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While you were sleeping: Dell deal helps restore mood

While you were sleeping: Dell deal helps restore mood

Feb 6 (BusinessDesk) – Equities advanced on both sides of the pond as a deal led by Michael Dell to take Dell private and a potential bid by Liberty Global for Virgin Media underpinned confidence in stock valuations.

Shares of Dell rose, last up 0.9 percent to US$13.395, after founder and CEO Michael Dell announced a US$24.4 billion leveraged buyout.

The transaction will be financed by Michael Dell, Silver Lake, MSDC Management, a US$2 billion loan from Microsoft, the rollover of existing debt, as well as debt financing from BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.

The group will pay shareholders US$13.65 a share.

“If insiders are buying their stock, that’s a positive sign. Here’s the ultimate insider of Dell, basically buying a controlling stake," Rob Morgan, who oversees US$1 billion as chief investment strategist at McLean, Virginia-based Fulcrum Securities, told Bloomberg News.

Meanwhile, the US government is suing Standard & Poor's Ratings Services, seeking US$5 billion in a civil lawsuit accusing the ratings agency of fraud in the lead-up to the 2008 financial crisis.

The lawsuit is "without legal merit and unjustified," S&P said in a statement.

The credit ratings agency said it wasn't alone in underestimating risks involved in mortgage-backed securities, denying it inflated ratings. It also said it wasn't alone in failing to predict the collapse of the US housing market.

“Clearly, we must all do a better job identifying economic trends that could lead to future crises. For their part, governments have established new institutions to identify risks to financial stability," S&P said.

"We have taken to heart lessons learned from the financial crisis and made extensive changes that reinforce the integrity, independence and performance of our ratings, including compliance with today’s enhanced regulatory oversight."

In afternoon trading in New York, the Dow Jones Industrial Average gained 0.77 percent, while the Standard & Poor's 500 Index climbed 0.87 percent, and the Nasdaq Composite Index advanced 1.05 percent.

The Institute for Supply Management’s index of US non-manufacturing businesses slid to 55.2 in January from the prior month’s 55.7. It was still just better than economists' expectations in a Bloomberg poll for 55.

In Europe, the Stoxx 600 Index ended the day with a 0.6 percent increase from the previous close, also boosted by news of a billion-dollar deal. Benchmark stock indexes also rose in London, Frankfurt and Paris, adding 0.6 percent, 0.4 percent and 1 percent respectively.

Shares of Virgin Media soared to a record, up 17.3 percent, after confirming it held talks with Liberty Global. A deal is expected to be announced as soon as today, Bloomberg reported. Virgin Media has a market cap of about US$10 billion.

About 55 percent of the 151 western European companies that have reported earnings since January 8 surpassed analysts’ projections for profit, according to Bloomberg data, while of the 177 that have posted sales, 54 percent beat expectations.

An index based on a survey of purchasing managers in the services industry of the 17 countries that use the euro climbed to 48.6 in January from 47.8 in December, according to Markit Economics today.

(BusinessDesk)

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