Hartford Financial Rallies on Allianz Investment, Cuts Dividend
Hartford Financial Services
announced that it will receive a $2.5 billion investment from Allianz. This investment comes on the heels of news that HIG expects to record a third-quarter loss of $8.50 to $8.80 per share, on the basis of losses in its investment portfolio.
The company also said it will slash its quarterly dividend to 32 cents per share. The firm had previously paid a dividend of 53 cents per share.
The deal's terms are similar to what we have been seeing lately, in that Allianz will purchase $750 million in preferred stock at $31 per share. Allianz will also receive warrants to purchase an additional $1.75 billion in common stock at $25.32 per share.
Hartford Financial was very fortunate to find any sort of financing with the losses that it has taken. We're surprised Allianz didn't make a play to acquire the company, instead going into the deal with a Warren Buffett-like arrangement. Because of the uncertainty surrounding the company's long-term viability, we are steering clear of HIG shares. The company's new dividend yield, based on the announced dividend cut, will be 4.67% -- on the basis of Friday's closing stock price of $27.40.
Hartford Financial Services is not recommended at this time, holding a Dividend.com rating of 3.0 out of 5 stars.
No Time for Arbitrage Plays
The potential for the breakdown of acquisition deals has increased dramatically in the last 72 hours.
With credit market trouble spreading to Europe and Asia, we are concerned that some acquisition deals may be at risk for delays, repricings or even outright cancellations. As a result, this morning we decided to remove
Ikon Office Solutions
from our Recommended Dividend Stock List.
Belgian brewer InBev's acquisition of Anheuser Busch has us concerned, because financing is a big part of the potential sale, and with financial institutions concerned about their balance sheets, the risk to the deal at $70 per share has dramatically increased. As for the Ricoh-Ikon deal, we are surprised that no other bidders have emerged. This makes the chances of a repricing of the buyout much greater. Investors should take notice of both of these potential scenarios.
We still believe these two acquisition deals have a good shot of closing, but in this current market environment, all sides involved may need to roll up their sleeves and work with the financiers on terms.
Wyndham Worldwide Reaffirms Guidance, Will Cut Jobs
is reaffirming its third-quarter earnings expectations as the company announces restructuring charges.
The company is restructuring operations and expects to post related pretax charges of $7 million, or 2 cents per share, as it trims its workforce. The changes will occur in its hotel group, its time-share division and its vacation rental and exchange business.
The company sees its quarterly earnings results coming in a range of 78 to 80 cents per share. The consensus estimates -- according to Thomson Reuters -- is for 80 cents per share.
The news in the lodging industry is not getting better, but valuations are starting to get more reasonable. Investors will need to be patient as we look for opportunities going forward. The company has a 1.26% dividend yield, on the basis of Friday's closing stock price of $12.70.
Wyndham Worldwide is not recommended at this time, holding a Dividend.com rating of 3.2 out of 5 stars.
Eli Lilly Outbids Bristol-Myers for ImClone
At this point, it seems as though
will be the winner in the battle for
Lilly was able to outbid
-- which held a 17% stake in ImClone and which had recently raised its offer price to $62 a share. Lilly's offer is for $70 per share in cash. The big prize that Lilly coveted was Erbitux, ImClone's signature drug, which is used to treat colorectal, lung, and head and neck cancers. The product had sales of about $1.3 billion in 2007. ImClone has other cancer agents in development, including a successor product to Erbitux called IMC-11F8.
Despite Lilly hitting a 52-week low on the news, we believe the company needed to make a move here. We will watch the shares closely and be ready to upgrade the shares if the stock price can sustain a bit above recent lows. The company has a 4.55% dividend yield, on the basis of Friday's closing stock price of $41.31.
Eli Lilly is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.4 out of 5 stars.
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At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.
Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.