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Stocks Lower on Acquisition News As Selling Erodes Early Gains

Posted on: Wednesday, 24 August 2005, 09:00 CDT

Wall Street opened the week with an uncertain advance today, boosted by news of several major acquisitions. The market gave back much of its early gains as investors cautiously eyed the price of oil.

The day's deals were led by a $4.2 billion offer from China National Petroleum Corp. for Canadian oil producer PetroKazakhstan Inc., as Chinese companies continue their buying spree of energy assets worldwide.

Investors were also pleased by a newspaper report that Ripplewood Holdings won't raise its bid for Maytag Corp., paving the way for rival Whirlpool Corp.'s planned $1.79 billion acquisition of the appliance maker. Additionally, OSI Pharmaceuticals, a drug maker focused on cancer treatments, said it is buying Eyetech Pharmaceuticals for nearly $1 billion.

Meanwhile, crude oil futures pushed slightly higher amid news that sabotage cut power to Iraq's only functioning oil-export terminals early today, halting shipments there. A barrel of light crude was quoted at $66.20, up 85 cents on the New York Mercantile Exchange.

At 1 p.m., the Dow Jones industrial average dropped 8.84, or 0.08 percent, to 10,550.39 after being up nearly 82 points in early trading. Broader stock indicators were lower after also giving up ground. The Standard & Poor's 500 index dipped 0.34, or 0.03 percent, to 1,219.37, and the Nasdaq composite index fell 2.82, or 0.13 percent, to 2,132.74.

China National's acquisition of PetroKazahkstan is the latest in a string of deals for China-based firms, and comes less than a month after another Chinese oil company withdrew a multibillion bid for a major U.S. energy producer amid concerns over national security. PetroKazakhstan shares jumped $8.52 to $53.92.

However, Maytag fell 10 cents to $18.61, while Whirlpool skidded $1.08 to $80.75 as investors eyed the end of the bidding war for Maytag. Earlier this month, Maytag dropped a $14 per share bid in favor of Whirlpool's sweetened $21 per share offer.

Late Sunday, OSI said it agreed to buy Eyetech for $20 per share, a 20 percent premium to Eyetech's Friday closing price. OSI said acquiring Eyetech, which makes treatments for eye diseases, should fatten earnings for the next four years beginning in 2006. Eyetech shares surged $4.12, or 29.5 percent, to $18.11, while OSI Pharmceuticals fell $8.59, or 21.1 percent, to $32.18.

Merck & Co. continued its decline following an unfavorable jury verdict late last week in the first lawsuit over its once-popular painkiller Vioxx. Lawyers for Merck, which plans to appeal the case, have said the jury award of more than $200 million will likely be reduced to about $26 million because of Texas laws that limit punitive damages. Merck's shares slumped almost 8 percent after the decision, and slid 62 cents to $27.44.

In earnings news, ketchup maker H.J. Heinz Co. said its profit slipped 19 percent in the fiscal first quarter, as higher costs offset sales growth led by increased North American volume. Heinz's shares rose 56 cents to $36.86.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume was 502.4 million shares, compared with 546.8 million shares traded at the same point Friday.

The Russell 2000 index of smaller companies rose 0.37, or 0.06 percent, to 652.88.

Overseas, Japan's Nikkei stock average surged 1.31 percent. Britain's FTSE 100 was up 0.11 percent, Germany's DAX index was up 0.24 percent, and France's CAC-40 was down 0.04 percent.

Source: Buffalo News

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