Update on takeover speculations of Credit Lyonnais and implications for BNP Paribas (page 3 of 3)

The CEOs of Allianz (ALV GY; EUR 102.70) and Deutsche Bank (DBK GY; EUR 46.33) said that they would give up their seats on the board of Munich Re (MUV2 GY; EUR 130.14). While the CEO of Deutsche Bank left due to the fact that Deutsche Bank is not a shareholder anymore, Allianz's CEO left because of 'compliance with the corporate governance code'. We believe that this might prepare the way for Munich Re and Allianz to unwind their cross-holdings (Allianz has a 24.8% stake in Munich Re and will reduce this to 20% by end 2003; Munich Re holds 20% of Allianz). A potential reduction in their stakes would probably be done by a secondary placement in the market or the sale to a third party. We remain cautious on Allianz in the short-term due to industry specific reasons but also due to increased share supply. However, we stick to our view that the stock currently trades below its long-term potential and as such reiterate our Hold rating.

CSFB issued a note on Aventis (AVE FP; EUR 51.30) and the patent threat of its key drug Allegra. This is an interesting note and confirms our view that the stock is overly punished for this issue. At current levels Aventis looks very attractively valued and we reiterate our buy rating on the stock. Going into the new year Aventis should be in every equity portfolio in our view as we expect the concerns regarding Allegra to unwind during the course of the year. In addition, the company bought back 98.6% of a convertible bond into Rhodia in preparation to divest its 25% stake in Rhodia. We expect this to be done in the course of next year and believe once the issue is solved, the market will refocus on Aventis' attractive growth potential.

Nokia's (NOK1V FH; EUR 16.63) mid-quarter update once again disappointed, which led the stock almost 4% lower. For at least the third consecutive quarter Nokia reduced its sales guidance to 8.8-9bln from EUR 8.9-9.2bln and reiterated that it felt very comfortable with the earnings guidance of EUR 0.23-0.25 per share. Interestingly the company did not guide towards the top end of this range as they used to do in the last two quarters. The mobile phone 4Q02 operating margins are expected to exceed 3Q02's 22.8% while Networks operating margins are expected to be about 0%, which is significantly lower than the previous guidance of 5.20%. Nokia expects the ASP (Average Selling Price) to decline from 3Q02s EUR 152, which is seen as a product mix shift to the higher volume low-end phones. The company seems to indicate that this is the basis for the lower revenue guidance. Despite Nokia not disappointing on the earnings side it is disturbing that the company seems to adopt a pattern of setting expectations high and then gradually stepping back. In our view, this does no good for the management's excellent track record in the long run in our view. Within a week Nokia has disappointed twice, which does confirm our view that market expectations are still very high and that the stock is fully valued at EUR 20.