Tuesday, May 26, 2015

Wall Street Breakfast: Charter Agrees To Acquire Time Warner Cable

 |  106 comments  |  Includes: AAPL, AMGN, AMZN, CHTR, CMCSA, GM, MSFT, QQQ, RYAA
Economy
Chinese shares marched higher in yet another session today, after the country announced over the weekend it would would allow funds domiciled in Hong Kong and China to be sold in each other's market starting July 1. China also said it would slash duties on some imported goods in a bid to boost consumer spending at home. The Shanghai Composite rose 2% to 4,910.90, taking its six-day rally to over 14%, while Hang Seng climbed 0.9% to 28,250.
Greece has threatened to default on its loan repayments again, saying it would be unable to meet pension and wage bills in June and also reimburse the IMF without a bailout deal with creditors. "This money will not be given and is not there to be given," Nikos Voutsis, the interior minister, told the Greek television station Mega. "We won’t accept blackmail that says it's either liquidity with a memorandum or bankruptcy." Euro -0.7% to $1.0899.
It's "misleading" to give so much importance to the Fed's first interest rate hike, since the process of returning to a more normal level will take a few years, Fed Vice-Chair Stanley Fischer declared at a conference in Israel. Any upcoming hike will be determined by data and not by date, he added. In a highly anticipated speech on Friday, Janet Yellen made clear the central bank was poised to raise interest rates this year, but also stressed that economic data would determine the tightening process.
Following the upbeat comments from the Fed and Friday's improved inflation data, the dollar rose against a basket of currencies on Tuesday, hitting an eight-year high of 122.76 against the yen. But whether the U.S. currency is ready for an attack on parity with the euro in the weeks ahead will largely depend on U.S. economic data improving after a disappointing Q1. Today's durable goods orders will be among the latest U.S. health indicators. U.S dollar index +0.7% to 97.15.
Stocks
Charter Communications has agreed to buy Time Warner Cable (NYSE:TWC) for $55B, finally clinching an agreement after its early 2014 bid was rejected and Comcast (NASDAQ:CMCSA) abandoned its offer. Charter (NASDAQ:CHTR) will pay $195.71 a share - 14% above Time Warner Cable's May 22 close - with $100 in cash and the remainder in its own stock according to a statement Tuesday. Bright House Networks, a smaller cable company Charter previously agreed to buy, will also be merged into the combined entity. TWC +9.1% premarket.
Bowing to regulatory pressure, Amazon (NASDAQ:AMZN) has begun booking European revenue in the countries in which sales were recorded, rather than funneling it through the low-tax haven of Luxembourg. The change, which could have a big long-term effect on Amazon's EU income tax payments, went into effect on May 1. The company's move could be a sign of things to come: Apple (NASDAQ:AAPL), Google (GOOG, GOOGL), Microsoft (NASDAQ:MSFT), Starbucks (NASDAQ:SBUX), and a slew of other U.S. multinationals have also come under fire for their use of tax havens to cut their EU tax bills.
Amazon is also prepping Handmade, a marketplace for handcrafted goods that takes direct aim at market leader ETSY. Etsy sellers have reportedly received invites offering a sneak peek at Handmade, directing them to a questionnaire regarding which products they offer. Amazon's (AMZN) huge customer base and fulfillment infrastructure could quickly make it a thorn in Etsy's side, however, Etsy's cult following and large network effect of craft/vintage goods buyers and sellers arguably make it tough to dislodge.
Samsung Group has announced the merger of two major affiliates, as it reconstructs itself to smooth the path for management succession within the founding Lee family. The all stock deal, approved by the boards of both firms, would see Samsung's de facto holding company Cheil Industries acquire building firm Samsung C&T, which has a key stake in Samsung Electronics (OTC:SSNLF), for 8.9T won ($8.1B).
With the scope of his design work having gradually expanded over the last few years, Apple's (AAPL) Jony Ive will now hold the title of Chief Design Officer, CEO Tim Cook said in a company memo. As a result of the change, Ive will hand over "day-to-day managerial responsibilities" for industrial and UI design to executives Richard Howarth and Alan Dye.
Twitter "has been engaged in an ongoing series" of discussions to acquire popular mobile reader app Flipboard in a $1B+ all-stock deal, Re/code reports, although the talks appear to have stalled. Flipboard, whose apps provide content from dozens of sources (including Twitter (NYSE:TWTR)) in a mobile-friendly magazine format, was valued at $800M in a 2013 funding round.
The mystery in Hong Kong continues after Goldin Properties surged as much as 52% today, after plunging more than 60% this past Thursday. CFO Kenas Chan said previously the company had no explanation for the decline. Despite the confusion, the stock has skyrocketed over 350% this year, the steepest rally on the Hang Seng Composite Index.
AstraZeneca's goal of topping $45B in revenue by 2023 has been dealt a severe blow by a problem with an experimental psoriasis drug that the company had viewed as a potential billion-dollar plus seller. Amgen (NASDAQ:AMGN), its partner on the project, announced late on Friday it was ending a collaboration to develop brodalumab after suicidal thoughts were observed in patients taking the medicine. AZN -1.6%; AMGN -0.8%premarket.
Ryanair said full-year profits surged 66% in the year to March as passenger numbers grew almost 11% to 90M on improved service and lower fares. Net income came in at €867M from €523M a year earlier, while sales increased 12% to €5.7B. Europe's largest budget airline said it also expects to carry more than 100M passengers for the first time this year and anticipates net profit of €940M-€970M. Ryanair (NASDAQ:RYAAY) shares are up 5.3% in London.
Fiat Chrysler Automobiles CEO Sergio Marchionne made a direct approach to General Motors (NYSE:GM) about a merger last March, according to NYT. An e-mail from the FCAU CEO pitched the strategic advantages of a combination of the two auto heavyweights, but was rebuffed by GM. In the last month, Marchionne made a highly entertaining trip to Silicon Valley and has been backing the company's 25-page thesis titled "Confessions of a Capital Junkie" in which it highlights the benefits of automobile industry consolidation.
Meanwhile, Justice Department investigators have identified criminal wrongdoing in General Motors' (GM) failure to disclose its defective ignition switch tied to at least 104 deaths and are negotiating what is expected to be a record penalty, NYT reports. A final settlement number is still being negotiated but is expected to exceed the $1.2B paid last year by Toyota (NYSE:TM) for concealing unintended acceleration problems in its vehicles.

Today's Markets:
In Asia, Japan +0.1% to 20437. Hong Kong +0.9% to 28250. China +2% to 4911. India -0.4% to 27531.
In Europe, at midday, London -0.4%. Paris +0.1%. Frankfurt -0.6%.
Futures at 6:20: Dow -0.3%. S&P -0.3%. Nasdaq -0.5%. Crude -0.7% to $59.32. Gold -0.8% to $1194.
Ten-year Treasury Yield +3 bps to 2.21%
Notable earnings before today's open: AZO, CAE, CYRN
Notable earnings after today's close: FWM, NMBL, TDW, TIVO, VNET,WDAY
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