According to people familiar with the discussions, the Wall Street Journal reported that Microsoft Corporation (NASDAQ: MSFT) has held discussions with Time Warner Inc (NYSE: TWX) and News Corporation (NYSE: NWS), among others, about joining it in a deal that could lead to the breakup of Yahoo! Inc (NASDAQ: YHOO). Some of the sources said the preliminary talks are unlikely to result in a deal with Yahoo!
Johnson & Johnson (NYSE: JNJ) is reportedly in exclusive talks to sell its wound-care business Ethicon to the private-equity arm of JP Morgan Chase & Co (NYSE: JPM), according to the Wall Street Journal. Terms of the potential deal were not disclosed.
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Sources familiar with the inquiry said that the Justice Department has opened a formal antitrust investigation into a deal that would allow Google Inc (NASDAQ: GOOG) to provide some search advertising for Yahoo!. The Washington Post reported that investigators will demand documents from Google and Yahoo!, as well as other large companies in the media and Internet industries.
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Reuters reported that regulators in the European Union are looking at the long-term effects of BHP Billiton Limited's (NYSE: BHP) $170B bid for Rio Tinto Group (NYSE: RTP). Sources familiar with the EU questionnaire said regulators have asked competitors and customers about effects of the deal on their businesses through 2015.
Anheuser-Busch Companies Inc (NYSE: BUD) is going to turn down InBev's unsolicited $46.35B takeover offer and that may come before week's end, the Wall Street Journal reported. InBev is then expected to pursue a hostile takeover and Anheuser will say the offer undervalues the company. Instead, Anheuser will attempt to boost its share price by selling non-core assets such as its theme parks.
The Wall Street Journal also reported that Belgian-Dutch financial firm Fortis NL (OTC: FORSY), in a move to increase its solvency, will attempt to raise $12.54B, and will also cancel its interim dividend and sell some assets.
The Financial Times reported that the London Stock Exchange, in a joint venture with Lehman Brothers Holdings Inc (NYSE: LEH), unveiled a pan-European equities trading platform to fight rivals that are hurting its market share.
Long Island, NY's Astoria Financial Corp (NYSE: AF) has found a novel way to reduce the number of its nonperforming loans by changing its internal policy on when mortgages are classified on its books as troubled, the Wall Street Journal reported. By counting home loans as non performing when the borrower misses at least three payments, not two, Astoria reduced its non-performers to $69M from $106M in three months.
The Wall Street Journal also reported that the indictments of Matthew Tannin and Ralph Cioffi, two former Bear Stearns hedge-fund managers, are expected to cite a personal e-mail suggesting the funds were "toast," four days before they told investors they had little to worry about. JP Morgan Chase & Co (NYSE: JPM) has said it will cover the legal costs of the fund managers.
Hewlett-Packard Company (NYSE: HPQ) is set to reorganize its printer unit. The Wall Street Journal said that the unit's five business units will be cut down to three to become more efficient at adapting to a marketplace in which consumers are relying less on printing.
According to people close to the situation, the Financial Times reported that Anheuser-Busch Companies Inc's (NYSE: BUD) board of directors is planning to meet this week to discuss the $46B bid from rival brewer InBev.
The Wall Street Journal reported that executives from Ford Motor Company (NYSE: F) informed plant managers and union representatives that they intend to reduce overtime and that additional buyouts of union workers were necessary to cut costs.
The Wall Street Journal also reported that federal prosecutors are preparing to file criminal charges against Ralph Cioffi and Matthew Tannin, two hedge fund managers at Bear Stearns, now part of JP Morgan Chase & Co (NYSE: JPM), with securities fraud.
Investors who helped U.S. financial companies raise capital are currently losing nearly $10B on paper, according to an analysis by the Financial Times.
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Fortune reported that the materials used to build Apple Inc's (NASDAQ: AAPL) new 3G iPhone could cost as little as $100, while the components of the old iPhone cost $170, according to analysis by Portelligent, an Austin, Texas-based teardown specialist.
Steve Jobs appeared to be extremely thin during the unveiling of Apple's new iPhone last Monday, causing speculation by observers. Fortune speculated that Jobs' weight loss over the years is being caused by a complex operation he underwent in 2004, in order to treat a rare type of pancreatic cancer.
Verizon Wireless, a joint venture of Vodafone Group Plc (NYSE: VOD) and Verizon Communications Inc (NYSE: VZ), is in talks to acquire Alltel Corp. in a deal valued at about $27B, the Wall Street Journal reported. If successful, the combined companies would create the largest cellphone company, and would be better positioned to compete against AT&T Inc (NYSE: T).
Gregory B. Penner, the son-in-law of Wal-Mart Stores Inc (NYSE: WMT) chairman S. Robson Walton, is expected to join the company's board of directors, a move seen as the beginning of a leadership change at the company, according to the Wall Street Journal.
The Financial Times reported that Singaporean sovereign wealth fund Temasek refused to provide funds to Bear Stearns shortly before Bear's sale to JPMorgan Chase & Co (NYSE: JPM). Temasek reportedly refused the request for practical and political reasons.
Russia's Interior Ministry questioned the head of BP Plc's (NYSE: BP) Russian oil venture as part of a criminal investigation into possible large-scale tax evasion, the Financial Times reported.
While bank stocks aren't exactly hot, they triggered yesterday's rally because when J.P. Morgan Chase & Co (NYSE: JPM) and Wells Fargo & Company (NYSE: WFC) reported, there were no unexpected surprises, according to the Wall Street Journal's "Heard on the Street". The ups and downs in the sector are expected to continue.
According to people familiar with the matter, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) may be moving closer to outsourcing its search advertising to Google Inc (NASDAQ: GOOG) after an initial test yielded what they considered to be positive results.
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The New York Times reported that AT&T Inc (NYSE: T) is planning today to make an announcement that they will gift $100M to improve the skills of the nation's work force and fight the problem of high school dropouts.
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Celgene Corporation (NASDAQ: CELG) is best known for its blockbuster drug Revlimid which is used treat multiple myeloma, a cancer which attacks blood and bones. For patients, it can prolong their lives about 2.9 years, or longer, according to Investor's Business Daily's "The New America".
When's the worst time to raise money? Well, of course, when you desperately need it.
That's the predicament for Washington Mutual Inc. (NYSE: WM), which needs to shore up its beleaguered balance sheet. Rejecting a buyout offer from JPMorgan (NYSE: JPM) for $8 per share, WaMu has instead opted for a $7 billion capital infusion from an investor group that includes private equity maestros, TPG.
Unfortunately, the deal is extremely dilutive. In fact, a Goldman Sachs (NYSE: GS) analyst -- James Fotheringham -- thinks that investors should actually short the common stock of WaMu and buy the company's bonds.
It's a bold call -- but seems to make sense. The capital infusion should be a back-stop on the bonds. At the same time, there is likely to be more problems in WaMu's core business, as the economy continues its sluggish ways.
Simply put, Fotheringham thinks that WaMu shares should trade at its tangible equity value, which is estimated at $9.84 per share. Plus, he thinks there will need to be about $14 billion set aside for charges on bad loans. Oh, and profits aren't likely to come until 2010, which is an eternity for equity investors.
However, for individual investors, it can be quite risky to short stock. In other words, perhaps the best policy is to stay clear for awhile on WaMu.
In an effort to increase sales in the Middle East, the Wall Street Journal reported that Dell Inc (NASDAQ: DELL) is in talks with a government-owned vehicle in Dubai called Tecom about establishing a joint venture.
The Wall Street Journal also reported that Washington Mutual Incorporated (NYSE: WM), which obtained a $7B capital infusion from TPG and other investors, had reportedly been working on the TPG deal while negotiating with JP Morgan Chase & Co (NYSE: JPM), which made a preliminary takeover bid of about $7B, people familiar with the deal said.
Citigroup Incorporated (NYSE: C) is close to reaching a deal to sell $12B in leveraged loans at a discount to a group of leading private equity firms, the Financial Times reported. Although details of the deal were still being worked out, inside sources said Apollo Management, The Blackstone Group LP (NYSE: BX) and TPG would buy the loan portfolio at a discount that could come in at about 90 cents on the dollar.
OTHER PAPERS:
The UK Times reported that The Boeing Company (NYSE: BA) is today expected to announce that its 787 Dreamliner has been delayed by 18 months, a setback which will affect all airlines that have ordered the 787, including British Airways Plc (OTC: BAIRY) and Virgin Atlantic.
Troubled savings and loan giant Washington Mutual Incorporated (NYSE: WM) will receive a $5B investment from private equity firm TPG and other investors, the Wall Street Journal reported. For now, this eliminates the possibility that it will be acquired by another financial institution such as J.P. Morgan Chase & Co (NYSE: JPM).
People close to the situation said that Delta Air Lines Inc (NYSE: DAL) and Northwest Airlines Corporation (NYSE: NWA) have revived merger talks. It is speculated, the Financial Times reported, that weak demand and high fuel costs are urging the airliners back to the table to work out a merger arrangement.
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Evergreen Solar Inc (NASDAQ: ESLR) is expected to announce today that it will double the size of its manufacturing facility in Massachusetts and add about 350 new jobs as part of its ongoing expansion, according to the Boston Globe.
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Bloomberg reported that The Goldman Sachs Group Inc (NYSE: GS) has been the only major investment bank that has refused to reduce its leverage. In fact, Goldman's adjusted leverage ratio of assets rose to 18.6 at the end of February, from 17.5 at the end of November.
They say you're judged by the company you keep, and I am honored to be keeping the company of one of my favorite financial journalists, James B. Stewart. Seems that we are both strong critics of the Federal Reserve-backed bailout of Bear Stearns. (I've expressed my dismay previously here and here.)
In today's Wall Street Journal, Mr. Stewart writes that "We can't turn the clock back to March 16, when the original deal was announced. Any subsequent improvement in Bear's asset value should accrue to the people who made it possible, namely the taxpayers, and to a lesser extent JP Morgan, which took the risk of stepping into the breach -- not those who drove the firm to the brink." Exactly!
As Mr. Stewart said, without the Fed's guarantee of $30 billion of Bear Stearn's assets, and JP Morgan's (NYSE: JPM) willingness to acquire the company, Bear Stearns would be in bankruptcy. So why are Bear Stearns shareholders being rewarded? This is the equivalent of helping a guy who was falling off a cliff regain his footing, and then paying him $1 billion for the privilege.
According to the article: "I would not be averse to a Fed-assisted transaction," Stumpf said, adding that any deal would have to meet the company's traditional acquisition targets and benefit the bank's acquired customers. Wells has built a reputation as a disciplined buyer over the years, focusing on deals that generate at least a 15% internal rate of return and contribute to the bottom line within three years.
"Fixer-uppers don't bother us," he added.
Who wouldn't want to be part of a deal like this? It's become pretty obvious that JP Morgan Chase got an amazing deal to buy Bear Stearns, and now Wells Fargo wants to join the party.
MarketWatch has an interesting opinion piece out on JPMorgan's (NYSE: JPM) re-negotiated deal for troubled investment bank, Bear Stearns (NYSE: BSC). Entitled "Dimon's Dog ", the article's thesis is that while JPMorgan's CEO, Jamie Dimon, initially had a great score scooping up Bear on the brink of insolvency, his renegotiated deal leaves the company with a significantly weaker hand than it had just one week ago.
According to MarketWatch's David Weidner, "Somewhere, Gordon Gecko is hanging himself with his suspenders."
It seemed that Dimon had it in the bag. A quick and dirty deal, approved by Bear's board with pressure from the Federal Reserve Board -- it appeared a done deal.
But then something happened.
$2 had tremendous shock value. Regardless of how that values the company, you can buy a hot dog for $2. The market didn't believe it could happen and I guess what happened is that JPMorgan couldn't believe it either even though the firm committed to taking on Bear Stearn's obligations whether or not Bear shareholders agreed to the deal. Check out Sheldon Liber's article on the subject.
When I first saw the news that JPMorgan Chase & Co. (NYSE: JPM) was quintupling its partially fed-funded offer for The Bear Stearns Companies, Inc. (NYSE: BSC), I felt my blood boil. I wrote that "no taxpayer-subsidized bailout should include over $1 billion in cash for shareholders of a mismanaged company."
While I'm usually able to resist the tempting allure of populism, in this case I can't. I have no evidence to back this up, but I do have a sneaking suspicion that the average shareholder of Bear Stearns is somewhere above the median in terms of wealth. Chairman and former CEO James Cayne -- who is partly responsible for the company's mess -- is set to receive around $75 million if the $10-per share offer goes through. And we can all thank the Federal Reserve for that bit of charity.
But maybe I've got it wrong. Maybe the role of the federal government really is to bail out people who made crummy investments in stuff they didn't really understand. If that's the case, I have another bailout idea:
In a deal that values Global Ship Lease at about $500M, the Wall Street Journal reported that Marathon Acquisition Corp. (AMEX: MAQ) is expected to acquire a majority stake, or 66%, in the firm that acquires and charters vessels to container shipping companies.
Activist investors are moving in on Circuit City Stores Inc (NYSE: CC), which is expected to result in a change of management as the company's turnaround efforts have failed and many investors have jumped ship, according to the Wall Street Journal's "Heard on the Street".
The mining industry is consolidating, Business Week noted, and investment pro Richard Steinberg, sees Anglo American Plc (NASDAQ: AAUK) as a possible takeover target due to its sizable deposits of platinum and ferrous and nonferrous metals.
Perfect World Co Ltd (NASDAQ: PWRD), a big player in China for online gaming, has seen its share price shoot up to $37 in October, up from $16 back in July, Business Week reported, and then slide back down to $21.90, attracting investors again.
Business Week reported that investors are flocking to overseas investments and opportunities as they have become spooked by Bear Stearns' collapse, and the prospect of a protracted U.S. financial crisis or recession. John Maloney, president of M&R Capital Management says it makes sense to put money in non-U.S. investments, particularly in Liberty Global Inc (NASDAQ: LBTYA), a major cable company.
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Comfort Zone Investing: Keep your recovery expectations real
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