Stocks to Watch: Charles Schwab and U.S. Trust to Merge; Tommy Hilfiger Issues Earnings Warning

Charles Schwab (SCH) and U.S. Trust (UTC) said they have agreed to merge, in a stock deal valued at $2.7 billion. According to the terms, U.S. Trust shareholders would get 3.427 shares of Schwab per each U.S. Trust share. The two companies said the merger would qualify as a pooling of interest for accounting treatment. Schwab said the merged company would have 1999 revenues totaling $4.5 billion and income of $663 million. In premarket activity, Charles Schwab was down at 34 from Wednesday's closing price of 37 10/16.

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Tommy Hilfiger (TOM) warned investors that it expects to post third-quarter earnings of between 58 cents to 64 cents a share, greatly missing the 14-analyst estimate of 73 cents, but possibly exceeding the year-ago 61-cent profit. The company is blaming pricing pressure for the disappointing outlook.

Tommy is forecasting fourth-quarter earnings between 35 cents to 45 cents a share, also missing the 13-analyst estimate of 58 cents. In premarket activity, Tommy was down to 17 3/8 from Wednesday's closing price of 19 3/16.

Mergers, acquisitions and joint ventures

Applied Materials (AMAT) said that it would acquire Etec Systems (ETEC) in a stock swap worth $1.77 billion based on the companies' value at the close of trading Wednesday.

In an announcement after the markets closed, the Santa Clara, Calif.-based supplier of semiconductor parts and services said it would exchange 0.649 of a share for each Etec share. In pre-market activity, Etec was up at 75 from Wednesday's closing price of 49 7/8.

-- Michael Brick

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Cypress Group said it has agreed to pay $100 million for the majority of Hannaford's (HRD) Internet grocery division.

DoubleClick (DCLK) said it has taken a 30% interest in closely-held ValueClick, which charges advertising fees depending on the number of times a user opens an ad on a Web page. According to the deal's terms, ValueClick will get $75 million in DoubleClick stock and $10 million in cash. The two companies would combine technology, which would enable Web publishers to post ads that automatically target the viewer.

Ericsson (ERICY) said that it has entered a pact with Extended Systems (XTND) to improve the transmission of information between mobile phones and computers. Ericsson said Extended would lend its XTNDConnect PC mobile data synchronization and management software to certain Ericsson mobile phones.

NBC Internet (NBCI) said it has agreed to a deal with Asiacontent.com to roll out an Asian Internet service. NBC Internet, which would hold a 35% interest in the venture, said that the service would be started in Korea, Hong Kong and Singapore. NBC Internet said it has an option to boost its interest to 60% and plans to start Internet services in other Asian markets in the months ahead.

Wells Fargo (WFC) said after yesterday's close that it signed a definitive merger agreement with National Bancorp of Alaska (NBAK), Alaska's largest bank, for a stock deal worth about $907 million. Under the deal, National Bancorp of Alaska shareholders will receive $30 a share worth of Wells Fargo stock. The companies announced their intent to merge three weeks ago.

During a special meeting, Royal Bank of Scotland shareholders favored the bank's offer for NatWest Group (NW), 488 million votes to 5.9 million.

Earnings/revenue reports and previews

(Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.)

ATI Technologies (ATYT) posted first-quarter earnings of 25 cents a share, in line with the eight-analyst estimate and up from the year-ago 2 cent-profit.

Blackrock(BLK) posted fourth-quarter earnings of 27 cents a share, in line with the five-analyst estimate and up from the year-ago 24 cents.

Chicago Title (CTZ) said it would report fourth-quarter earnings of roughly $1.25 a share, beating the two-analyst estimate of $1.05 per share.

Omnova (OMN) posted third-quarter earnings of 19 cents a share, missing the two analyst-estimate of 21 cents and down from the year-ago 34 cents.

Rational Software (RATL) reported third-quarter earnings of 27 cents a share, beating the 10-analyst estimate of 24 cents and the year-ago 20 cents.

UAL's (UAL) United Airlines forecast its fiscal-2000 fully distributed earnings per share between $7 to $9. United said its cost-control program would not offset increased wages and rising fuel prices, which have become challenges for the company. United said it expects revenue improvement in three out of four global regions.

Separately, the company said it would launch an e-commerce division to increase Internet sales.

Offerings and stock actions

Gene Logic (GLGC) said it has filed with the Securities and Exchange Commission for a 3.5 million share offering.

Infinity Broadcasting (INF) said it added $500 million of class A common shares to its current stock buyback.

Analyst actions

ABN Amro upped its price target on Illinova(ILN) to 54 from 47.

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For analysis of the market's preopen tone and trends, see the Wake-Up Call, now published separately.

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