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Dow hits 12,000. Again

Friday's fall below the benchmark didn't last long, thanks in part to two buyout deals.

Published November 7, 2006


NEW YORK - Wall Street roared back Monday, erasing its losses of last week after private-equity buyout deals involving companies such as Four Seasons Hotels Inc. and OSI Restaurant Partners Inc. of Tampa, parent of Outback Steakhouse, revived investors' belief that stocks still have room to run. The Dow Jones industrials shot up 119 points.

The gains came a day ahead of the U.S. midterm elections, though the prospect of a power shift in Congress didn't seem to unnerve investors.

"I think what you're seeing on the tape is a reflection of the amount of money that has been raised in the private equity pools and that money is starting to go to work," said John O'Donoghue, co-head of equities at Cowen & Co.

He also said investors are growing more confident that the elections will bring gridlock in Washington, a prospect Wall Street finds pleasing because it is seen as reducing risks to business interests.

The Dow rose 119.51, or 1 percent, to 12,105.55. The Dow moved back above the benchmark 12,000 level after closing below that Friday, when the blue chip average ended the week down 104.22 points. The Dow hadn't closed below that level since first finishing above 12,000 on Oct. 19.

Broader stock indicators also advanced Monday. The Standard & Poor's 500 index was up 15.48, or 1.13 percent, at 1,379.78, and the Nasdaq composite index advanced 35.16, or 1.51 percent, to 2,365.95.

"I think it's a pretty broad-based rally," said Stephen Massocca, president of Pacific Growth Equities. "I think when you see things this strong, it's a harbinger of things to come."

Stocks rose sharply in October as investors sensed that corporate profits would hold up as the economy cooled. That notion lost backers last week, however, as negative economic data stirred fears the economy was slowing too quickly. Before Monday's gain, when 28 of the 30 stocks that make up the Dow closed higher, the best-known market index closed lower for six straight sessions for the first time since June 2005.

O'Donoghue thinks investors will examine valuations of stocks to consider whether they are too low given that the latest buyout offers carry hefty premiums for some companies.

Companies owned by Bill Gates and a Saudi prince announced Monday they had joined forces with the founder and CEO of Canadian hotel giant Four Seasons in a bid to take the company private for $3.7-billion, or $82 per share in cash.

The offer was made by Four Seasons chairman and CEO Isadore Sharp - who founded the company in 1960 with one small hotel in downtown Toronto - and Triples Holdings Limited, the controlling shareholder, along with Kingdom Hotels International and Gates' Cascade Investment LLC.

Kingdom Hotels is owned by a trust created by Prince Alwaleed bin Talal Alsaud, believed to be the wealthiest businessman in the Muslim world. A nephew of the late King Fahd, Prince Alwaleed is worth more than $20-billion, according to Forbes magazine.

The Toronto-based company said it has set up a special committee of independent directors to consider the offer and make recommendations.

"This transaction is intended to ensure the legacy of the Four Seasons," Sharp told reporters in a teleconference. "This proposal achieves all my objectives for Four Seasons and my family, and is the only one that I am prepared to pursue."

Four Seasons Hotels Inc.

Owns 71hotels in 31 countries and has more than 25 properties under development.

OSI Restaurant Partners Inc.

Operates Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Lee Roy Selmon's and other restaurants in the United States and 21 other countries.

[Last modified November 6, 2006, 23:21:34]

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