Interview: Why the takeover trend has been growing
>> it’s 9:12 a.m. in sideny. we’re expecting a dry day today, a warm and mostly sun in day in that city with high temperature reaching 26 degrees celsius. and now we take a closer look at the day’s trio of deals in the u.s. and why the takeover trend has been growing since last year. su keenan has that story from new york. what more can you tell us, su?
>> well, cathy, these latest transactions deal in structure and strategy and industry group. we have media and telecom, yet scottsman capital management’s charles crane sees one common theme and that is that u.s. c.e.o.’s are putting their financial strength to work.
>> corporate balance sheets are pretty healthy and they’re looking for ways to put that money to work. dividends are one option, but buying other companies, especially if there are opportunities to cut some costs, is another option.
>> well, let’s take a look at the growing option of merging companies. rising stock prices, lower interest rates here in the u.s., and a rebounding economy has set the stage for a surge in mergers. according to bloomberg data, wall street firms advised on $1.89 trillion in deals last year, many of the transactions coming in the final weeks of the year. and that compares with roughly $1.2 trillion in 2003. burnham securities’ david liebowitz, a managing director there, says growing competition and price cutting in certain industries could spur history-making deals in the months ahead.
>> i would expect to see significantly more and not just in these two industries, but several of the other consolidating industries as well. this year may very well prove to be the best deal year dollarwise, that we’ve enjoyed, if not in the last several years, but perhaps even the best single year ever in a dollar amount.
>> well, the maxim group’s barry ridholt, a market strategist there, he views the trend of deals as positive, but he also takes a lesson from recent history.
>> it does show that c.e.o.s are optimistic and they’re looking to put their capital to work. that is a net positive over the long run. recognize we did see a whole lot of deals in 1999 and beginning of 2000 and we know how that worked out. you have to take it with a little bit of a grain of salt.
>> well, let’s take a closer look at 1999-2000. bloomberg data shows that the year 2000 turn out to be a recent peak for deal making with wall street firms advising on almost $3 trillion worth of transactions. ridholt says after 2000, we entered what he called a desert for deal making and says, quote, it would be foolish to ignore similar signs taking place now. jim rogers, former manager of the quantum hedge fund, takes a stronger position. he says the surge in deals, quote, signals we’re nearing a top in the u.s. stock market . cathy, back to you.
>> thank you for that, su. toyota motors threatens general motor’s 80-year reign as the world’s biggest automaker. japan’s largest car maker came to the detroit auto show this week with four new models aimed at grabbing gsm’s customers. toyota is introducing vehicles including a sedan, targeted at people who might otherwise buy g.m.’s new buick. toyota became the first foreign car maker to sell more than two million cars in the u.s. last year. the japanese automaker aims to grab 15% of the global market share by the end of the decade. g.m. has a 14.5% market share now and is currently closing u.s. factories and cutting production capacity in europe. nissan’s chief executive is counting on four new models to surpass last year’s record sales performance in the u.s. this year.
>> in 2005, we have four new products coming and they are in very important segments of the market . we have a new pickup truck coming, we have a new s.u.v. coming, which is a new xterra and a new product in infinity, the luxury car, the m-45 and we launched already the pathfinder at the end of 2004, which is going to impact mainly the year 2005.
>> japan’s second largest car maker show cased some of is new cars and trucks at the detroit auto show this week. nissan sold more than one million vehicles in the u.s. last year, grabbing a bigger piece of the market . he says that should help nissan turn its fifth straight record profit in the current fiscal year. he also plans to move more production in the u.s.
>> we started the revival of nissan t revival effort of nissan―we were at 60%, 60% of the cars sold in the u.s. market were sold, assembled in north america. today, we are above 80% and hopefully in the next three years, we should be above 90%. we’re trying to move systematically towards the higher level of autonomy in our u.s. operation. >> record profits failed to lift nissan shares in 2004. they declined 9% last year and have recovered about 2% so far this year. australia’s trade deficit probably widened for a fourth month in november. the stronger australia dollar slowing exports from asia pacific’s number five economy and imports are rising thanks to higher demand for cars and consumer goods. economists survived by bloomberg expect australia’s trade deficit grew 7.1% in november. the figures are due at 1:30 a.m. today in sideny. the philippines reports november trade numbers today. economists we surveyed estimate overseas sales rose 13.5%, for the biggest gain in three months. rising demand for computers and mobile phones is boosting exports there. and coming right up, the dollar falls for the first time this year against the euro in new york monday.
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Listen Market briefing --- Cathy (fast)
Australia market --- David (slow)
Tokyo market --- Ron (slow)
>> plenty in store for you in this edition in 20 minute, a economy strategist will comment about the loss of the dollar against the euro in the new year and global semiconductor outlook from the world’s biggest semiconductor maker. plus, we’ll be taking you live to the detroit motor show. we’ll find out whether japan’s only losing car maker is ready to turn things around. and then we’ll hear from nissan’s chief executive and find out how carlos ghosn plans to boost u.s. sales after turning in a record performance in 2004. alcoa, the world’s biggest aluminum maker has prices with a unexpected fall in earnings. fourth quarter profits fell 7.9% to $283 million or 32 cents a share. it says higher costs and the weak u.s. dollar cut into earnings. aluminum prices have risen 20% on average, demand from china. china last month said it will end subsidies in aluminum exports to curb output and ease energy shortages. some analysts say alcoa stands to gain if china exports less aluminum.
>> if chinese export less, the price of aluminum should be better. if the price of aluminum is better, that’s a plus for alcoa.
>> alcoa is the first dow company to release results for the quarter. oil turns lower after rising to a six-week high. prices had risen on news that the region oil output is reduced by 12% because of storms in the north sea. that oil, norway’s biggest oil company, has been forced to cut production by 205,000 barrels a day. its field wells were off on november 26. bad weather is delaying work to restore output from those oil fields. royal/dutch shell has stock pumping the equivalent of 44,000 barrels of oil a day since friday. a supply disruption in the north sea comes as opec cuts production. opec promised last year to reduce output by one million barrels a day starting january 1. norway is the world’s third largest oil exporter after saudi arabia and russia. the dollar’s longest winning streak against the euro in more than a year comes to an end. the dollar slipped against the european currency in new york for the first time this year. it also eased back versus the yen and you are looking at the line market quotes on your screen with the yen worth 10.31 and strategists say the dollar is pulling back after rising too far too fast. they point to short-term technical indicators which suggest the dollar could fall further, depending on u.s. trade figures out wednesday. economists surveyed by bloomberg expect the gap to shrink somewhat, coming in just $54 billion, the third biggest monthly deficit on record. before the alcoa earnings announcement, u.s. stocks the rose on hopes that fourth quarter earnings from companies reporting this week will beat forecasts. 12 companies in the s&p 500 are reporting this week, including intel tomorrow. the dow is up .2%. the s&p and nasdaq both higher .4%. treasurys grew on speculation that job growth will hurt debts this week. the treasury department will sell $25 million of five and 10-year notes in the next two days. the economy added more jobs in december than in november and the fed suggested last week its rate is the too low to prevent inflation from accelerating. higher interest rates are negative for treasuries. asia stocks rising u.s. trading. gainers included japan’s three largest automakeringses, toyota, nissan and honda. both are introducing new models at this week’s auto show in detroit. the bank of new york’s indexes, the track asian stocks rose. nikkei futures point to a higher start than the tokyo stock exchange when the market opens in two hours. japan’s market was closed yesterday for a holiday. news corps offers to buy out minority holders of fox entertainment group for $5.85 billion. the move is news corps to continue its founder, rupert murdoch, continue its largest u.s. assets. let’s go to david dweed in sydney for more on that story. good morning, david. how are news corps shares expected to open in australia?
>> well, we would expect those shares to open to follow what happened in the united states. we saw the preferred shares dropping about 1.6% in australian dollar equivalent terms and the ordinary shares down about 1.7%. so, given the fact that news corporation shares still represent about 4.5% of the australian a.s.x. 200 index, we would expect to see the index pulled a little bit lower by those. the index was indicating the futures on the index was indicating that it would open about .1% higher. one of the interesting aspects about what news corporation is doing is that david duveaux, the chief financial operation, said since news corps moved their headquarters to the u.s., having fox as a separate listed company no longer exists because american investors can invest straight into news corporation shares, especially american investors whose mandates wouldn’t allow them to invests in companies outside. so, fox up until then, had been one way that these u.s. investors would be able to get access to some of news corporations business and they had certainly invested in fox and fox’s shares right up to the highs since its initial public sale back in 1988. cathy?
>> what else will investors be looking at before the market opens?
>> looking in australia we have had ansalo, the luxembourg-based steel company, declined to report on speculations reported in the financial review yesterday that it might be in the market to buy blue scope steel, the biggest steel company in australia. a couple of other one, cleveland clips and westfield have been named for portman shares whose shares were suspended from trading yesterday. cathy?
>> thank you for that, david. in world news, the election of a new palestinian leader tops our world news. ron madison with that story and more in tokyo. good morning, ron.
>> good morning, cathy. the newly elected palestinian authority president says he does have a tough job ahead. mahmoud abbas is expected to resume peace talks with israel and reign in militant groups that have been blamed for stalling the process. israeli leaders say they will watch closely to see how hard abbas tries to subdue militants. u.s. president george w. bush has welcomed abbas to the white house. it is an invitation he refused to extend to late palestinian leader yasser arafat.
>> well, i personally want to offer my congratulations to abu mazen. i look forward to talking with him at the appropriate time. i look forward to welcoming him here to washington if he chooses to come here. i look forward to helping to make sure that the conference in london, a conference all aimed at helping the palestinians develop the institutions necessary to support abu mazen’s vision of a peaceful, active, vibrant state to become reality.
>> well, aides to israeli prime minister ariel sharon say sharon plans to meet with the new leader soon. abbas has received more than 62% of the vote, considered a clear mandate. an american observer says the election was freeze and fair. meantime, president bush says america will be aiding tsunami victims for a long time to come. he says the united states is quote, committed today and will be committed tomorrow. bush would not commit, though, to specific amounts of additional aid. he says any increases will be demand-driven. bush has pledged $350 million to countries hit hardest by the tsunami. but officials stress that’s just for the initial relief stage. cathy, that is the latest look at world news. going to hand things back over to you in hong kong.
>> thank you for that, ron. and right after the break, u.s. wireless company alltel agreed to buy western wireless for $4.2 billion, capping a big day for u.s. mergers. bloomberg’s su keenan takes a look at why 2005 may be another strong year for corporate deal making.
