Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

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• Enterprise/Teppco tie-up. After years of merger rumors, Enterprise Products Partners (EPE) agreed to buy Teppco Partners (TPP) for $3.3B in stock, forming a $26B energy partnership that will be one of the largest natural gas producers in the U.S. The combined firm will own nearly 48,000 miles of pipeline. The deal must be approved by Teppco shareholders.
• Jury tells Abbott to pay up. A federal jury ordered Abbott Laboratories (ABT) to pay $1.67B in a patent suit brought by Johnson & Johnson (JNJ) over its arthritis treatment. J&J had alleged Abbott's Humira arthritis therapy infringed on a patent for J&J's rival treatment Remicade. Abbott plans to appeal the ruling.
• Broadcom broadens Emulex offer. Broadcom (BRCM) sweetened its hostile takeover offer for Emulex (ELX), raising its bid 19% to $912M and promising to give up its attempts by July 14 if Emulex doesn't indicate support for the deal by then. Emulex said it will review the new terms 'in due course,' and urged shareholders not to take action in the meantime.

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• BG moves into U.S. shale market. BG Group (BRGYY.PK) will pay $655M for a 50% stake in EXCO Resources' (XCO) U.S. shale gas project, and will pay another $400M to fund capital development. This is the latest in a series of BG acquisitions, and follows similar moves by other international oil companies interested in the U.S. oil shale sector.
• Cablevision wins DVR court fight. The Supreme Court ruled that Cablevision (CVC) can bypass set-top digital video recorders and allow its customers to record programs straight onto its servers. Comcast (CMCSA) and Time Warner Cable (TWC) had previously said they would launch similar services if Cablevision's approach was upheld as legal. The news pushed TiVo (TIVO) shares down 4.1%, but the potential impact of the ruling on the DVR set-top firm isn't entirely clear.
• State Street may face SEC charges. State Street (STT) said its State Street Bank & Trust Co. unit may face SEC charges over some fixed-income trading strategies it used in the run up to the subprime crisis. State Street will have a chance to present its defense before any formal decision is made on a civil enforcement action.
• RHJ may steal Magna's Opel deal. RHJ International is apparently close to a deal to pick up General Motors' Opel unit, squeezing out auto parts firm Magna International (MGA). Magna reached an agreement with GM in May, but talks have stalled since then, while RHJ has improved its bid and is being taken 'very seriously' by GM.
• DoJ objects to airline cooperation. The Department of Justice belatedly objected to plans by United Airlines (UAUA) and Continental (CAL) to cooperate on some global routes, and recommended that the airlines form a more limited trans-Atlantic deal instead. The Transportation Department gave the deal preliminary approval three months ago, but the Justice Department said the deal would likely result in higher fares and less competition. Though the Justice Department technically has no jurisdiction over international aviation agreements, its ruling could prompt the DoT to reverse its decision.
• Elpida wins Japanese aid. Elpida (ELPDF.PK), the world's third-largest maker of memory chips, received a ¥30B ($313M) injection from the Japanese government, bringing its total aid to $1.7B. Elpida, which is struggling to compete with larger South Korean rivals, is the first Japanese firm to qualify for a new program which makes public funds available to businesses hit by the global financial crisis.
• Chinalco to buy Rio shares. After being snubbed by Rio Tinto (RTP) over a planned $19.5B investment, Chinalco (ACH) plans to participate in Rio's $15.2B rights issue. Chinalco currently owns a 9% stake in Rio, and intends to subscribe to the rights issue to prevent a dilution of its holdings.
• IEA trims oil outlook. The International Energy Agency slashed its medium-term outlook for global oil demand by 3.7%, forecasting demand of 87.9M barrels per day in 2013, down from a previous 90.25M, and 6.25M lower than its original forecast last July. "The global financial crisis has turned the economic landscape upside down, with huge implications for the oil and gas sector," IEA's Nobuo Tanaka said.
• Madoff heads to prison. As expected, Madoff received an effective life sentence for orchestrating a $65B Ponzi scheme. The judge, who called Madoff's crimes 'extraordinarily evil,' invoked the maximum sentence of 150 years in jail. Sources say another ten people will face federal charges before the investigation is completed.
• U.K. GDP tumbles. The U.K. economy shrank 2.4% in Q1, the largest contraction in over fifty years. The revised figure is considerably weaker than the earlier estimate of a 1.9% decline.

Earnings: Monday After Close

• Apollo Group (APOL): FQ3 EPS of $1.26 beats by $0.14. Revenue of $1B (+26%) in-line. (PR)
• H&R Block (HRB): FQ4 EPS of $2.10 beats by $0.05. Revenue of $2.5B (-3%) in-line. Sees FY10 EPS $1.60-1.80 vs. $1.66. (PR)

Today's Markets

Asian markets closed mostly down, and European markets are modestly lower.

• In Asia, Nikkei +1.8% to 9,958. Hang Seng -0.8% to 18,379. Shanghai -0.5% to 2,959. BSE -2% to 14,494.
• In Europe at midday, London -0.1%. Paris -0.1%. Frankfurt -0.03%.
• U.S. futures: Dow +0.2%. S&P +0.3%. Nasdaq +0.3%. Crude +0.3% to $71.69. Gold +0.01% to $940.80.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  9:00 S&P/Case-Shiller Home Price Index
  9:00 NAPM NY Report
  9:45 NAPM Chicago Business Barometer
  10:00 Consumer Confidence
  10:00 State Street Investor Confidence Index
  12:00 PM Fed's Bullard speaks on Fed exit strategies
  4:10 PM Fed's Hoenig speaks on bankruptcy and the economic crisis
  5:00 PM ABC Consumer Confidence Index
  9:00 PM Fed's Yellen speaks on the economy
• Notable earnings after Tuesday's close: ZZ

Seeking Alpha editor Eli Hoffmann contributed to this post.

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