For Immediate Release
Chicago, IL – November 15, 2010 – Zacks.com Analyst Blog features: LAN Airlines S.A. (LFL), The Boeing Co. (BA), TAM S.A. (TAM), PPL Corporation (PPL) and MeadWestvaco Corporation (MWW).
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Here are highlights from Friday's Analyst Blog:
LAN Traffic Rises Significantly
Chile-based LAN Airlines S.A. (LFL) released its passenger traffic data for October 2010. Total passenger traffic grew significantly by 16.0% year over year, with an 11.9% increase in domestic traffic and 17.7% in international traffic. International passenger traffic accounted for approximately 70% of the total passenger traffic.
Cargo traffic shot up 18.5% year over year based on higher imports into Latin America and increased operations to Europe with the Boeing 777-200 freighter fleet.
During the third quarter of fiscal 2010, LAN recorded a 14.2% increase in passenger traffic and 19.0% in cargo traffic. The primary reason for this increase was the new routes to United States, Europe, Mexico and the Caribbean together with improving economic conditions.
We expect a considerable increase in passenger traffic both domestically and internationally during the fourth quarter of 2010 based on market recovery. Moreover, LAN's continuous fleet expansion and renewal program are expected to fetch profitable returns in future.
Recently, LAN signed a memorandum of understanding for buying 50 modern Airbus A320 family aircraft to be delivered between 2012 and 2016. It has also signed an agreement with The Boeing Co. (BA) for five 787-8 Dreamliner aircraft in 2012 in addition to ten Boeing 787-8 Dreamliners announced in March 2010.
Moreover, we remain optimistic about the proposed merger of LAN and TAM S.A. (TAM), which is to be christened LATAM Airlines Group S.A. (LATAM). According to the agreement, LAN will become the parent company with a 73% stake in TAM and shareholders of TAM will receive 0.9 shares of LATAM for each share of TAM. It will be an all-stock transaction of approximately $2.7 billion.
The merger is expected to provide annual synergies of approximately $400 million, out of which approximately $133 million will be realized in the first year of the close of transaction and $267 million in the next two years. Passengers and cargo customers of both companies will benefit from the increase in the number of flights, destinations and connections.
Moreover, LAN is well positioned to benefit from the global economic recovery, particularly from the emerging economies in Latin America. The economic growth in the emerging markets will be higher than the developed markets.
However, €8.2 million (approximately US$11.5 million) fine for the infringement of antitrust regulations of the European Union will have downward pressure on the upcoming results. Hence, we reiterate our Neutral recommendation on ADR and the stock retains its short term Hold rating (Zacks #3 Rank).
PPL's E.ON Financing Complete
PPL Corporation (PPL) announced the completion of the final leg of financing for the recently acquired LG&E and KU Energy LLC, formerly E.ON U.S., the parent company of Louisville Gas and Electric Company (LG&E) and Kentucky Utilities Company (KU).
The three Kentucky companies agreed to sell $2.9 billion worth of debt, proceeds of which will be used to repay interim financing made by PPL to the Kentucky companies in connection with PPL's acquisition of them.
Of the planned $2.9 billion debt sale, Kentucky Utilities would sell $1.5 billion of first mortgage bonds consisting of $750 million of 30-year debt with a coupon of 5 1/8%, priced to yield 5.2% to investors; $500 million of 10-year debt with a coupon of 3 1/4%, priced to yield 3.3% to investors; and $250 million of 5-year debt with a coupon of 1 5/8%, priced to yield 1.7% to investors.
Louisville Gas and Electric's debt sale portion includes $535 million of first mortgage bonds consisting of $285 million of 30-year debt with a coupon of 5 1/8%, priced to yield 5.2% to investors; and $250 million of 5-year debt with a coupon of 1 5/8%, priced to yield 1.7% to investors.
LG&E and KU Energy LLC has agreed to sell $875 million of senior unsecured debt consisting of $475 million of 10-year senior unsecured debt with a coupon of 3 3/4%, priced to yield 3.8% to investors; and $400 million of 5-year debt with a coupon of 2 1/8%, priced to yield 2.2% to investors.
MeadWestvaco to Acquire Spray Plast
Paper and plastics maker MeadWestvaco Corporation (MWW) entered into an agreement to acquire Spray Plast SpA in a drive to expand its European footprint in the Home & Garden business. The acquisition is expected to close by the end of the fourth quarter of this year.
Based in Italy, Spray Plast is a producer of all-plastic trigger sprayers and dispenser pumps, which are widely used in the consumer and professional markets.
MeadWestvaco's Home & Garden business is faring well in the North American market. The company was eying to expand its Home & Garden presence in Europe as well as in other emerging markets. We believe this acquisition has provided an appropriate opportunity for the company in this space.
The all-plastic product portfolio of Spray Plast is widely popular in the household and industrial cleaning, automotive, agriculture and veterinary markets in Europe. MeadWestvaco will leverage the expertise of Spray Plast to cater to the increasing demand for high performing and environment-friendly products.
The Home and Garden business is part of MeadWestvaco's Consumer Solution segment. This segment experienced a year-over-year increase in volume during third-quarter 2010, driven by continued growth in home and garden and in personal care dispensing solutions. We expect the addition of Spray Plast to the portfolio will be accretive to revenues going forward.
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