THE MARKET MIDDAY
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Fortis Takes Out American Bankers
European financial services giant Fortis agreed to purchase specialty insurance maker American Bankers Insurance (NYSE: ABI) for $55 per share in cash. American Bankers offers specialty insurance products (such as credit life insurance) through financial institutions, retailers, and consumer finance companies. The $2.8 billion dollar deal drove the company's stock up $5 3/4 to $52 1/8. Fortis is not listed on a major U.S. exchange, but sponsored American Depositary Receipts (ADRs) trade in the over the counter market under the symbol FAMVY.
This transaction ends a tumultuous 15-month period for American Bankers. In December 1997, American International Group (NYSE: AIG) agreed to buy the company for $47 per share. After that deal was announced, Cendant (NYSE: CD) made a hostile $58 per share bid to purchase American Bankers. AIG then matched Cendant's offer, but Cendant came back with a higher $67 bid that AIG did not meet. After Cendant won the bidding war, however, the company ran into accounting problems that knocked its stock down over 50%. Due to this tumble and the myriad problems faced by its management, Cendant paid $400 million last October to terminate the American Bankers acquisition.
American Bankers operations suffered last year, due in large part to the management distraction and uncertainty associated with this takeover battle. Nonetheless, after a sharp drop to $30 at the height of last year's market turbulence in October, the company's stock quickly rebounded to around $45 because of optimism about its strong position in lucrative niche markets.
While the past 15 months have been a wild ride, long-term shareholders in American Bankers have been well rewarded. Over the past five years, they have earned a compound annual return of over 35%. Short-timers, those people who invested to play the takeover speculation, were not quite so lucky. Over the past year, they lost about 16%. Chalk up another win to investors over speculators.
Enterprise software company BMC Software (Nasdaq: BMCS) advanced $2 9/16 to $40 3/4 after agreeing to buy systems management software designer New Dimension Software (Nasdaq: DDDDF) for $650 million in cash, or $52.50 per share -- a 7% premium to New Dimension's closing share price of $48 15/16 on Friday. BMC said it expects to take an in-process research and development charge equal to 30% of the purchase price in connection with the deal. New Dimension gained $2 3/8 to $51 5/16.
Network software developer Novell (Nasdaq: NOVL) gained $2 7/8 to $23 after an analyst told Barron's that the firm's Netware software and the "explosion of Internet business" will help double Novell's fiscal 1998 profits compared to a year ago and boost its share price to $30 per share. The article also reported rumors of "deep negotiations" between Novell and Compaq (NYSE: CPQ), which could lead to a combined push into the Internet caching business.
Chip giant Intel Corp. (Nasdaq: INTC) rose $4 1/2 to $119 1/8 after the Federal Trade Commission said its lawyers reached an agreement with the company over the weekend to settle antitrust-related allegations filed against Intel last summer. If the members of the FTC agree to the settlement, Intel will avoid the possibly lengthy federal antitrust trial that was expected to begin this week.
Internet software and online training products provider 7th Street.com (Nasdaq: SEVL) rolled sevens and gained $2 15/16 to $7 15/16 after signing a deal to offer online multimedia training products through its Tutorials.com unit on America Online (NYSE: AOL). The deal confirms rumors of the agreement that surfaced late last week and helped boost 7th Street.com's stock 82% on Friday.
Completing the story in this morning's Breakfast With the Fool, trash hauler Allied Waste (NYSE: AW) picked up $15/16 to $15 15/16 after announcing it will acquire rival Browning-Ferris Industries (NYSE: BFI) for $45 per share in cash as part of a deal valued at a total $9.1 billion, including $1.8 billion in assumed debt. Helping out in the financing department will be Allied's two largest shareholders, privately held Apollo Group and Blackstone Group, who will lead a group that will purchase $1 billion in convertible preferred stock. Allied expects the merger to add to its operating earnings starting in 2000, leading to EPS of $1.60 that year. Browning-Ferris rose $4 1/2 to $39 1/4.
Communications chipsets supplier Conexant Systems (Nasdaq: CNXT) moved ahead $4 to $22 11/16 after saying "solid overall sequential growth" at its wireless, network access, digital infotainment, and personal imaging businesses will lead to breakeven fiscal Q2 results and profits in Q3. Analysts surveyed by First Call had been expecting a Q2 loss of $0.03 per share.
Group employee benefits provider Delphi Financial Group (NYSE: DFG) bounced back $5 11/16 to $33 11/16 this morning after falling 31% on Friday due to what it called "serious misconceptions" about potential losses at its Unicover reinsurance pool management subsidiary. "We do not believe there are material issues for Delphi," the company said. "The market seems not to understand that Unicover is a separate legal entity; therefore, it is solely responsible for its own liabilities."
Nonbank financing company Newcourt Credit Group (NYSE: NCT) picked up $15/16 to $26 3/4 after agreeing to merge with commercial and consumer lender CIT Group (NYSE: CIT) in a stock swap valued at $9 billion. The companies said they expect the combination will yield $150 million in total cost savings.
Specialty semiconductor company PMC-Sierra (Nasdaq: PMCS) climbed $3 3/4 to $79 3/4, adding to Friday's 12.6% rise on buyout speculation following Intel's decision to acquire PMC-Sierra rival Level One Communications (Nasdaq: LEVL). Fellow specialty chip maker Broadcom (Nasdaq: BRCM) gained $9 1/2 to $63 1/4 as well, thanks in part to a Morgan Stanley Dean Witter upgrade to "outperform" from "neutral."
Communications systems equipment provider Andrew Corp. (Nasdaq: ANDW) slipped $1 3/16 to $13 3/16 after announcing that it expects fiscal Q2 EPS to fall between $0.05 and $0.08, well below Wall Street's $0.22 consensus estimate, because of slow January and February revenues. "We expect [second-half] sales to be stronger than the first half due to normal business seasonality and to the higher capital expenditure spending plans announced but not yet implemented by some of our customers," said CEO Floyd English.
Gold mining company Homestake Mining Co. (NYSE: HM) dulled $1/2 to $8 15/16 after announcing an agreement to buy Argentina Gold Corp., traded on the Vancouver exchange, for about $200 million in stock.
Waste management services holding company Med/Waste Inc. (Nasdaq: MWDS) dumped $13/16 to $4 3/16 following news that the company hired Sutro & Co. to help investigate strategic alternatives, possibly including a sale or merger. The company also said it may restate earnings for the first three quarters of 1998.
Financial services company Point West Capital Corp. (Nasdaq: PWCC) shed $7/8 to $16 1/2 after reporting a fourth quarter loss of $1.12 per share. The company said it is evaluating "strategic business opportunities" but did not elaborate.
Computer telephony products maker Notify Technology Corp. (Nasdaq: NTFY) returned $13/16 to $5 3/16 after adding $1 16/16 on Friday following news that Inktomi Corp. (Nasdaq: INKT) co-founder David Brewer will buy a sizable stake in the company.
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