Today was another one of those days where it was hard to tell if the market was up. The market gapped up and then posted a great morning rally, and then proceeded to give back most of the gains from noon until late in the afternoon. Housing was dismal, producer prices were down, and Bernanke and Paulson testified about the TARP usage.
Anheuser-Busch Companies Inc. (NYSE: BUD) is no more..... The merger was completed today with InBev and the stock will now be European listed and be called Anheuser-Busch InBev. Shareholders of common stock receive $70.00 per share in cash as part of this $52 billion merger.
Corning Inc. (NYSE: GLW) gave disappointing LCD panel guidance which was "below" the $1.1 to $1.2 billion in revenues previously offered and "at the low end of below" the $0.20 to $0.28 EPS range previously offered just a few weeks ago. Shares were down 7% right before the the close.
Who knew that the fate of world beer would one day be in the hands of the beer faithful in Rochester, New York? The tastes of this blue-collar town, along with neighbors Syracuse and Buffalo, are key in the pending acquisition of Anheuser-Busch (NYSE: BUD) by Belgian giant InBev, SA. The three cities make up half of the U.S. consumption of Labatt Blue and Labatt Blue Light. Due to the popularity of Labatt brews and Budweiser brands in upstate New York, the U.S. Justice Department worries that beer prices might rise in Rochester.
So, if the acquisition is to be approved, giving Europeans control over America's iconic beer brands, InBev is being asked to sell the Labatt USA subsidiary. Other major InBev brands, including Stella Artois, Becks, and Bass, are not considered competitive enough in any markets to reduce competition between beers and provide upward pressure on prices.
Nope, it all comes down to Rochester and its surprisingly European tastes. Who would have thought?
The credit crisis has ruined a number of M&A deals, so why not the InBev transaction to buy Anheuser-Busch (NYSE: BUD) and create the world's largest brewer?
The problem may not be so far fetched. Most of the money needed to close the transaction is debt.
According toReuters, "A banking industry meltdown and corresponding market volatility has already caused the Belgium-based brewer to postpone a $13.4 billion rights issue it planned in connection with the deal."
The InBev management may say that BUD is worth less now as the economy has faltered. The Anheuser-Busch board may not buy that. They like the $70 a share offer they have now. But, do they have any choice to take less? Maybe not.
BUD trades at $58, which means that some risk of problems with InBev are already in the stock. But, before word of the deal leaked, BUD traded below $50. If the board walks now, especially given how far the overall stock market is off, shares could drop well below $40.
Anheuser-Busch is trapped by the 40% drop in most of the equity indexes. Its shareholders are about to be hammered. Look for a deal to get done at $55. BUD don't have any leverage to do better.
Stock futures dropped sharply Monday morning after the bailout plan was revealed Sunday and several banks in Europe were bailed out. U.S. investors are expected to react similar to stock markets around the word, which tumbled Monday following Washington's $700 billion bank bailout deal. The bailout may not be enough, and it will take a while to clean up the mess and restore confidence to financial markets. The economic reading due to be released today, August personal income and spending is not expected to affect markets much.
Three major banking bailouts were announced in Europe. 1) The Dutch-Belgian bank and insurance giant Fortis failed and was provided with a $16.4 billion lifeline by the governments of Belgium, the Netherlands and Luxembourg. 2) The British government nationalized mortgage lender Bradford & Bingley -- the second British bank to be taken under government control this year. 3) A consortium of German banks and regulators bailed out Hypo Real Estate Holding AG, in a deal worth billions of dollars.
Wachovia Corp. (NYSE: WB) - after WaMu's failure, the focus has shifted to Wachovia and at least two major banks, Citigroup Inc. (NYSE: C) and Wells Fargo & Co. (NYSE: WFC), were reportedly in talks Sunday to buy it. Wachovia shares are trading down 60% to $4 in pre-market action. C and WFC shares are down over 6.5% and 3.5% respectively in pre-market trade.
For financial markets, August is always a slow time as Wall Streeters head for their vacations. But this year, there was more than just seasonality. Simply put, it was a very tough month for M&A operators.
It's been about a year since the credit crunch started, and it looks like things aren't getting better. If anything, it's a good bet we'll continue to see volatility and layoffs in the financial services space.
In August, the M&A volume in the U.S. came to about $28.5 billion, which is 53% off from the same period a year ago.
Ironically, while private equity funds have a huge amount of capital to put to work, there is not much bank financing. As a result, most of the private equity deals have been fairly small (below $2 billion or so).
Also, some of the recent mega deals – such as InBev's $45 billion acquisition for Anheuser-Busch Cos. (NASDAQ: BUD) – are crowding out the financing market.
In other words, investment bankers may need to wait until next year for things to warm up again.
The stock market was down yesterday and it is down again today. Bearish sentiment is roaming through Wall Street right now, so I thought I would look back on another occasion when the market was going through similar turmoil and I wrote about the following eight stocks, which I thought would be "safe havens" in such a storm.
Six of the eight did well and two did not, and of course one of those two was a disaster. Among the losers, I do not think anyone is fretting about UPS, which is still one of the few triple-A rated companies along with Berkshire Hathaway. It has been well reported that the slowing economy and higher fuel prices have been the major culprits affecting UPS's earnings. In the case of WaMu, it's demise has also been well reported, but at the time I recommended it WaMu had a stellar reputation of growth and high yield for over two decades. There is no hiding, it turned out to be a lousy pick and an ANTI-SAFE Haven
Washington Mutual(NYSE: WM) closed Monday at $4.21 down from $45.50; a 98% loss.
Fortunately the remaining six picks have done very, very well. If you had bought the pool, the average gain over the last two years would have been 7.14%. Adding the dividends over the two years would have raised this to 13.14%.
For hungry Wall Street investment bankers, the $45 billion merger of InBev and Anheuser-Busch Cos. (NASDAQ: BUD) is a nice relief. Yes, it means lots of juicy fees.
Another big winner is Busch IV (the CEO of Anheuser). Apparently, he is negotiating a consulting agreement that may exceed $10 million (there will be a $120,000 monthly retainer through December 31, 2013).
But according to a piece in Reuters, the transaction may have a dark side. Simply put, it hasn't been easy to raise the debt financing. As a result, this may crowd out some of the financing of other M&A deals.
The high rates on the InBev financing is likely to push up other debt costs on other pending transactions. What's more, there will be a flood of bond issuances on the market, which will put further pressure on the debt markets.
In other words, we may see a slowdown in M&A activity for the rest of the year -- except for those buyers that have substantial balance sheets.
New data from Dealogic shows that July was the fifth straight month of growth in U.S. mergers and acquisitions activity -- and the highest total since a year ago.
But it's not quite as good as it looks. The data is skewed upward by foreign bids for American companies like Genentech (NYSE: DNA) and Anheuser-Busch (NYSE: BUD) and, according to the Associated Press, "the rise in M&A ... more likely reflects foreign companies taking advantage of the weak dollar than it does a loosening of credit."
But from an investors' perspective, the cause of the increase probably doesn't really matter. Deep value investors like Mohnish Pabrai have been struggling to post strong returns of late, in part because the private equity funds that could be relied on to buy undervalued companies a couple years ago have brought their U.S.-based activity to a hault.
But now the foreign companies and sovereign wealth funds are in the game and, from an investors' perspective, that's just as good -- whoever will buy undervalued public companies at a premium will boost returns. The low price-book, low price/earnings, contrarian investment strategies that haven't worked lately could be ready to start working again, just as they have historically.
The credit crunch should be bad news for investment banks, right? Not necessarily. After all, strategic buyers have been aggressive lately, perhaps because there's not much competition from private equity operators.
One of the beneficiaries is Lazard (NYSE: LAZ), which reported its Q2 numbers. Eearnings came to $64.6 million, or 54 cents per share, which compares to $61.5 million, or 53 cents per share in the same period a year ago.
Simply put, Lazard has been snagging some choice client engagements. For example, Q2's revenues on merger assignments spiked 37% to $225.1 million.
In fact, the firm is an advisor on InBev's $52 billion deal to purchase Anheuser-Busch Cos. (NYSE: BUD). Another high-profile assignment is Gaz de France's 44.6 billion euro deal with Suez.
Keep in mind that Lazard has worked on about $100 billion in announced deals in July alone. This is certainly a nice momentum boost.
Besides, Lazard has a strong restructuring division. While the business is still fairly small – at $32.7 million – there should be lots of potential for growth. Just look at some of the major bankruptcies lately, such as Mervyn's, Steve & Barry's, Linen 'n Things and so on.
Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors' attention with Costco already giving a profit warning. Costco Wholesale Corp. (NASDAQ: COST) shares are plunging over 8% in premarket trading after the wholesale retailer warned its August-ending quarter's profit would miss analyst estimates. This is most surprising as Costco had been one of the retailer that seemed to have benefited from consumers trying to save and buy lower-cost items. But Costco blamed the lower profit on rising energy costs, saying it will earn less than $1 per share.
Washington Mutual Inc. (NYSE: WM) late Tuesday reported second-quarter results, posting a loss of $3.3 billion, was worse than analysts had anticipated. Excluding one-time items, WaMu lost $3.34 per share, much wider than the expected loss of $1.05 per share. Piper Jaffray downgraded WM shares from Neutral to Sell and Friedman Billings halved its target price on the shares from $8 to $4. Shares are off nearly 3% in premarket trading.
Yahoo Inc. (NASDAQ: YHOO) also reported profits and sales that came up short of estimates. Second-quarter profit fell 18% to $131 million, or 9 cents per share. Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Financial. Revenue grew 6% to $1.8 billion, or $1.35 billion after subtracting commissions, also below estimates. Yahoo! shares, however, are up about 3% in premarket trading since investors were relieved the performance wasn't as bad as many had feared after Google (NASDAQ: GOOG) reported last week and disappointed investors. Also, Yahoo didn't dramatically lower its revenue outlook for the remainder of the year.
TheStreet.com's Jim Cramer says the biotechs look sweet in a bank-led slowdown.
Thank you, New York Times. Remember just a couple of weeks ago, when The New York Times wrote about how Genentech's (NYSE: DNA) (Cramer's Take) Avastin was too expensive and the stock got cracked down to $77? I know Roche did. I bet that was the last draw. The dramatic decline in the dollar plus a sentiment that has spawned a thousand articles -- that life-saving drugs cost too much -- gave the Swiss giant a chance to bolster its own anemic pipeline by buying what may be the greatest wonder drug of all time in its $43 billion bid, no doubt the beginning price for what will ultimately be a deal close to $100 a share. (I pushed DNA hard here and on "Mad Money" because I have been a huge believer in Avastin and I'm confident that people will pay anything -- or family members will pay anything -- for the hope of three or four months or more of life, or the chance of beating cancer altogether.)
I don't even know where to begin about the positives of this deal. First, it confirms the general trend: the dollar is so weak that it is worth buying anything that's name-brand if you are from Europe, including Anheuser-Busch (NYSE: BUD) (Cramer's Take), a total creature of the weak dollar.
Again this week, in a list of earnings expectations for some prominent companies in a variety of sectors, we see an apparent optimism. That is, analysts are anticipating more earnings growth than earnings declines.
Analysts surveyed by Thomson Financial expect the following companies to report a rise in earnings when compared to the same period of the previous year.
Who is next to fail/fall? That seems to be the only question on investors' minds these days, and this morning is not different as concern about the health of the financial sector grows. With global markets plunging overnight, the dollar falling to yet another record low against the euro and ahead of a day full of economic data releases and earnings, as well as a testimony from Fed chairman Bernanke, U.S. stock futures dropped this morning, indicating the market is poised for a lower open.
On Monday, what seemed like might be a promising day with the government plan to bail out Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and several large deals including the mega beer deal between Anheuser-Busch (NYSE: BUD) and InBev. But once again financials took front stage and after IndyMac was seized by federal regulators over the weekend Wall Street tumbled. The Dow industrials fell 45 points, or 0.41%, the S&P 500 dropped 11 points, or 0.9%, and the Nasdaq Composite lost 26 points, or 1.17%.
As the day go on, investors will have more to chew on though as several economic reports are due out today. June Producer Price Index, a measure of inflation at the wholesale level, is due before the market open, at 8:30 a.m. EDT. While economists expect a smaller increase in prices in June, an increase is expected for both PPI and core-PPI, which excludes food and energy prices. At the same time, June retail sales will be released, and may show a nice increase due to the government checks. July NY Empire State Index will also be released at that time and it's likely we'll see it decline further. Then, 10:00 a.m., a reading on business inventories for May is due.
The exchange rate between the dollar and Euro gives InBev a 30% to 35% discount making the acquisition price seem like a great deal for BUD shareholders but an even better one for InBev shareholders. And if the the currency exchange rates shift back over time then all the shareholders win.
This means that Americans will be answering to the Dutch Belgians. If the dollar had gained against the Euro instead of becoming weaker is it possible that Anheuser-Busch (BUD) would have bought out InBev (NV)? If the dollar stays down or drifts lower as seems likely right now look for more M&A activity from abroad.
In the mean time, since 'my pal Warren', is the largest shareholder of BUD through Berkshire Hathaway (NYSE: BRK.A) and supports the deal, will he remain a shareholder of the new company? No doubt this increases the value of Berkshire, but does this set the stage for Buffett to enter the European market in a big way?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B.
The credit crunch is not going away, and as a result, there has been a sharp fall-off in leveraged buyouts (LBOs). Basically, only relatively small LBOs -- between $1 billion to $2 billion -- are getting done.
But there is a bright spot: strategic acquisitions. If anything, we are seeing a variety of mega deals in this category. A survey from Dealogic shows that – as of June 25 – there were $597 billion in strategic M&A transactions, only 2% down from last year's total.
Today was another one of those days where it was hard to tell if the market was up. The market gapped up and then posted a great morning rally, and then proceeded to give back most of the gains from noon until late in the afternoon. Housing was dismal, producer prices were down, and Bernanke and Paulson testified about the TARP usage. 
For financial markets, August is always a slow time as Wall Streeters head for their vacations. But this year, there was more than just seasonality. Simply put, it was a very tough month for M&A operators.
and 
. He also operates 
The stock market was down yesterday and it is down again today. Bearish sentiment is roaming through Wall Street right now, so I thought I would look back on another occasion when the market was going through similar turmoil and I wrote about the following eight stocks, which I thought would be "safe havens" in such a storm.
The credit crunch should be bad news for investment banks, right? Not necessarily. After all, strategic buyers have been aggressive lately, perhaps because there's not much competition from private equity operators.
Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors' attention with Costco already giving a profit warning.
We have posted numerous articles about the acquisition of 
The credit crunch is not going away, and as a result, there has been a sharp fall-off in leveraged buyouts (LBOs). Basically, only relatively small LBOs -- between $1 billion to $2 billion -- are getting done.
Big 3 CEOs drive to Washington to suck up to Congress
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
