Prideco for consideration of $23.20 in cash and 0.4498 shares of National Oilwell Varco per share of Grant Prideco. Based on Friday December 14, 2007''s closing share prices for both companies, the combined consideration totals $58 per share for Grant Prideco, a premium of 22 percent. This transaction is not expected to have an impact on Grant Prideco''s pending sale of its tubular businesses to Vallourec S.A
The merger agreement was unanimously approved by each company''s board of directors. Upon completion of the transaction it is anticipated that the current stockholders of National Oilwell Varco will own approximately 86% of the combined company and the current stockholders of Grant Prideco will own approximately 14%.
The transaction is expected to be accretive to earnings and cash flow per share for National Oilwell Varco in 2008, on a pro forma full-year basis and assuming a full year rate of estimated consolidation cost savings of $40 million. Based on National Oilwell Varco''s Friday closing price the combined company would have an equity market capitalization of approximately $32 billion.
Moody’s Investors Services reaffirmed the AAA rating of MBIA and CIFG Guaranty with a negative outlook and rating for Financial Guaranty Insurance Company was placed under review. The recent losses in the sub-prime lending are likely to lower profit outlook of bond insurance companies.
Oil in the morning trading in New York fell $1.40 to $89.87 per barrel and gold declined $2.30 to $795.70 per ounce. Natural gas rose 5 cents to $7.08 per mBTU.
9:45AM New York – Ingersoll-Rand agrees to pay $10 billion to purchase Trane Inc.
Ingersoll-Rand Company Limited has agreed to acquire Trane Inc for cash and stock valuing the company at $10.1 billion or $47.81 per share. Trane, manufacturer of indoor climate control systems is expected to generate revenue of $7.4 billion and with the acquisition Ingersoll revenue is estimated at $17 billion in the year 2008.
Trane Inc, formerly American Standard Companies Inc was recently spun-off as an independent company on November 28, 2007. Trane (
TT: chart) employs 29,000 people and generated $6.8 billion in sales in the year 2006.
Under the terms of the merger agreement, which has been approved by the Boards of Directors of both companies, Ingersoll Rand will acquire all outstanding common stock of Trane. Holders of Trane''s approximately 200 million common shares will receive a combination of $36.50 in cash and 0.23 Ingersoll Rand shares of common stock per each Trane share. The total value for this transaction was $47.81 per Trane share based on the closing price as of December 14, 2007. The transaction which is expected to close late in the first quarter or early in the second quarter of 2008, is subject to approval by Trane shareholders, regulatory approvals and customary closing conditions.
Fred Poses, Trane chairman and chief executive said, ""On a combined basis, Ingersoll Rand''s climate control operations are projected to have revenues of approximately $11 billion in 2008 and will have a significant presence in all major segments of the associated industries worldwide. It is anticipated this combination will produce annual pre-tax cost and revenue synergies exceeding $300 million by 2010. Anticipated synergies include purchased material savings through supplier rationalization and procurement leverage, improvements in manufacturing costs, and lower general and administrative costs. Longer term, we will benefit from synergies related to cross selling and service revenue expansion.""
8:00AM New York, 6:30PM Mumbai – Nearly 4% decline in Sensex led the Asian market correction on the inflation worries in the U.S.
The Bombay Stock Exchange benchmark index Sensex fell 3.8% or 769 to 19,261.35 on renewed concerns of rising inflation in the U.S. might make it difficult for the Federal Reserve to make another rate cut.
The 30-share index had moved in a range of 19,177 to 20,032 levels. Heavy selling was noticeable in metals, real estate, and oil and gas stocks.
DLF and NTPC topped the decliners in Sensex index with the stocks sliding over 7.3% each. Tata Steel, HDFC, ONGC, Tata Motors and Hindalco Industries also lost over 5.7 per cent each.
Among the shares on the BSE, 972 advanced, 1,932 stocks retreated, and 23 remained unchanged. Of the 30 index stocks, 29 surged and one fell.
