Tuesday, September 8, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Krafting a Cadbury deal. Cadbury (CBY) rejected a £10.2B ($16.7B) acquisition offer from Kraft (KFT) yesterday, saying the bid 'fundamentally undervalues' the company and paving the way for possible counteroffers, including from rivals Hershey (HSY) and Nestle (NSRGY.PK). The offer was a 31% premium to Cadbury's Friday close, and Kraft said it remains committed to reaching a deal. However, analysts suggested Kraft may have to raise its offer as much as 40% to get Cadbury to accept. KFT -2.3%, CBY +41% premarket (7:00 ET). (Read Kraft's press release (.pdf))
  • U.K. mobile phone merger. Earlier this morning, Deutsche Telekom (DT) and France Telecom (FTE) announced plans to join their U.K. operations in a 'merger of equals,' surpassing Telefonica (TEF) as Britain's largest mobile phone operator. The joint venture will have 30M customers, control 38% of the U.K.'s highly competitive mobile market and generate £4B ($5.7B) of savings. Separately, Telefonica reached an agreement to expand its strategic alliance with China Unicom (CHU), giving the Spanish firm a stronger foothold in the world's largest mobile phone market. (Read the Deutsche Telekom press release)
  • G-20 keeps banking reform alive. Over the weekend, G-20 finance ministers and regulators announced new, tougher guidelines that would force banks to raise billions more in capital over the coming months. Full details are not yet finalized, but central bank governors and bank supervisors from 27 countries said they would present concrete proposals by the end of this year. (Read the G-20's plans for strengthening the financial system (.pdf))
  • AIG continues to shed units. AIG (AIG) may be looking to take its time on the sale of some major assets, but it's open to quick sales of smaller units. Case-in-point: Saturday's agreement to sell an asset-management division to Hong Kong tycoon Richard Li's Pacific Century Group for $500M, below the $800M price tag potential bidders were discussing several months ago. In its press release, AIG said the deal 'provides fair value' for the unit. Meanwhile, Chinatrust Financial has reportedly outbid rivals by offering $2.4B for AIG's Taiwan Nan Shan Life unit. AIG had targeted the unit to bring in $2B.
  • Pro-Linux group closes in on MSFT patents. The Open Invention Network, a group which supports open-source software and includes such giants as IBM (IBM) and Sony (SNE), is nearing an agreement to acquire 22 of Microsoft's (MSFT) patents in an effort to avoid any legal threats that could discourage the adoption of Linux. Microsoft has suggested in the past that the Linux operating system may violate some of its patents. The patents are currently held by Allied Security Trust, which bought the patents from Microsoft earlier this year.
  • Abu Dhabi challenges chip firms. Abu Dhabi's Advanced Technology Investment Co. [ATIC] agreed to buy Chartered Semiconductor Manufacturing (CHRT) for $1.8B in cash yesterday. ATIC's second major investment in the industry, the deal will allow its semiconductor joint venture to better compete with Taiwan's leading contract-chip manufacturers, including Taiwan Semiconductor Manufacturing (TSM) and United Microelectronics (UMC). (Read ATIC's press release (.pdf))
  • WTO ruling gives Boeing fans ammo. After the WTO's preliminary ruling that Airbus received illegal subsidies from European governments, pro-Boeing (BA) lawmakers in the U.S. are pushing the Pentagon to keep the ruling in mind for its $40B tender to supply tanker planes. However, upside implications of the ruling may be limited, as "we live in a glass house of global subsidies" and future WTO victories may be harder to come by following the U.S. provision of billions of dollars to banks and automakers.
  • Google shelves European book plan. Bowing to pressure from European publishers, Google (GOOG) said it will remove all copyright-protected European books from its book scanning program. Google also promised to put two non-U.S. representatives on the governing board of the Books Rights Registry, which will oversee Google's settlement with publishers. Shares +1% premarket (7:00 ET).
  • OPEC happy with oil prices. Ahead of tomorrow's OPEC meeting, Saudi Oil Minister Ali al-Naimi said the oil market is in 'good shape' and 'everybody likes' the current price. The group is expected to leave output quotas unchanged. Taking advantage of the production cuts is Russia, which is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse.

Earnings: Tuesday Before Open

  • Smithfield Foods (SFD): FQ1 EPS of -$0.56 misses by $0.01. Revenue of $2.7B (-14%) vs. $2.8B. (PR)

Today's Markets

Markets are up across the globe.

  • In Asia, Nikkei +0.7% to 10,393. Hang Seng +2.1% to 21,070. Shanghai +1.7% to 2,930. BSE +0.7% to 16,124.
  • In Europe at midday, London +0.6%. Paris +0.4%. Frankfurt +0.5%.
  • Futures: Dow +0.9%. S&P +1%. Nasdaq +1%. Crude +2.1% to $69.43. Gold +1.1% to $1007.20.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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