Business Digest


October 23, 2002

In the Region

Legg Mason shares fall 5.3% after stock rating is cut to `sell'

Shares of Legg Mason Inc. fell 5.3 percent, or $2.53, to close at $44.93 after Merrill Lynch & Co. analysts cut the money manager's stock rating to "sell" from "neutral."

The analysts expect Legg Mason's shares to decline as much as 12 percent in the next year, according to a Merrill report. Flows into Legg Mason's retail brokerage business will "remain muted intermediate term," and growth in its institutional managed asset business may falter short-term, the report said.

Pretax returns on revenue in the brokerage and managed asset businesses are below industry benchmarks, and improvement will be tied to growth in the economy, the report said.

Allegheny Energy sued over trading practices

Wolf Haldenstain Adler Freeman & Herz LLP has filed a lawsuit against Allegheny Energy Inc. and its leadership on behalf of shareholders, claiming the Hagerstown-based energy company failed to disclose that its revenues depended on deceptive trading practices.

Allegheny's stock price has plunged 70 percent since it filed a lawsuit against Merrill Lynch & Co. Inc. on Sept. 25 amid allegations that the investment firm allowed the business to engage in sham trades with Enron Corp. to inflate revenue and trading volumes, making it more attractive for sale. Allegheny's action was in response to a Merrill Lynch suit accusing the energy company of failing to buy out the firm's remaining investment in the trading business.

The lawsuit alleges sham trades and subsequent misleading statements by Allegheny deceived investors about the financial health of the company.


Australia to become 8th partner to join U.S. on F-35 fighter

Australia has agreed to become the eighth international partner to join with the United States in developing the F-35 Joint Strike Fighter.

Yesterday's decision by the Australian Cabinet is seen as a further endorsement of the futuristic aircraft being developed by Lockheed Martin Aeronautics.

Senior defense officials of Australia and the United States are expected to meet and sign the formal agreement Oct. 31. Australia will contribute $175 million to the program. Tom Burbage, executive vice president of the aeronautics division and general manager of the F-35 program, said the eight nations involved have pledged $4.5 billion, or about 15 percent of the projected cost of designing, developing and building prototypes of the F-35 that will be used for flight testing.

Bill would give Pa. official say in OK of Hershey sale

Pennsylvania's state attorney general would have the power to require court approval of any sale of Hershey Foods Corp., or any other publicly traded corporation controlled by a charitable trust, under legislation that the state House of Representatives passed yesterday.

The bill, which was approved 154-43, now goes to Gov. Mark S. Schweiker for his signature. Schweiker spokesman Michael Lukens said the governor has not decided whether to sign it. The Senate approved the legislation Oct. 9.

The vote was praised by Attorney General Mike Fisher, who called for changes to the state law governing charitable trusts in August when he went to court to block a proposed sale of the nation's largest candy maker.

EU approves Deutsche Post purchase of 25% of courier

The European Union on Tuesday approved Deutsche Post AG's planned purchase of another 25 percent stake in DHL Worldwide Express Inc., pushing its control in the courier to more than 75 percent.

The EU executive commission said there were only "minor overlaps" between the two companies and therefore posed no antitrust problems. Deutsche Post is paying 610 million euros ($596 million) for the stake. The commission said in a statement that "Deutsche Post is mainly active in mail delivery in Germany, a market where DHL is not active."

Regulators to challenge merger of pickle makers

Federal antitrust regulators voted to challenge a combination of the nation's two largest pickle makers, Vlasic Foods International and Claussen Pickle Co.

Vlasic parent Pinnacle Food Corp., owned by investment firm Hicks, Muse, Tate & Furst Inc., agreed in May to buy Claussen from Kraft Foods Inc., the Federal Trade Commission said.

The FTC said the purchase would create a monopoly in the U.S. market for refrigerated pickles by combining the two biggest pickle brands and eliminating their "unique rivalry." The FTC said Vlasic, which sells mostly nonrefrigerated jars of pickles, serves as the "primary price constraint" on Claussen's refrigerated products.

Blockbuster in the black, but short of expectations

Blockbuster Inc. returned to the black in the third quarter, earning a $51 million profit that nonetheless fell short of the video chain's expectations because of higher marketing costs and additional money spent to add more DVDs and video games to its stores.

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