Wednesday's Company Report: UAL, U, COST, WCOM, NWAC, BRCM, More

United Airlines parent UAL agrees to buy US Airways, the world's sixth largest airline, for $4.3 billion.
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United Airlines' parent

UAL

(UAL) - Get Report

agreed to buy

US Airways

(U) - Get Report

, the world's sixth-largest airline, for $4.3 billion, in a deal that will create a huge carrier with 6,500 daily flights. Under terms of the deal, UAL will pay $60 in cash for each US Airways share, a price that represents a 137% premium to US Airways' closing price of 26 5/16 yesterday. The transaction calls for the assumption of $1.5 billion in US Airways' debt. UAL will also assume $5.8 billion worth of US Airways' aircraft lease obligations.

Today, the pilots' union at United Airlines said it has strong concerns about the agreement, especially because United and the union are in contract talks. A key issue for the pilots would be merging seniority lists for the two airlines, according to the union.

Though the deal is likely to face significant regulatory hurdles, the two airlines will likely emphasize the lack of overlap across their routes. Additionally, United plans to spin off a large part of US Airways' operations at

Reagan National Airport

in Washington, D.C.

Donaldson, Lufkin & Jenrette

cut UAL to underperform from buy, citing hurdles to the deal.

In response to the merger,

Merrill Lynch

airline analyst Candace Browning downgraded American Airlines parent

AMR

(AMR)

to accumulate saying the merger "would significantly shift market share; AMR and United today each have an 18% market share, but if the deal is successful, United's market share will jump to 26%, by far the highest of any carrier." DLJ also cut AMR, to market perform from buy.

Meanwhile, Browning upgraded

Northwest Airlines

(NWAC)

to long-term buy from accumulate saying the transaction is likely to set off a wave of consolidation in the industry. Merrill reiterated a positive stance on the airline sector, calling it undervalued. UAL slipped 7 3/16, or 11.9%, to 53 3/16, while US Airways soared 22 7/16, or 85.2%, to 48 3/4. AMR skidded 2 9/16, or 7.8%, to 30 1/16 and Northwest jumped 4 13/16, or 19.9%, to 28 15/16.

For more on this

story, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

Mergers, acquisitions and joint ventures

Communications semiconductor company

Broadcom

(BRCM)

said it will acquire privately held

Pivotal Technologies

for about $242 million in stock in a deal that gives it necessary technology for the rapidly growing digital TV and flat-panel screen markets. Broadcom said it would issue about 1.94 million shares of its class B stock for Pivotal, which designs semiconductors that serve as communications links for wired and wireless applications. Broadcom lifted 4 to 129.

Four railroad companies have invested in a private Internet company called

Arzoon

in an effort to provide a one-stop Web site for businesses to merge their freight traffic. The companies include

Canadian Pacific

(CP) - Get Report

,

CSX

(CSX) - Get Report

,

Norfolk Southern

(NSC) - Get Report

and

Union Pacific

(UNP) - Get Report

. Canadian Pacific tacked on 13/16 to 24 15/16 and CSX edged up 1/8 to 22 7/16, while Norfolk Southern added 1/16 to 18 7/16. Union Pacific declined 1/8 to 45 1/16.

Chase Manhattan

(CMB)

shed 1 3/8 to 71 3/4 after it agreed to buy closely held investment-banking boutique

Beacon Group

in its effort to build a global investment bank. Though terms were not disclosed, the purchase price is believed to be between $450 and $500 million, according to

The Wall Street Journal

.

Ford

(F) - Get Report

has finalized its agreement to pay $2.7 billion for German auto maker

BMW's Land Rover

unit. BMW said the first two-thirds of the purchase price will be paid immediately and the final third of the payment for the luxury sport utility vehicle company will be made by 2005. The deal was announced in March as part of BMW's plan to shed its Britain-based Rover passenger car division and its Land Rover unit. Ford's CEO said Land Rover will report a net loss for the next two years, but will generate good profitability in three years. Ford gained 9/16 to 51 15/16.

Internet Capital Group

(ICGE)

and

IBM

(IBM) - Get Report

said they are forming a new Chicago-based company to create an online marketplace for buyers and sellers of intellectual property. Internet Capital Group slid 3/16 to 26 7/8 and IBM lifted 1 7/8 to 109 1/4.

Vastar Resources'

(VRI)

board of directors approved an $83-a-share cash merger with

BP Amoco

(BPA)

to acquire the 18.1% of Vastar's common stock that is publicly held. Vastar jumped 1 3/8 to 81 1/8.

WorldCom

(WCOM)

and

America Online

(AOL)

agreed to a multiyear alliance, in which WorldCom will market AOL to its residential local- and long-distance telecommunications customers, offering users up to one hour of free calls a month if they join AOL. Worldcom said it will offer residential Internet service provider customers an opportunity to convert to the AOL service. WorldCom bounced 2, or 5.5%, to 38 1/4 and AOL climbed 2 to 51 1/2.

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Earnings/revenue reports and previews

Costco's

(COST) - Get Report

stock was taking a beating this morning and after a trading halt shortly after 9 a.m. EDT was sinking over 30%. The company alerted institutional clients about possible earnings shortfalls but neglected to release the information to the general public. Costco said it sees fourth-quarter earnings 1 cent to 2 cents a share below the current 20-analyst estimate of 45 cents and sees 2001 earnings growth in a range of 11% to 13%.

Morgan Stanley Dean Witter

cut its rating on Costco to neutral from strong buy, while

Lazard Freres

downgraded it to hold from outperform. Costco also posted third-quarter earnings of 26 cents a diluted share, a penny shy of the 22-analyst estimate , but up from the year-ago 23 cents Costco fell 8 3/4, or 21.5%, to 31 7/8.

Intuit

(INTU) - Get Report

, which supplies Web software products to small businesses, posted third-quarter earnings of 36 cents a share, topping the 15-analyst estimate of 33 cents a share and up from the year-ago 25-cent profit.

Credit Suisse First Boston

said it recommended buying Intuit in volume at its current levels and said Intuit shares should retrace the ground lost in recent weeks. Intuit moved up 8, or 29.5%, to 35 1/16.

For more on Intuit's

earnings, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

Neiman Marcus

(NMG)

shed 3/4 to 24 3/8 after it reported third-quarter earnings of 94 cents a share, beating the five-analyst estimate of 85 cents and up from the year-ago earnings of 73 cents a share.

Novell

(NOVL)

lost 1 11/16, or 17.3%, to 8 1/16 after it posted second-quarter earnings of 9 cents a share, which included a royalty that added 7 cents. The six-analyst estimate was a penny profit. The year-ago report was an 11-cent profit.

For more on Novell's

earnings, see coverage from

TheStreet.com/NYTimes.com's

joint newsroom.

Polo Ralph Lauren

(RL) - Get Report

skidded 1 3/16, or 7.5%, to 14 9/16 after it reported fourth-quarter earnings of 32 cents a share, in line with the 14-analyst estimate and up from the year-ago earnings of 27 cents a share. The earnings figure reported is before a restructuring cost.

Stewart & Stevenson Services

(SSSS) - Get Report

popped 1 1/8, or 9%, to 13 1/2 after it reported first-quarter earnings of 27 cents a share, beating the one-analyst estimate by a nickel and up from the year-ago earnings of 8 cents a share.

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Analyst actions

UBS Warburg

said it suspended its strong buy rating and price target on

Young & Rubicam

(YNR)

. Young & Rubicam added 1/16 to 44 3/4.

Upgrades

Bank of New York

(BK) - Get Report

: price target UP to 56 from 46 at UBS Warburg. Bank of New York climbed 7/8 to 48.

Genesco

(GCO) - Get Report

: UP to market outperformer from market performer at

Goldman Sachs

. Genesco advanced 5/16 to 16 1/8.

KLM Royal Dutch Airlines

(KLM)

: UP to buy at

Credit Suisse First Boston

. KLM Royal Dutch Airlines hopped 3, or 14.6%, to 23 1/2.

Nextel

(NXTL)

: UP to hold from underperform at

ABN Amro

, price target: 80. Nextel added 5 15/16, or 7.8%, to 82.

Tidewater

(TDW) - Get Report

: UP to outperform at Salomon Smith Barney; price target: 44 ; 2002 EPS estimate up to $2.30 from $2.10. Tidewater edged up 1/4 to 36 3/4.

Downgrades

Black & Decker

(BDK)

: DOWN to neutral from outperform at Salomon Smith Barney. Black & Decker slipped 2 7/8, or 7.2%, to 37.

Gerald Stevens

(GIFT)

: DOWN to neutral/neutral from accumulate/buy. Gerald Stevens slid 1/4, or 11.7%, to 1 7/8.

Lexmark

(LXK)

: DOWN to attractive from buy on slowing demand outlook for laser printers in the corporate market. Lexmark lost 7 1/4, or 9.9%, to 65 1/2.

Mead

(MEA)

: DOWN to market perform from buy at

Deutsche Banc Alex. Brown

. Mead slipped 7/8 to 31 3/16.

Pacific Gateway Exchange

(PGEX)

: DOWN to neutral from outperform at

Morgan Stanley Dean Witter

; 2000 earnings estimate DOWN to a loss of $1.79 a share from a profit of 19 cents at Goldman Sachs. Pacific Gateway Exchange stumbled 5/8, or 15.1%, to 3 1/2.

Initiations

Archer Daniels Midland

(ADM) - Get Report

: NEW buy at Salomon Smith Barney. Archer Daniels tacked on 7/8, or 8%, to 11 3/4.

Illinois Tool Works

(ITW) - Get Report

: NEW buy at CSFB; price target: 85. Illinois Tool Works added 2 9/16 to 64.

MAF Bancorp

(MAFB)

: NEW neutral at

Lehman Brothers

.MAF Bancorp added 3/8 to 18 3/8.

Group Moves

Robertson Stephens

lowered estimates on the electronic brokerage industry due to declining trading volumes in the June quarter:

  • Knight/Trimark (NITE) : Second-quarter revenue projection DOWN to $279.3 million from $381.8 million. Earnings per share DOWN to 50 cents from 68 cents. Knight/Trimark bounced 1 9/16, or 6%, to 27 5/8.
  • E*Trade (EGRP) : Third-quarter revenue projection DOWN to $335.8 million from $366.2 million. Earnings per share DOWN to 0 cents from 1 cent. E*Trade fell 1 13/16, or 11.5%, to 13 15/16.
  • Ameritrade (AMTD) - Get Report: Third-quarter revenue estimate DOWN to $147.5 million from $171.5 million. Earnings per share DOWN to a loss of 1 cent from a gain of 4 cents. Ameritrade declined 9/16 to 11 3/16.

Offerings and stock actions

Generic drug company

Andrx

(ADRX)

stumbled 2 3/8 to 47 5/8 after it said its 6.35 million share offering was priced at $48 a share.

Shareholders of

AT&T

(T) - Get Report

voted to increase the number of authorized shares of

Liberty Media Group

(LMGA)

, its cable television arm, allowing it to proceed with Liberty's previously announced stock split. AT&T tacked on 3/16 to 34 13/16, while Liberty Media slipped 11/16 to 39.

Rambus

(RMBS) - Get Report

shareholders favored raising the number of outstanding shares in order to set a previously announced 4-for-1 stock split. The holders voted to boost the company's outstanding stock to 500 million shares from the current 23.9 million shares. Rambus soared 17 3/4, or 11.7%, to 168 3/8.

Seacor Smit

(CKH) - Get Report

slid 13/16 to 63 11/16 after it declared a 3-for-2 stock split.

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Miscellany

Catalytica

(CTAL)

fell 3/8 to 8 1/2 after it said Gabriel Cipau has decided to retire as president and CEO on June 2. Michael Thomas will succeed Cipau begin beginning June 1. Thomas recently served as group president and CEO of

R.P. Scherer's

Americas and Global Division.

Utility holding company

GPU

(GPU)

said it declined all the bids that were submitted for the sale of its two Australian subsidiary companies GPU PowerNet and GPU GasNet. GPU rejected the bids, calling them below expectations. GPU skidded 13/16 to 27 13/16.

Hyseq

(HYSQ)

named George Rathmann president and chief executive of the company. Rathmann was co-founder and chairman of

Amgen

(AMGN) - Get Report

and more recently chief executive and president of

ICOS

(ICOS)

. Hyseq moved up 5/16 to 24 3/16.

Intel

(INTC) - Get Report

gained 7 1/2, or 6.8%, to 117 3/8 after it said it will spend $2 billion to add microprocessor capacity in New Mexico. Intel said the extra chip capacity will be online by the end of 2002.

KPN Telecom

(KPN)

lifted 1 5/8 to 77 3/4 after it announced it will sell its 21% stake in

Eircom

(EIR)

. Eircom declined 1/2 to 12 1/16.

Microsoft's

(MSFT) - Get Report

MSN said it will spend $90 million in Asia over the next 12 months. The move is intended to offer new services and to expand its marketing and brand awareness, the company said.

Separately, the judge presiding over the

Microsoft

antitrust case said he expects "no further process" in the trial after today's hearing on possible resolutions. Although Judge Thomas Penfield Jackson didn't say when he would announce his decision, his statement today makes early verdict likely. Microsoft hopped 2 3/8 to 65 9/16.

SBC Communications

(SBC)

said it filed a complaint against

Time Warner

(TWX)

unit Time Warner Cable and its Road Runner unit charging Time Warner workers placed and then canceled orders for Road Runner digital subscriber lines. SBC asked the

Public Utility Commission of Texas

to investigate the DSL scheme, which it contends is unlawful and anticompetitive. SBC Communications bounced 1 5/16 to 43 1/8, while Time Warner added on 1/4 to 74 1/2.

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