Mapfre Buys Commerce Group; Deutsche Bank Outperform Estimates; Semiconductor Manufacturing International Reports 3Q Loss and Forecasts a 4Q Loss; Splenda Maker Posts Sour Earnings; Petrobras Ordered by Court to Pipes Running
Mapfre SA, Spain's largest insurer, announced yesterday (Wednesday) that it is buying U.S. insurer Commerce Group, Inc. (CGI). The purchase of the Massachusetts-based insurer has a total price tag of $2.21 billion and represents Mapfre's largest acquisition so far. Commerce shareholders will receive $36.70 a share, a 22.5% premium over last month's average trading price. Mapfre has said that it will stay with Commerce's current management and keep its headquarters location. The deal will be financed by a capital increase of 500 million euros (or $718 million) and a bond issue of 800 million euros (or $1.15 billion). The move is the latest in the series of Spanish financial services firms purchasing U.S concerns to tap into the fast-growing Hispanic marketplace. Banco Santander, S.A. (STD), Banco Bilbao Vizcaya Aregenteria S.A. (BBV) and Banco Popular have all made acquisitions of U.S. firms recently, taking advantage of the favorable exchange rates against the U.S. dollar.
Deutsche Bank AG (DB) of Germany announced yesterday that it beat third-quarter profit estimates, a stark contrast to its Swiss neighbor UBS AG (UBS), which Tuesday reported large losses from exposure to the United States mortgage market. The bank earned 1.62 billion euros (or $2.3 billion) in the quarter - well above last year's earnings of 1.24 billion euros - and above the consensus estimate of 1.4 billion euros (or $2 billion). It did not escape the carnage in U.S. mortgage and credit trading, however, reporting $3.17 billion in write-downs from trading losses. The Associated Press reported yesterday that Deutsche Bank's gains in other operating divisions far outweighed the negative impact of the trading losses. The Wealth and Asset Management Group reported that, on a pretax basis, its profits rose 45%, while Private and Business Clients units posted 15% gains in net profits for the three-month period. The Mergers and Acquisitions Advisory Group had its best quarter ever with profits of 269 million euros (or $387.6 million). The bottom line received additional help from tax gains of 182 million euros (or $262 million), as well as 629 million euros (or $906 million) in capital gains. Deutsche Bank American Depository Receipts rose 3.85% to close at $133.67.
Semiconductor Manufacturing International (SMI), the largest chip factory by capacity in China, reported a third-quarter loss that it attributed to continued losses in the dynamic random access memory (DRAM) business. It reported a loss of $25.6 million on revenue of $319.4 million. They also expect to experience further losses in the fourth quarter. "We expect the DRAM business to report a loss of $20 million to $30 million in the fourth quarter which will offset the net profit in the logic business," Chief Executive Richard Chang said. He also said that he felt that DRAM prices, which represent 24% of the company's revenue, couldn't fall any further, as they already sell below cost.
Tate and Lyle PLC (TATYY), a London-based sugar refiner and artificial-sweetener maker, reported Wednesday that profits fell more than 45% in the first half of the year. The company reported after-tax profits of 84 million pounds (or $174 million) in this year's first half, a decline from the 145 million pounds (or $301 million) reported in the first half of 2006. Tate and Lyle said the chief culprits for the decline were tough trading conditions in the international sugar markets and the weak U.S. dollar. The company also cited higher corn prices and slowing growth in the market for its Splenda sweetener product. The company has warned of weakening business conditions for several months now and indicated that it does not expect much improvement in the second half of the year. Continued high corn prices in Europe and the fear that the slow growth of Splenda will be offset by the weak dollar, which cut Splenda profits by 10% in the first half and could cut them by 6% or more in the second. Splenda accounts for 20% of the company's overall revenue. In spite of the disappointing report, Tate and Lyle also announced that would raise the dividend by 5% and renew its share buyback program of up to 275 million pounds ($572 million).
A state court ordered Brazil's state-run oil company Petroleo Brasileiro S.A. (PBR) to resume natural gas supplies on Wednesday, a day after the company began reducing gas flows to distributors and industries. Specifically, Petrobras cut flows of gas to distributors in the Sao Paulo and Rio de Janeiro districts in order to meet rising demands from thermoelectric power plants, which run ion natural gas. Earlier this year, Petrobras guaranteed the Brazilian electric energy agency Aneel that they would make available sufficient volumes of gas for electricity generation. The guarantee also carried with it the threat of heavy fines should Petrobras not make the supplies available. Aneel had recently ordered many thermoelectric plants to be turned on to offset the impact of southeastern Brazil's drought on the nation's hydroelectric generation capabilities. Brazil's Energy Minister sided with Petrobras in the matter, saying that many of the distributors had sold more gas than Petrobras agreed to supply in their contract. Petrobras agreed, stating that for more than a year, distributors had been receiving far more gas than they were promised in the contract negotiations.