February 8, 2010
Last week’s trading was overshadowed by several employment reports that proved troubling to Americans. After a positive start to the week, the remainder of the trading sessions showed immense volatility, which included a 3.1% drop in the S&P 500 on Thursday, marking its steepest decline since April 2009.
The DOW closed the week lower, falling 55.10 points, or 0.5%, to close at 10,012.23. The S&P also finished the week in the red, slipping 7.69 points, or 0.7%, ending at 1,066.18. The NASDAQ concluded the week down, declining by 6.23 points, or 0.3%, to close at 2,141.12.
Following a week that saw the markets fluctuate considerably, one of the higher percentage gainers for the week ending February 5 was Airgas Inc. (ARG), which managed to increase their market share by more than 44%.
Airgas is the largest U.S. distributor of industrial, medical, and specialty gases, and hard goods, such as welding equipment and supplies. Airgas is also the third-largest U.S. distributor of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, and a leading distributor of process chemicals, refrigerants, and ammonia products.
The one factor that solely contributed to the surge in stock price came last Friday, when the company was approached by Air Products & Chemicals Inc. (APD) and offered an unsolicited cash bid of nearly $5.1B. APD later informed Airgas representatives that the company was also prepared to make a hostile bid if necessary. Including debt that would be incurred by APD, the total offering would total around $7B for the deal.
This is not the first offer from APD for Airgas. In fact, Airgas has already refused two other offers since last October that had the highest bid at $62 per share for Airgas.
John McGlade, President and CEO at Air Products, commented on their offer, "While we are disappointed that Airgas has thus far prevented its shareholders from receiving a substantial premium and immediate liquidity, we have repeatedly communicated to the Airgas Board our willingness to improve our offer to reflect any incremental value they can demonstrate."
McGlade later added, "While it remains our strong desire to reach an agreement with Airgas on a friendly basis, we are fully committed to pursuing this transaction and are prepared to take all necessary steps to complete it, including making an offer directly to Airgas shareholders."
Airgas, in response to the proposal, stated that the company’s board of directors would review the offer with financial and legal advisors and strongly advised their shareholders to not take any immediate action at this time until the offer is fully analyzed.
Following the announced takeover bid, shares of ARG jumped 38% during the February 5 trading session. With that gain, the stock managed to add more than $18 per share and established a new 52-week trading at a high of $62.82 per share.
As the new week begins, shares of Airgas slipped, falling $0.41, or 0.7%, to end Monday’s trading at $60.55 per share. With a new yearly high set last Friday, the stock has also seen frustrating days, as shares of ARG have slipped to a yearly low of $26.29 per share, established last March.
Much like the aforementioned Airgas proposal, Comsys IT Partners Inc. (CITP) was also involved in its own acquisition proposal. Comsys, an IT staffing and solutions company which has enhanced its core competency of IT staffing services by creating client-centric, cost-effective information system solutions, entered into an agreement with Manpower Inc. (MAN) in a deal that would pay Comsys shareholders $17.65 per share.
With a total value of the deal, including all debt, at $431M, the announced deal would place Comsys’ services with Manpower’s business services and would create an entity with more than $2.5B in total yearly revenues. The merger would then create a team of professional consultants within Manpower that would exceed more than 25,000 workers. Manpower already has more than 4,000 offices worldwide, and the addition of Comsys would add an additional 400 offices to the mix.
Jeff Joerres, Chairman and CEO at Manpower remarked, “The acquisition of Comsys is consistent with our strategy and strengthens the continued expansion of our professional staffing services and outcome-based solutions. Both are areas where we have significantly grown organically over the past few years, driven by our strategy to provide clients with all the talent they need, particularly in the high demand skill verticals of IT, engineering, finance and accounting."
Joerres later added, “We grow our capabilities organically and acquire companies for the combination of financial gain, and strategic and cultural fit for our organization.”
Larry Enterline, Comsys’ CEO, responded to the news by saying, “This is a great opportunity for us to leverage our demonstrated expertise and strong market presence with Manpower’s global leadership in the employment services industry.”
By the end of the trading week, shares of CITP surged more than 38%, adding nearly $5 per share to its market value. However, with a new week beginning, the company’s stock reversed its upward trend to end the February 8 session down $0.02, or 0.1%, at $17.45 per share.
Over the course of a year, shares of Comsys have traded as low as $1.82 per share, while reaching a yearly high of $17.53, which was established the day the merger was announced.
Without a proposed buyout or merger during the week, shares of Lexmark International Inc. (LXK) jumped more than 25% by the end of the week, primarily on news of a solid 4Q earnings report. Lexmark works primarily as a purveyor of services that makes it easier for businesses and consumers to move information between the digital and paper worlds.
As the week concluded, the upswing in trading was attributed to a 4Q report that showed a profit of $59.8M, or $0.76 per share, compared to the previous year’s 4Q earnings of $18.1M, or $0.23 per share, an increase of more than 230%. The most recent results were greatly affected by the company’s restructuring costs that reduced overall earnings per share by $0.40. Excluding these costs, Lexmark would have posted a quarterly profit of $1.16 per share.
Meanwhile, overall revenues for the company slipped on year-over-year basis, falling from $1.08B a year ago to $1.07B, a drop of 1%. On average, analysts within the industry were looking for the printing and imaging product manufacturer to post a quarterly profit of $0.63 per share based on total sales of $987.51M.
Looking further inside the report, Lexmark witnessed a 7% decline in operating expenses, which fell from $314.2M last year to $292.2M. Additionally, the company also saw a decrease in R&D costs, which declined from $105M a year ago to $93.3M, a decrease in costs of more than 11%.
"Lexmark's fourth quarter results were significantly better than anticipated, reflecting strong sequential improvements in customer demand, which were enhanced by the strength of the new products we introduced over the past year," remarked Paul Curlander, Chairman and CEO at Lexmark.
As Lexmark enters the 1Q of fiscal 2010, the company expects to post a quarterly profit between $0.64 and $0.74 per share. Lexmark is also aware of more pending restructuring costs that will eat into the company’s 1Q profits by $0.16 per share. Excluding these charges, LXK is looking to post a profit between $0.80 and $0.90 per share. Analysts are looking for Lexmark to post a 1Q profit of $0.59 per share.
After gaining nearly $7 per share throughout last week’s trading, shares of Lexmark could not continue with its upward trend. By the sound of the closing bell on February 8, shares of LXK fell $0.17, or 0.5%, to end the session at $32.09 per share.
Throughout the past year, the company’s stock has traded within a relatively broad range. The stock has managed to trade as high as $32.74 per share, which was set last Friday, while dipping to an annual low of $14.23 per share.
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