Kimco Realty Inks $4Bln Merger Deal With Pan Pacific Retail - Update
Monday, July 10, 2006; Posted: 01:27 PM
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(RTTNews) - Monday, real estate giant, Kimco Realty Corp. (KIM | charts | news | PowerRating), which holds the nations largest portfolio of local shopping centers, signed a definitive merger agreement to acquire Pan Pacific Retail Properties Inc. (PNP | charts | news | PowerRating).
Under the terms of the deal, Kimco will acquire all the outstanding shares of Pan Pacific for a total merger consideration of $70.00 per share in cash. Kimco may elect to issue up to $10 per share of the total purchase price in the form of common stock.
The terms of the transaction also calls for Kimco to assume Pan Pacific's outstanding debt totaling around $1.1 billion. Including Pan Pacific's outstanding debt and $2.9 billion in equity, the transaction is valued at $4 billion.
The San Diego-based Kimco said that it has received financing commitments of up to $3.0 billion, which it may use to fund the acquisition.
Pan Pacific also headquartered in San Diego holds a portfolio of 138 properties, encompassing about 22.6 million square feet.
Kimco expects the merger to fit well with its strategy of owning the highest quality shopping center portfolio and generating solid investment returns for its partners and shareholders while conserving its own equity capital.
The merger has been unanimously approved by both companies' board of directors. The merger, which is subject to customary closing conditions, including approval by the Pan Pacific stockholders is expected to close during the fourth quarter of 2006.
Kimco, which was added to the Standard & Poor's Index on March 31, 2006, has seized every opportunity to expand into new geographical regions. The company acquired Atlantic Realty Trust (ATLRS | charts | news | PowerRating) in April, in a stock deal worth $81.8 million. In March, Kimco acquired interests in two shopping centers and agreed to purchase stakes in five additional shopping centers located in Puerto Rico for an aggregate value of $448 million.
The company's Puerto Rican acquisitions were effective in boosting its first quarter results. For the first quarter Kimco's Funds From Operations (FFO | charts | news | PowerRating) jumped 14.8% to $124.61 million from $108.54 million in the prior year quarter. On a per share basis, FFO rose 12.8% to $0.53 from $0.47 in the comparable period last year, topping analysts' estimate of $0.52 per share for the quarter.
Revenues from rental property rose to $142.71 million from $129.31 million in the year-ago period. Wall Street analysts had a consensus revenue estimate of $146.28 million.
Kimco, which has grown by acquisitions, joined Supervalu Inc., CVS Corp and others to buy Albertsons stores in January in a $17.4 billion cash and stock deal. The transaction was completed in June.
The company, while reporting its first-quarter results on April 25 reaffirmed its full year per share Funds From Operations outlook range of $2.12 - $2.16. Wall Street analysts expect the company to earn $2.17 per share for the year.
KIM is currently up 1.36% or $0.50 trading at $37.37 on a volume of 481,400 shares. PNP is down $0.52 trading at $69.48 on a volume of 693,700 shares.
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Oil Prices Hit Record Above $75 a Barrel
Oil prices climbed Friday and reached record territory above $75 a barrel for the second time this week on geopolitical tensions and rising gasoline demand.
The ongoing nuclear standoff between the West and Iran is keeping a high floor beneath prices because of fears that sanctions imposed against Iran could prompt OPEC's No. 2 producer to withhold some of its crude from the market. Other geopolitical factors include the war in Iraq, which has hindered output there, and instability in Nigeria, which has forced the shutdown of some 500,000 barrels-a-day of oil production.
The increasing motor-fuel consumption comes despite near-$3-a-gallon pump prices, and analysts say even the slightest interruption to the flow of crude or refined products could push prices above that psychologically significant benchmark.
Still, oil futures have risen in 10 out of the past 11 trading sessions, leading some analysts to anticipate a pullback - on profit-taking - before a continuation of the uptrend.
"The bigger trend is pretty well intact," said Michael Guido, Societe Generale's director of commodity strategy.
Light sweet crude for August delivery climbed as high as $75.78 a barrel in electronic trading on the New York Mercantile Exchange before easing back to $75.30, up 16 cents. The previous intraday record was $75.40 set Wednesday.
Nymex gasoline futures were steady at $2.2625 a gallon.
Oil futures are 24 percent higher than a year ago. The average retail price of gasoline is $2.94 a gallon, or 32 percent above year ago levels.
In its weekly inventory report, the Department of Energy said Thursday that U.S. gasoline consumption over the past four weeks averaged 9.5 million barrels a day, or 1.4 percent more than a year ago. U.S. refiners ran their plants at 93 percent of total capacity.
The global oil industry is pumping roughly 85 million barrels a day to meet rising demand but there is little room for error, analysts say, because the amount of spare production capacity that could be tapped in an emergency is razor thin. The same goes for the refining end of the business.
As a result, any real or feared disruptions to output can push prices sharply higher, making energy traders eager to make that bet.
"The financial players are attracted like a moth to a flame to the energy complex," said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York-based industry-financed think tank. "If you bet right, you get unreasonably rewarded."
In London, Brent crude hit a new high of $75.09 a barrel. In later trading, August Brent on the ICE Futures exchange was up 51 cents to $74.59.
In other Nymex trading, natural gas futures fell 6.9 cents to $5.595 per 1,000 cubic feet. Natural gas futures settled Thursday at their lowest level since Sept. 27, 2004.
The United States is awash in natural gas and some analysts believe there may not be enough underground storage capacity, potentially forcing some producers to shut wells. Others predict the falling price will spark demand and cause the supply overhang to be whittled away by fall.
Copyright 2006 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
Big Award on Tobacco Is Rejected by Court
By MELANIE WARNER
Published: July 7, 2006
Tobacco companies in the United States won a major legal victory yesterday when the Florida Supreme Court upheld a decision to toss out a $145 billion judgment against them.
Related
Text of the Opinion (pdf)
The ruling, in what is one of the last remaining personal injury class-action cases against tobacco companies, is a crushing blow to plaintiffs' lawyers, who have pushed for large class-action cases with the potential for multibillion-dollar verdicts. The six-judge Florida court stated that smokers' cases "are highly individualized" and "do not lend themselves to class-action treatment."
Investors applauded the decision, which sharply reduces the possibility of large, bank-breaking awards in tobacco cases. Shares of the two largest companies named in the suit, Altria Group, the parent of Phillip Morris, and Reynolds American, which owns R. J. Reynolds, were up sharply. Altria closed up $4.43, or 6 percent, at $77.76, and Reynolds American closed up $4.59, or 4 percent, at $118.95.
The ruling is perhaps most important for Altria, which is preparing to spin off its Kraft Foods unit. The company has said that the long-running lawsuit, originally led by a Miami Beach pediatrician, Howard A. Engle, who has emphysema, was one of the major litigation hurdles the company needed to clear before it could restructure.
Dawn Schneider, an Altria spokeswoman, said the company would not comment on when a breakup would take place.
Altria consists of Philip Morris USA, Philip Morris International and Kraft Foods, which is 86 percent owned by Altria.
Yesterday's ruling follows another industry-friendly outcome in a large case in Illinois. In December, the Supreme Court of Illinois threw out a $10 billion judgment against Philip Morris USA in a class-action consumer fraud suit that had accused the company of deceiving smokers by marketing its "light" cigarettes as having lower levels of tar and nicotine.
Despite these two victories, analysts say Altria will probably hold off announcing details of a restructuring until after there is a ruling on a civil racketeering case filed by the Department of Justice against Philip Morris and several other large cigarette makers. The government, which originally filed its case in 1999 during the Clinton administration, seeks damages of $14 billion over 10 years as well as fines if youth smoking rates do not decline and government monitoring of company research and development.
A nine-month trial concluded a little more than a year ago and tobacco companies say they are expecting a ruling from Judge Gladys Kessler of Federal District Court in the District of Columbia within the next few months.
Among investors, hopes are high for another tobacco-friendly outcome in the Department of Justice case. Tobacco companies have already won several victories in the case, including a ruling in February 2005 that the government cannot seek financial penalties from tobacco companies for previous wrongdoing, only for future infractions. In response, the Justice Department cut its financial demands from $280 billion to the current $14 billion.
"The D.O.J. case has already been emasculated," said David Adelman, an analyst at Morgan Stanley. "It can't be ignored, but it isn't something that's going to prevent an Altria breakup."
In a research note, a Citigroup analyst, David Driscoll, said a Kraft spin-off could take place two months after the Justice Department case was resolved.
Altria is eager to restructure because it believes it would have greater value as two or three separate units. While sales and earnings at Philip Morris USA and Philip Morris International have been on an upswing, Kraft's business has stagnated in recent years and may be dragging down the value of the tobacco business. Altria's price-to- earnings ratio trails that of Reynolds American, though Philip Morris is the global and domestic market leader in cigarette sales.
Some analysts say an Altria breakup could be good for Kraft, the country's largest maker of packaged food. Mr. Adelman of Morgan Stanley said an independent Kraft could use its stock to make large acquisitions and to help retain and attract talented managers.
In June, the directors of Kraft Foods ousted the chief executive, Roger K. Deromedi, and the company has recently experienced a number of high-level departures.
But it is unclear if a Kraft spinoff would bolster the food company's sluggish stock price. Mr. Driscoll of Citigroup said a Kraft spinoff could drive down Kraft's stock, because Altria shareholders who receive Kraft shares in the deal may sell some of them.
Though it is now much less probable there will be a class-action verdict that could bankrupt a tobacco company, yesterday's decision in the Engle case could open the door to a lot of small cases being filed in Florida by individual smokers.
While the Florida court struck down the $145 billion award, it has upheld two individual damage awards to Florida cancer patients: $2.9 million to Mary Farnan and $4 million to the estate of Angie Della Vecchia, who died in 1999.
The court also supported a part of the jury's original verdict in the Engle case that found that smoking causes a variety of diseases and that tobacco companies concealed information and acted negligently. The ruling means any new case filed in Florida can start with those claims already proved.
"This is going to open up a whole new chapter of cases in Florida where you could see a large number of smaller verdicts," said Matthew L. Myers, president of Campaign for Tobacco-Free Kids, an antitobacco group. Both Altria and R. J. Reynolds say they will probably appeal those portions of the court's ruling.
Charles Blixt, general counsel for R. J. Reynolds, said that even if many of these individual cases do come forward, they do not represent a significant financial threat to tobacco companies. "There's always been the potential for large numbers of individual lawsuits being filed," he said. "I think it's proven that we can defend successfully against those kinds of cases."
Jeremy W. Peters contributed reporting for this article.
GM Under Foreign Control Not Farfetched
By SARAH KARUSH Associated Press Writer
© 2006 The Associated Press
DETROIT — It's been said that what's good for General Motors is good for the country. But with a proposal now on the table to link the world's largest automaker with Japan's Nissan and France's Renault, the question arises: which country?
Billionaire Kirk Kerkorian, who owns 9.9 percent of GM's shares, is proposing that Renault SA and Nissan Motor Co. each buy stakes in General Motors Corp. and add the American industrial icon to their existing alliance. On Friday, GM's board of directors voted to pursue "exploratory discussions" with Renault and Nissan.
The idea of foreign companies exerting control over GM doesn't sit well with some U.S. politicians, union leaders and admirers of the company. Their discomfort is compounded by the fact that the French state holds 15 percent of Renault.
"I'm in favor of Michigan winning. I'm in favor of jobs coming here and the concern is, that if it's controlled by businesses on another continent or other continents, that we may end up on the losing end," Gov. Jennifer Granholm told reporters Wednesday in Lansing. "I don't know that to be the fact. Maybe it will make us stronger. But that's certainly my concern."
GM was founded in 1908 by Flint businessman William Durant, who built the company through a series of acquisitions, beginning with the Buick Motor Co. and Olds Motor Works. Later, legendary chairman Alfred P. Sloan pioneered many fundamental ideas of modern corporate management and marketing.
During World War II, GM converted all of its production to the war effort, turning out planes, trucks, tanks, guns, shells and other military equipment.
In 1953, President Eisenhower named GM head Charles E. Wilson secretary of defense. At his Senate confirmation hearing, Wilson was asked about whether his loyalty to the automaker could create a possible conflict of interest. "I cannot conceive of one because for years I thought that what was good for our country was good for General Motors, and vice versa," he answered. A simplified version of the quote became ingrained in the nation's collective memory.
Early on, GM had a global presence, establishing an export division in 1911 and a plant in Argentina in 1925.
David L. Lewis, a former GM speechwriter and a professor of business history at the University of Michigan, recalled the pride he felt working for the company from 1959 to 1965.
"General Motors was at one time not only No. 1, but in such a big way. It was Gulliver among the Lilliputians," Lewis said. "People used to say all the time that something else would be 'the General Motors of.' It was a yardstick."
Lewis said he was saddened by the prospect of a tie-up, though he acknowledged it might not be bad for the company and its shareholders.
United Auto Workers President Ron Gettelfinger said the idea would be bad news for workers. "We're seeing a further erosion of good jobs in the country should this come about," he told WJR-AM on Friday.
But Jim Graham, president of UAW Local 1112 in Lordstown, Ohio, said he was trying to take a pragmatic view.
"In the global market that we've been thrust into I guess the more alliances you have the better off you are," he said.
But on the emotional level, Graham, who represents workers at a plant that makes the Chevrolet Cobalt, said the idea was hard to accept after years of urging people to buy American.
Beyond symbolism, it probably doesn't make much difference what country GM's owners are from, said Charles Ballard, an economics professor at Michigan State University.
If sacrificing an all-American identity could help restore GM's financial health, "which would you rather have? Which is better for GM workers and GM stockholders?" Ballard said.
Asked to respond to concerns about foreign ownership, U.S. Senator Carl Levin said Thursday: "We own a British car company, don't we? Doesn't Ford own Jaguar? Who owns Chrysler?"
But Levin told reporters in Southfield that he lacked information to comment directly on the proposal.
Chrysler Corp.'s 1998 marriage with Daimler-Benz AG was billed as a merger of equals, but critics say the German company simply swallowed the American one.
If something similar were to happen to GM, Ford Motor Co. could claim the title of only remaining U.S. automaker.
Currently both companies trumpet their American identity in advertising, for example, with the Chevrolet slogan "An American Revolution."
Ballard said GM would want to do some careful market research on consumer reaction to an alliance before charging ahead. But he added: "At some level, everybody knows that all these companies are international."
___
Associated Press writers Kathy Barks Hoffman in Lansing, Mich., and David Runk in Southfield, Mich., contributed to this report.
