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Market Update

Heinz in $23 Billion Deal, AMR and U.S. Air in $11 Billion Merger Agreement


Author: Nichole Harper
ticker.com
Last Update: 11:51 AM ET February 14 2013

11:50 AM New York – Deal making dominated market news in morning trading. Heinz agreed to a deal worth $23 billion, AMR and U.S. Air agreed on an all-stock $11 billion merger and Cardinal Health offered to buy AssuraMed for $2.07 billion.

Stocks in morning declined but pared losses after Heinz agreed to be acquired in a $28 billion deal and American Airlines parent and U.S. Air agreed on a merger.

U.S. weekly jobless claims declined 27,000 to 341,000 in the week ending on February 9, according to the Labor Department data released today. The weekly decline in initial claims was the largest in a month.

Deal making dominated the morning news.

AMR Corp and U.S. Airways Group agreed in an all-stock deal to merge operations valued at $11 billion.

After the deal, the management of U.S. Air led by Chief Executive Doug Parker will operate the combined carrier. Creditors of AMR will control 72% of the combined carrier and 28% will be controlled by U.S. airways shareholders.

AMR creditors will assume 5 seats on the 12-member board.

H.J. Heinz agreed to a deal that valued the company at more than $23 billion and including the debt deal was worth $28 billion. Berkshire Hathaway and Brazil based 3G Capital offered cash and will control equal amount of equity in the partnership.

Market indexes were on the decline after economies of the euro zone and Japan shrank.

In the three months to December, economy in the euro zone shrank 0.6% from the previous three months, according to the latest data released by the statistics office of the European Union. The GDP declined 0.5% in 2012 from the previous year.

Economy in Germany shrank 0.6% and in Italy declined 0.9% but France suffered lower shrink of 0.3%.

Japan’s gross domestic product contracted at annual 0.4% rate in the quarter to December following a revised 3.8% decline in the previous three months, according to the latest data released by the Cabinet Office.

Stocks in Review

Cisco Systems, Inc. (CSCO) dropped 2.4% or 51 cents to $20.63 after the networking products maker reported net sale in the second quarter ending on January 26 climbed 8% to $12.10 billion. Net income in the quarter surged 44% to $3.14 billion or 59 cents per diluted share compared to $2.18 billion or 40 cents a share a year ago.

Constellation Brands Inc (STZ) soared 33% to $42.90 after the company was in a deal to acquire the U.S. distribution rights for Corona and other Modelo brands for $2.9 billion. Anheuser Busch InBev offered the deal to the company to salvage its purchase of Mexico based Grupo Modelo.

General Motors Company (GM) climbed 2% or 59 cents to $29.26 after the automobile company reported revenues in the fourth quarter ending in December grew 3% to $39.31 billion. Net income in the quarter surged 89% to $892 million or 54 cents per diluted share compared to $472 million or 28 cents a share a year ago.

H. J. Heinz & Co (HNZ) soared 20% to $72.45 after the company agreed to acquire in a deal valued at $28 billion. 3G Capital and Berkshire Hathaway in equal partnership offered to take the company private and Berkshire will offer between $12 billion and $13 billion in cash in exchange of common and preferred stocks.

In 2008, Berkshire controlled by Warren Buffett offered to fund $23 billion deal to purchase Wrigley by Mars Inc.

PepsiCo, Inc. (PEP) gained 1.6% or $1.19 to $72.69 after the food and beverage company said revenues in the fourth quarter ending in December fell 1% to $19.95 billion. Net income in the quarter soared 17% to $1.66 billion or $1.06 per diluted share compared to $1.42 billion or 89 cents a share a year ago period.

For 2013, the company expects 7% core constant currency earnings per share growth from fiscal 2012 and core earnings per share of $4.10.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc