The Motley Fool: 05/05/97: The Lunchtime News

FOOL PLATE SPECIAL
An Investment Opinion by Randy Befumo

Fort Howard - James River Merge

Consumer paper products manufacturers JAMES RIVER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JR)") else Response.Write("(NYSE: JR)") end if %> and FORT HOWARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORT)") else Response.Write("(Nasdaq: FORT)") end if %> have agreed to merge in a deal that values Fort Howard at $5.4 billion, including cash and debt. Under the agreement, shareholders of Fort Howard will receive 1.375 shares the new Fort James Corp. common stock, putting the value of their shares at roughly $41 7/8 per share intra-day. The combined company has a valuation of $10.5 billion, including debt, and annual revenues of $7 billion. Shares of Fort Howard climbed $3 1/4 to $39 3/4 in response to the news, up almost 100% from where it traded one year ago. There will be a continuous replay of the merger conference call starting at 2:30 PM EST today and running through Monday, May 12, 1997. Interested readers can hear the call at (402) 222-9937.

Both James River and Fort Howard mass produce tissues and paper towels for consumer use. The companies have been facing increasing competitive pressure since Scott Paper and KIMBERLY CLARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %> merged in July of 1995. Although Fort Howard only came public in March of 1995, the company has done quite well in terms of stock price appreciation since the Scott-Kimberly Clark merger, due to the fact that it concentrates on the low-end of the paper towel universe, leaving PROCTER & GAMBLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %>, Kimberly Clark and James River to beat each other to a pulp at the high-end of the tissue universe. The new Fort James will be the number two tissue maker in the world and the company expects to generate annual savings of $150 million to $200 million per year in cost efficiencies as a result of the merger.

Unlike Fort Howard, restructurings and increased competitive pressures have weighed on Virginia-based James River. The stock has basically gone nowhere in the past two years in spite of a myriad of attempts to "create shareholder value." James River's major brands include Dixie, Chelsea, Nice 'n Soft, Quilted Northern, Vanity Fair, and Brawny. Fort Howard's line of recycled brands like So-Dri, Soft 'N Gentle, Green Forest, Page, and Mardi Gras fill out James River's product lines with strategic assets rather than the non-core assets that the company has been flushing out for the past six years, including the spin off of CROWN VANTAGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CVAN)") else Response.Write("(Nasdaq: CVAN)") end if %> in 1996. Now strictly focused on consumer paper in the form of towels, tissues and cardboard boxes for consumer products, perhaps the company can now recognize some shareholder value.

UPS

JILIN CHEMICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCC)") else Response.Write("(NYSE: JCC)") end if %> climbed $1 7/8 to $18 3/8, continuing its roller-coaster ride after reporting 1996 results two weeks ago. The firm is one of the most heavily traded Chinese companies.

Strong insider buying at healthcare products provider ALLEGIANCE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AEH)") else Response.Write("(NYSE: AEH)") end if %> has the shares up $1 1/2 to $24 3/4 this morning. More than 140 company officials purchased a combined 2.4 million shares as part of a voluntary program.

FLOWERS INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLO)") else Response.Write("(NYSE: FLO)") end if %> rose $7/8 to $17 1/4 after Morgan Stanley provided the firm with some yeast in the form of an "outperform" rating. Flowers is one of the largest bakeries and snack food makers in the U.S.

Although no recent news explains the $1 1/4 to $7 3/4 rise in the shares of electronic commerce concern PREMENOS TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRMO)") else Response.Write("(Nasdaq: PRMO)") end if %>, the company did present at Hambrecht & Quist's Technology Conference last week.

JPM CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JPMX)") else Response.Write("(Nasdaq: JPMX)") end if %> vaulted $4 3/4 to $26 on more than five times normal volume on no discernable news. The recently public company manufactures cable assemblies and wire harnesses for the telecommunications and networking industries.

Continuing the trend of the morning, INTEGRATED SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTS)") else Response.Write("(Nasdaq: INTS)") end if %> jumped $2 1/4 to $14 1/4 on no discernable news. The cash-rich software developer for embedded systems microprocessors has been hammered of late.

METATOOLS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTLS)") else Response.Write("(Nasdaq: MTLS)") end if %> jumped $1 3/8 to $12 3/4 and FRACTAL DESIGN <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRAC)") else Response.Write("(Nasdaq: FRAC)") end if %> climbed $1 1/4 to $8 7/8, perhaps on speculation that the pending merger of the graphics design software companies will yield benefits for shareholders.

Contract manufacturer PLEXUS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PLXS)") else Response.Write("(Nasdaq: PLXS)") end if %> popped up $3 3/4 to $33, continuing its rise of the last two weeks after reporting earnings stronger than expected and getting raised to "strong buy" by Stephens Inc. The company's largest customers are IBM and GE.

ACT NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANET)") else Response.Write("(Nasdaq: ANET)") end if %> enjoyed a snappy recovery today, up $2 1/4 to $16 3/4. The maker of frame-relay wide-area network (WAN) switches got clobbered in February when Cascade Communications reported that sales had slowed.

Information technology outsourcing firm and recent initial public offering (IPO) COMPLETE BUSINESS SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBSL)") else Response.Write("(Nasdaq: CBSL)") end if %> jumped $13/16 to $11 15/16 after reporting earnings of $0.15 per share, a penny above estimates and 67% above last year.

AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> dialed up a $2 1/2 gain to $49 3/4 as investors anticipate the online company's earnings report to be released after the bell this evening.

DOWNS

SEAGULL ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGO)") else Response.Write("(NYSE: SGO)") end if %> dumped $1 to $16 1/2 after President and Chief Operating Officer Robert Vagt announced his resignation. The company is a natural gas exploration and production concern.

A pending decision in a Florida lawsuit that pits the family of deceased smoker Jean Connor against RJ Reynolds has shares of RJR NABISCO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %> down $3/4 to $28 3/4 and PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> off $1 1/8 to $38 3/4.

OPTICAL SENSORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OPSI)") else Response.Write("(Nasdaq: OPSI)") end if %> crashed $3 5/16 to $4 5/16 after the company began a voluntary recall of its SensiCath Sensors, designed to monitor arterial blood gas levels. Alex. Brown and Hambrecht & Quist cut their ratings on the medical device manufacturer.

PHYSICIAN SALES & SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSSI)") else Response.Write("(Nasdaq: PSSI)") end if %> dropped $2 7/8 to $11 1/8 after the company pre-announced a loss of five to seven cents per share in the fourth quarter due to acquisition charges on $690 million in revenues for the year.

CONFERENCE CALLS

PEPSICO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %>
(800) 577-6980 (code: 03160)

MATTSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTSN)") else Response.Write("(Nasdaq: MTSN)") end if %>
(402) 220-6969 -- replay available through 5/6

MORROW SNOWBOARDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRRW)") else Response.Write("(Nasdaq: MRRW)") end if %>
(402) 220-4250 -- replay through 5/6

MENTOR GRAPHICS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MENT)") else Response.Write("(Nasdaq: MENT)") end if %>
(201) 633-1010 -- replay

INFORMIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFMX)") else Response.Write("(Nasdaq: IFMX)") end if %>
Available until 5/16
(800) 839-8790 -- replay

PREFERRED EMPLOYERS HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PEGI)") else Response.Write("(Nasdaq: PEGI)") end if %>
3:00 PM EDT
(800) 982-5946 (at the recording, dial 666606) -- live call

ATC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %>
(303) 267-1037 (code 195584)
Replay available until Friday

GENZYME (regarding purchase of Seprafilm from Cleveland Clinic)
(402) 220-9054 -- replay through 5/9 at 5:00 PM EDT

THIS WEEK'S CONFERENCE CALL SYNOPSES

ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %> Q1 Conference Call
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> Q1 Conference Call
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> Q3 Conference Call
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> Q2 Conference Call
C-CUBE MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CUBE)") else Response.Write("(Nasdaq: CUBE)") end if %> Q1 Conference Call
INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> Q1 Conference Call
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> Conference Call
SPRINT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %> Q1 Conference Call
MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> Q1 Conference Call
SILICON GRAPHICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGI)") else Response.Write("(NYSE: SGI)") end if %> Q3 Conference Call
PRIME MEDICAL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMSI)") else Response.Write("(Nasdaq: PMSI)") end if %> Q1 Conference Call

FOOL PORTFOLIO STOCKS
FOOL PORTFOLIO

ATCT up $3/4 at $4 3/4
AOL up $1/8 at $47 1/8
CHV unch. at $68
COMS up $2 1/8 at $33 1/8
DJT unch. at $9
GM down $5/8 at $56 7/8
IOM down $1/8 at $16 5/8
KLAC up $9/16 at $47 9/16
LU down $3/8 at $59
MMM up $3/8 at $87 1/2
T unch. at $33 7/8