STMicro stock jumps up on buyout speculation
The Semiconductor Reporter
September 28, 2006
NEW YORK -- The price of STMicroelectronics stock jumped today on speculation that the Geneva-based company may be a target for a leveraged buyout similar to the recent deals for NXP Semiconductors (Philips Semiconductors) and Freescale Semiconductor.
Merrill Lynch & Co. analysts suggested in a report this week that STMicro could get such an offer, although they said they had no evidence that such a deal is planned, Bloomberg reported today.
Credit-default swap contracts, a type of derivative designed to offer bondholders insurance against possible default, rose in value yesterday for STMicro bonds because a buyout would likely increase STMicro's debt load, increasing the odds that it could fail to meet its debt obligations at some point in the next five years, according to the report. A rise in credit-default swap (CDS) prices indicates deterioration in the perception of credit quality.
"In the past few days the CDS has experienced some volatility, probably due to M&A activity in general and in the semiconductor sector in particular," an STMicro spokesperson told Bloomberg. Despite the volatility, CDS pricing levels are still at a historical low level for the company, the STMicro spokesperson said.
The two big buyout deals this year have clearly sensitized investors to the possibility of additional deals of this type in the semiconductor industry, such that now any plausible speculation affects markets, even absent real information about deal negotiations.
At mid-day, STMicro stock was trading at about $17.50, up almost 4% from yesterday's close. |
