Friday, June 17, 2011

Focus Stocks: BJ, COF, STLD

Shares of BJ's Wholesale Club Inc. (NSE: BJ) rallied more than 3% in Friday's pre-market trading after Leonard Green & Partners disclosed that it and CVC Capital Partners submitted a joint proposal to BJ's Wholesale, in compliance with the terms of their respective confidentiality agreements. The Joint Acquisition Proposal contemplates that a newly formed entity jointly controlled by Leonard Green and CVC would acquire all of the outstanding equity securities of BJ's through a merger. The Joint Acquisition Proposal contemplates that the aggregate equity investment required to fund the Potential Acquisition would be obtained equally from the LGP Funds and the CVC Funds.

Capital One Financial Corp. (NYSE: COF) late Thursday agreed to buy ING Groep NV’s U.S. online bank for $9 billion in cash and stock. Capital One will pay $6.2 billion in cash and $2.8 billion in stock, giving ING a 9.9 percent ownership stake.

Steel Dynamics, Inc. (NASDAQ: STLD) slumped more than 1% in Friday's pre-market trading after the company announced that its board of directors has declared a quarterly cash dividend of $0.10 per common share. The dividend is payable on or about July 14, 2011, to shareholders of record at the close of business on June 30, 2011. The company also expects second quarter earnings to be in the range of $0.35 to $0.40 per diluted share, somewhat lower than the first quarter 2011 reported results of $0.46, but higher than earnings of $0.22 per diluted share achieved in the second quarter of 2010. On a comparative basis, unrealized hedging gains at the company's metals recycling operations were $9.5 million in the first quarter 2011, as compared to an estimated second quarter unrealized hedging loss of approximately $3 million, resulting in a non-cash fluctuation in the company's quarter over quarter pretax earnings of $12.5 million, an estimated impact of approximately $0.03 per diluted share. During the quarter, the company has been experiencing reduced metal margins in its metals recycling operations, as the cost of acquiring unprocessed scrap material more than outpaced any price increases, resulting in an estimated 15% quarterly reduction in ferrous margins and an estimated 25% reduction in nonferrous margins (excluding the impact from unrealized hedging adjustments), driven by the copper and stainless steel markets. The impact of Mesabi Nugget on the company's results is estimated to be comparable to that experienced in the first quarter 2011, due to the previously discussed planned May maintenance outage. In addition, during the second quarter the company experienced periods of weaker than expected market dynamics for both its sheet and structural products. April incoming orders for flat-rolled steel were about 25% less than the monthly average achieved in the first quarter; however, orders since the beginning of May have returned to levels consistent with those achieved earlier in the year and currently the company expects this trend to continue. Unexpectedly, incoming orders for structural steel weakened in the quarter, as the residential and non-residential construction markets remain a challenge. Despite these volume and pricing issues, the company's steel operations' operating results are expected to be further improved from those experienced in the first quarter 2011.

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