Wednesday, March 25, 2015

Wall Street Breakfast: Kraft, Heinz Announce Mega Merger

Economy
Unless it secures fresh aid, Greece risks running out of cash by April 20, a source told Reuters, leaving it little time to work out a deal with its EU creditors. Earlier this week, Greek PM Alexis Tsipras discussed reforms with Germany's Angela Merkel and promised to present a detailed list of proposed overhauls by Monday, but new pressures are popping up. Yesterday, the ECB instructed Greece's largest banks to refrain from increasing their exposure to Greek government debt, posing a severe challenge to the nation’s government.
Oil dipped overnight as more evidence emerged that China's strategic reserves could nearly be full and ballooning U.S. storage volumes pressured prices. An API report yesterday showed a slightly smaller build in U.S. crude stocks at 4.8M barrels last week, but any build from the more closely watched EIA figures due later today would confirm U.S. crude stockpiles hit a record for an eleventh straight week.
Australia is "well and truly" disposed to become a member of the China-led Asian Infrastructure Investment Bank, Prime Minister Tony Abbott said today, although he wants to know how much power Beijing would hold in the institution before making a formal decision. Australia, South Korea and Japan are the notable regional absentees from the bank, while U.S. allies Britain, France, Germany and Italy announced earlier this month that they would join the AIIB, despite Washington's misgivings.
In the five years after the financial crisis, CEOs at large U.S. companies collectively realized at least $6B more in compensation than initially estimated in annual disclosures, a Reuters analysis shows. The reason for the windfall: the soaring value of their stock awards. The S&P 500's total return (including dividends) of 166% - from the end of 2008 through Monday - has some investors re-evaluating how they judge compensation plans. In some cases, they say CEOs may be benefiting from the bull market even when their performance might be weak.
Stocks
H.J. Heinz, owned by P-E firm 3G Capital and Berkshire Hathaway (BRK.A,BRK.B), and Kraft (NASDAQ:KRFT) have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America. Heinz shareholders will own a 51% stake in the combined company, while Kraft shareholders will hold a 49% stake and receive a special cash dividend of $16.50 per share. Together the new company will have eight $1B+ brands and five brands between $500M-$1B. KRFT +15.8% premarket.


An increasing supply outlook weighed on chicken stocks yesterday, with Pilgrim's Pride's (NASDAQ:PPC) 8% decline leading the group. Shares of Tyson Foods (NYSE:TSN) and Sanderson Farms (NASDAQ:SAFM) each slid about 3%. The companies came under pressure from U.S. Department of Agriculture data that showed leading chicken breeders in February increasing the number of young hens they placed for future supply flocks by 9% from a year earlier.
"Potential growth here is greater than the U.S. market," said Royal Caribbean's (NYSE:RCL) Michael Bayley, as the cruise line makes plans to add a fifth ship to its Chinese fleet. After the U.S. and Europe, China is now Royal Caribbean’s third-largest market by revenue, a swift move up from No. 50 just five years ago. In the next decade, Bayley expects the country's cruise industry to match that of the U.S., where Royal Caribbean carries more than 2M passengers each year.
Telefonica has officially announced it will sell U.K. mobile carrier O2 to rival Hutchison Whampoa (OTCPK:HUWHY). Telefonica (NYSE:TEF) will receive £9.25B ($13.84B) in cash up-front, and could receive up to £1B ($1.49B) later if O2 and Hutchison's Three U.K. unit hit cash flow targets post-merger. The deal comes as Telefonica gets set to acquire Brazilian wireline carrier GVT for $8.05B, and follows Telefonica's $12B 2014 acquisition of German rival E-Plus.
Countering the bids of several liquidators, Standard General has increased its offer for 1,740 stores of bankrupt electronics retailer RadioShack (OTCPK:RSHCQ), raising its original $145M bid by at least $20M with a promise to keep 7,500 jobs. According to sources, the auction is being complicated by disputes among creditors over how the hedge fund would pay for its bid. Much of Standard's offer is taking the form a "credit bid," or a pledge to forgive some of what it is owed.
After returning $13B in cash last year, Merck (NYSE:MRK) has upped its buyback authorization by $10B to $11.7B. That's good for repurchasing 7% of shares at current levels. The drug giant still expects its 2015 average diluted share count to be around 2.86B, down from 2014's 2.93B and Q4's 2.88B. MRK +1.7% premarket.
Banco Sabadell sees little chance of a rival bidder for TSB (OTCPK:TSBBY) emerging, as it nears a £1.7B takeover of the British bank, said Chairman Josep Oliu, adding he did not expect major regulatory obstacles for the purchase. Sabadell (OTCPK:BNDSY), Spain's fifth-biggest bank, already effectively controls 30% of TSB thanks to a call option on shares and has the backing of Lloyds (NYSE:LYG), which owns a 50% stake in the lender.
The inventory backlog of shares created by Whiting Petroleum's (NYSE:WLL) new public offering will take weeks to unload, a NYSE floor trader told Benzinga on Tuesday. Whiting plunged 20% yesterday on disappointment that its rumored sale is almost certainly dead in the wake of plans to raise $3.2B in a stock offering and sale of notes.
Lexmark has agreed to buy Kofax for about $1B, in a deal that would double the size of its enterprise software business. Following the announcement, Kofax (NASDAQ:KFX) shares soared, and are now up 46%premarket at $10.94, just shy of Lexmark's (NYSE:LXK) $11 per share cash offer. Lexmark is up 6.7%. Struggling with a decline in the PC and printer market, Lexmark divested its inkjet printer business in 2013 and has since looked to boost its software business.
Airbus is again cutting its stake in Dassault Aviation (OTC:DUAVF), dropping its holdings to around 27% from 42%, as it continues its plan to sell its full stake in the fighter jet maker by the end of 2015. Separately, the cockpit voice recorder for the Germanwings (OTCQX:DLAKY) flight that slammed into the French Alps yesterday has been found, although a search for the second black box, the flight data recorder, is still ongoing. The same model airplane, the Airbus (OTCPK:EADSY) A320, crashed into the Java sea off the coast of Indonesia just under three months ago (AirAsia Flight 8501).

Today's Markets:
In Asia, Japan +0.2% to 19746. Hong Kong +0.5% to 24528. China -0.8% to 3661. India -0.2% to 28112.
In Europe, at midday, London flat. Paris -0.5%. Frankfurt -0.3%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude flat at $47.53. Gold flat at $1191.70.
Ten-year Treasury Yield -4 bps to 1.88%
Notable earnings before today's open: APOL, DXLG, FRAN, LDOS, LNN,PAYX, YGE
Notable earnings after today's close: FIVE, FNV, FUL, OTIV, PSUN, PVH,RHT, TGB, VRNT, WOR
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)