Santander conquers slowly; a Harbinger for the Alpha-Cliffs deal; BASF surveys deal-land

By Aaron Hochman-Zimmerman

New York, July 30 - The action may have been light in deal-land since earnings season began, according to one analyst who claims to have been on at least two earnings calls at a time over the past few days, but for its part Harbinger Capital Partners has been busy trying to influence the mining sector, which has seen a rash of mergers.

Harbinger has nearly brought doom to the door of a deal between Alpha National Resources Inc. and Cleveland-Cliffs Inc. by opposing the merger with the power of its 20% stake, but investors were waiting to see if there will be any more developments from Cliff's earnings call on Thursday.

In the chemical industry, which has also seen recent consolidation, Germany's BASF AG is believed to be considering adding other ingredients to its formula in the form of WR Grace & Co. or Rockwood Holdings Inc.

Elsewhere, Banco Santander SA said it is no longer looking to pick up damaged banks, but one trader believes Sovereign Bancorp Inc. will be the first target after the real estate and finance sectors hit bottom.

Meanwhile, the Dow Jones Industrial Average ended better by 186.13, or 1.63%, at 11,583.69, while the Nasdaq Composite Index added 10.10, or 0.44%, to finish at 2,329.72.

The S&P 500 improved by 21.07, or 1.67%, to close at 1,284.26.

Santander sated for now

Spain's Banco Santander has been one of the banks left with a seat at the table after the credit crisis set in.

"Grupo Santander's first half earnings continued to grow notably and compare very well with those of other large international banks," the bank said in a statement.

"These rates of growth were achieved in an environment of economic slowdown, liquidity tensions and uncertainty in the main financial markets," the statement continued.

It recently devoured the United Kingdom's Alliance & Leicester for $2.5 billion after cutting itself a slice of ABN Amro.

The bank has also grown at the expense of banks in Germany as well as Sovereign Bancorp.

Still, Santander's chief executive officer Alfredo Saenz insisted that, despite a fair amount of speculation, his bank will take time to digest what it has already eaten before moving on to another course.

Also, the bank may be feeling a little indigestion from some home cooked staples.

"They are dealing with their own issues arising in Spain at the moment," a trader said, adding that "Latin America is very strong for them."

If the bank does intend to move on to round two at the bank buffet, "They can buy the rest of Sovereign without stretching," the trader said, but they will likely hold off for now.

"In time" they will finish off Sovereign, he said, but "I don't see any rush for them at this point."

However, "if you see signs that U.S. real estate and banking improving ... then: next day," he joked about Santander's presumed pick up of Sovereign when the market hits a bottom.

Shares of Santander (NYSE: STD) inched higher by $0.03, or 0.16%, to $19.25.

Share of Sovereign (NYSE: SOV) also crept higher by just $0.02, or 0.21%, to $9.62.

Owl perched on Alpha, Cliffs?

Harbinger Capital may have given the market a sign of what lies ahead for the deal between Alpha Natural Resources and Cleveland-Cliffs.

The private equity firm holds a 20% stake in Cleveland-Cliffs where only one-third of the shareholders can kill a merger and Harbinger has already expressed its disapproval.

"Harbinger has pretty much had their way with the market for the past 20 months," an equity analyst said.

"When you have a 20% holder saying they don't want it ... it's trading like it's not going through," he said.

Alpha posted strong earnings on Tuesday and the same was expected for Cleveland-Cliffs going into its earnings call on Thursday.

Fundamentals in the metallurgic coal industry are very strong, the analyst said.

Despite industry consolidation, including Tuesday's tie up between Teck Cominco Ltd. and Fording Canadian Coal Trust, each company would be able to stand on its own, the analyst said.

However, that is not exactly what Harbinger has in mind.

"Harbinger want's Cliffs sold," the analyst said.

Last Friday, Harbinger claimed it could a fetch a price of $130 per share for Cleveland-Cliffs which traded well on Wednesday "because of fundamentals and Harbinger," the analyst said.

Shares of Cleveland-Cliffs (NYSE: CLF) jumped up by $10.20, or 9.64%, to end the day at $116.00.

Shares of Alpha Natural Resources (NYSE: ANR) also added $6.87, or 7.16%, to close the session at $102.80.

BASF considers new formula

BASF is reportedly looking for another chemical company that will dissolve nicely into its mix, reports said.

How serious BASF is and its possible motivation was not immediately clear, an analyst said.

The recent combination of Dow Chemical Co. and Rohm & Haas Co. may be enough to force companies to consider consolidation, he said, but "the motivations are so broad and they vary."

According to a report in FT Deutschland, BASF may have its eyes on either WR Grace or Rockwood Holdings.

Shares of Grace (NYSE: GRA) tacked on $1.28, or 5.44%, to finish at $24.80.

Shares of Rockwood (NYSE: ROC) were better by $2.24, or 6.45%, to end at $36.96.

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