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Monday's stock market news from United Parcel Service Inc. (NYSE: UPS), U.S. Steel Corp. (NYSE: X), and Glencore International Plc helped drive gains in U.S. markets. The Dow moved up a slim 0.05% to close at 13,239.13; the S&P 500 climbed 0.4% to close at 1,409.75; and the Nasdaq rose 0.75% to 3,078.32.
United Parcel Service Inc. (NYSE: UPS) biggest deal in company history: UPS announced Monday a $6.77 billion deal to buy Netherlands-based delivery service TNT Express NV to bolster global sales growth.
TNT is Europe's second-biggest express mail company. Its acquisition will double the UPS presence in Europe and give it about the same market share as the region's industry leader DHL. The deal also will boost UPS's international sales to 36% of its total from 26% currently – a significant leap towards the company's goal of 50%.
UPS Chief Financial Officer Kurt Kuehn said at a press conference that TNT will give UPS access to "underserved" areas, like "Brazil. Australia. The Middle East. The road and train network in Europe."
International packages generate the most revenue for UPS, at $19.30 each in 2011, compared with $9.30 per domestic package.
Europe's dysfunctional economy has deterred companies from investing in the region, but has also created deals for giant global businesses like UPS.
"To buy something at the bottom of the market like this at an attractive price like this is great," Art Hatfield, an analyst with Morgan Keegan & Co, told Bloomberg News. "The market always wants to focus on the next quarter, but corporations think in terms of what this means for the next 30 to 40 years, and this is a tremendous deal for UPS."
It's the biggest purchase for UPS in its 105-year history.
UPS shares rose 3.44% to close at $81.11.
U.S. Steel Corp. (NYSE: X) leads industry gains: U.S. Steel rose 6.35% Monday to $31.64 after analyst upgrades drove the sector higher. U.S. Steel is now up more than 20% in the past five days.
UBS analyst Shneur Gershuni raised his U.S. Steel price target to $47 from $38, and reiterated his "Buy" rating on the stock.
Gershuni also raised his rating for Steel Dynamics Inc. (Nasdaq: STLD) to "Buy" from "Neutral" and gave it a $18 price target. STLD closed up 3.06% at $15.49.
The steel industry got bullish news last week from a Reuters article that said big steelmakers planned to switch their manufacturing process to include more natural gas. Natgas prices have reached 10-year lows, making the energy source a steel-industry game changer.
"There is a new focus on natgas," Larry Kavanagh, president of the American Iron and Steel Institute's Steel Market Development Institute, told Reuters. "Until the recent discovery, we believed coal-based technologies would dominate the future. Now the game has changed in the near term."
U.S. Steel Chief Executive John Surma said in an interview that using natural gas in parts of steel production can cut the use of more expensive coking coal by about 10%. Surma said that overall savings, when factoring in costs like labor, energy and transportation, would be $6 to $7 per ton of steel. U.S. Steel produces 23 million tons per year.
Glencore goes for another deal: Glencore International Plc, the world's largest commodities supplier, again is making moves to expand.
The company caused a mining sector frenzy last month with news it would take over Xstrata PLC and create a $90 billion global commodities powerhouse.
Now Glencore is working with two Canadian agricultural companies, Agrium Inc. (NYSE: AGU) and Richardson International Ltd., to bid for agribusiness company Viterra Inc. Rumors put the bid around $16.20 ($16 Canadian), valuing Viterra at $6.94 billion.
Viterra makes up 45% of Canada's grain handling market. It would give Glencore a broader global reach in the ag sector, and a buy is in line with Glencore's strategy of growth through acquisition.
Early reports stated Glencore and friends would divide Viterra into three parts: its retail business, its food-processing unit and its grain assets.
Viterra's shares have soared a staggering 57% in the past month, pushed higher by takeover speculation.
News and Related Story Links:
- Money Morning:
Three Glencore Xstrata Takeover Targets: TCK, AAL, FCX
- Associated Press:
UPS to Buy TNT Express for $6.8 Billion
- Bloomberg News:
UPS to Purchase TNT Express for $6.8 Billion
- Bloomberg News:
Glencore Said to Near Viterra Deal With Agrium, Richardson