S&P DOWNGRADES SHARES OF CORN PRODUCTS INTERNATIONAL TO HOLD FROM BUY (CPO; 52.99):
CPO agrees to be acquired by Bunge in an all-stock deal for about $56 a share, subject to adjustment. In our view, the combined company would have significant synergy benefits from cost savings in procurement, logistics and overhead, and in revenues, as a more diversified product offering results in increased customer penetration. The transaction is expected to close in the fourth quarter 2008 pending customary closing conditions, including regulatory and shareholder approvals. Our downgrade is based on valuation, as the shares are trading close to the acquisition agreement price. -J. Agnese
S&P REITERATES HOLD RECOMMENDATION ON SHARES OF BUNGE LTD (BG; 116.50):
BG agrees to acquire Corn Products for about $4.8 billion, including debt, pending closing conditions and shareholder approval. We believe the acquisition would provide opportunities to reduce risk through broadening of commodity exposure and increasing geographic diversification. Long-term demand would benefit, in our view, as an improved product offering results in increased customer penetration. Due to a favorable near-term environment, with soybean and fertilizer demand strong, we are raising our 2008 EPS estimate by $2.10 to $9.50, in line with guidance. -J. Agnese
S&P MAINTAINS HOLD OPINION ON SHARES OF CITIGROUP (C; 19.30):
According to an unconfirmed story in The Wall Street Journal, Citi is looking to cut up to 10% of the 65,000 employees in its investment-banking division. Through March 2008, the company had already reduced its workforce by 9,500. We are in favor of the downsizing, as we believe the profit potential of Citi's investment-banking unit has been reduced due to market conditions. Separately, we remain concerned regarding what we see as Citi's riskier-than-peers balance sheet. We are maintaining our 12-month target price of 23, 1.1 times book value of $20.73, in line with peers. -S. Plesser
S&P REITERATES HOLD OPINION ON SHARES OF GOOGLE INC. (GOOG; 546.43):
Today's WSJ includes an unconfirmed story indicating that handsets anchored by GOOG's Android software will not be available until the fourth quarter, at the earliest. Although we did not see Android as a material near-term contributor to revenues, we believe such delays would enable competitors to better entrench themselves. While we see notable potential for Android, related issues underscore one of our chief criticisms of the company -- that it has been largely unable to follow up AdWords/AdSense with an offering product/service delivering comparable financial benefits. -S. Kessler
S&P MAINTAINS HOLD OPINION ON BCE SHARES (BCE; 34.10):
We expect BCE to open higher today following news that Canada's Supreme Court overturned an appeals ruling and will allow the private equity acquisition of BCE to proceed as planned. The stock sold off in recent weeks as bondholder claims put the deal in jeopardy. We still see risk to the buyer's ability to finance the cash-based transaction as currently structured and keep our 12-month target price of 40, a discount to the offer of 43. We look for the pending transaction to close in the second half of 2008. -T. Rosenbluth