Teck Cominco drops after stock shuffle; National City sale whispers; Huntsman scores another win

By Aaron Hochman-Zimmerman

New York, Oct. 14 - The deals that did not fall by the wayside in Monday's M&A massacre picked up and moved on during Tuesday's session, which saw an opening rally fade into the afternoon.

The Federal Reserve and Treasury Department's nationalization plans helped push National City Corp. forward, making it one of the day's outperformers along with many other regional players.

Far from a regional player, PNC Financial Services Group Inc. dropped as some expected it to be the one to buy National City, but other bets fell on Citigroup Inc. as the eventual suitor.

Out in the mines, Teck Cominco Ltd. sank as it announced another step on the way to acquiring Fording Canadian Coal Trust.

Its complex deal is structured to help the company see less of the taxman.

Also in industrials, Huntsman Corp. officials had more reason to celebrate as a Texas judge barred lawsuits by the financing banks that would claim the Huntsman-Hexion Specialty Chemicals, Inc. entity would be insolvent.

In pharmaceuticals, Abbott Laboratories investors were encouraged on Tuesday by the announcement of a $5 billion share buyback program.

In the rest of the market, the Dow Jones Industrial Average slipped by 76.62, or 0.82%, to finish the day at 9,310.99, while the Nasdaq Composite Index was battered for 65.24, or 3.54%, to finish at 1,779.01.

The S&P 500 fell back below 1,000.00 as it lost 5.34, or 0.53%, to close at 998.01.

Teck drops on circular deal

Teck Cominco shares burrowed lower on Tuesday, mimicking American coal stocks, said BMO Capital Markets analyst Tony Robson.

"Most" of Teck's earnings for the coming years will be from coal, he said, and the stock will continue to trade as though it is part of the coal sector.

On Monday night, the company announced an agreement that will shuffle around $2.4 billion in cash and equity between itself, Fording Canadian Coal Trust and the Ontario Teachers' Pension Plan Board.

In order to create "tax shields," Teck Cominco is "selling it and buying it back," Robson said.

The transfer did not come as a surprise and was initially announced along with the original merger agreement with Fording on July 29.

Monday's announcement likely had little impact on Tuesday's drop in prices. "The events are unrelated," Robson said.

Shares of Teck Cominco (NYSE: TCK) dug lower by $3.16, or 16.26%, to close at $16.28.

Shares of Fording Canadian Coal (NYSE: FDG) added on $2.00, or 2.63%, to end at $78.17.

The $83.30-per-share deal is expected to close before the end of October.

Big banks at gates of National City

After Banco Santander SA made Sovereign Bancorp, Inc. the latest bank to pull down its colors, the talk shifted to National City.

The Cleveland-based bank has long been the subject of merger rumors as many feel the Fed would be happy to bless the marriage of National City to one of the country's major lenders.

PNC Financial Services was the most-discussed candidate for National City, a trader said.

"The story is they're buying NCC shortly," he said, "but I think Citi will buy it."

Shares of PNC Financial Services (NYSE: PNC) dropped $5.31, or 7.77%, to $63.04.

Shares of Citigroup (NYSE: C) flew up $2.87, or 18.22%, to $18.62.

Shares of National City (NYSE: NCC) soared by $0.80, or 34.78%, to close at $3.10.

Abbott brings back $5 billion

Abbott announced that it will bring $5 billion of its wayward common shares back into the fold.

Prices were slightly uplifted by the move, which was aimed at taking advantage of the nearly 8-point drop over the past two weeks.

The $5 billion will be put to work "from time to time," according to a company press release, rather than in a lump sum.

The repurchase plan is also not time sensitive and may be discontinued at the discretion of the company, the release said.

Shares of Abbott Laboratories (NYSE: ABT) improved by $0.57, or 1.05%, to finish the session at $54.78.

Huntsman heralds 'major victory'

Credit Suisse and Deutsche Bank, the lenders retained to provide financing to the Huntsman-Hexion deal, were enjoined by judge Fred Edwards of the Montgomery County Texas District Court "from filing any lawsuit seeking to declare that the combined Hexion-Huntsman entity would be insolvent, or that the combined entity would not be able to pay its debts when due," according to a statement from Huntsman.

Still, judge Edwards only issued a temporary restraining order barring lawsuits by the financing banks.

Huntsman was heartened by the decision and felt that the decisions of the two courts - the Delaware Court of Chancery ordered Hexion to complete the merger - are beginning to set a favorable precedent.

"Two courts have now ruled in Huntsman's favor," president and chief executive officer Peter Huntsman said.

"We continue to press for consummation of the merger and, in light of today's ruling, we hope the banks will now move forward constructively to live up to their commitment to fund Hexion's acquisition of Huntsman," he said.

In a case that is still pending, Huntsman is seeking $3 billion in damages from Apollo Management LP's Leon Black and Joshua Harris.

The damages suit is scheduled to be heard beginning Feb. 9.

Shares of Huntsman (NYSE: HUN) tacked on $0.17, or 1.27%, to end the day at $13.51.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.