If you ever wondered what a quick stealth 1,000 point move in the DJIA looks like, you just have to look at the move from last week's lows. Today's economic reports came out fairly dismal again, although the deterioration in "some" areas was not quite as bad as expected. Enjoy tomorrow's tryptophan laziness after turkey on Thanksgiving.
BCE, Inc. (NYSE: BCE) announced that KPMG found that BCE might not fit within the solvency test at the December 11 closing date on a post-merger basis because of the added debt, which may throw the going-private deal led by the Ontario Teachers Pension Plan in jeopardy. Shares were down before the close.
Citigroup, Inc. (NYSE: C) shares rallied again today after it was reported last night that Mexican billionaire Carlos Slim bought a stake of over $100 million in Citigroup. Shares were up before the close.
General Motors Corp. (NYSE: GM) rose sharply on rumors and reports that it and the other automakers would outline some sort of formal plan next week. Shares were up before the close.
If you want a little bear market humor, here is a quick take on some familiar financial terms that have been redefined to fit the new economy.
The telecom business is definitely not recession-proof, as those that have followed the industry have recently realized, but it is not a field that is going to fade into the horizon any time soon either. Simply put, people need to communicate and the telecom business is poised to continue rolling with the new technology and bringing people what they need. If you see the value of telecom companies and agree that their future is, perhaps not golden, but definitely strong, then an investment in an Exchange Traded Fund (ETF) is an excellent way to invest in the future of the telecom field without placing all of your trust in one specific company.
iShares S&P Global Telecommunications Sector ETF (NYSE: IXP) let's you own shares in some of the most noted and reliable telecom companies by simply purchasing shares of the one ETF. With IXP you'll find your investment basket is loaded with companies such as Amercia Movil, S.A.B. (NYSE: AMX) a fixed and wireless provider in Latin America, AT&T, Inc. (NYSE: T) a telecom provider for customers in the U.S. and worldwide, Verizon Communications (NYSE: VZ) a wireline and domestic wireless provider across the globe, as well as several other highly rated and well known telecom leaders.
iShares charges only a 0.48% fee to maintain IXP using computers rather than money managers. IXP also has typically paid about $1.50 per year in dividends -- IXP is down about (41%) this year so that's about a 4% yield -- and these companies seem to have the cash-generating ability to continue dividends.
Of the 44 stocks in IXP, the top 10 holdings total about 71% of all total assets. Take note of the global exposure you'll get by investing in the future of the telecom industry:
Despite all this, some deals are getting done. Perhaps the most notable is the BCE (NYSE: BCE) LBO. BCE has reached an agreement with its private equity sponsors and banks to close its $51 billion LBO. This will represent the biggest buyout in history.
Now, there are some wrinkles. The closing date will be extended to December and there will not be any dividend payments for the rest of the year. The break-up fee was also upped from $1 billion to $1.2 billion.
Yet, the fact is that the price tag will remain unchanged (at $42 per share). No doubt, this is a big feat, especially in light of the credit crunch.
Apparently, there was much discussion about renegotiating the price. Then again, the prospects of massive litigation were daunting, as we have seen in a variety of other deals such as with Clear Channel, SLM (NYSE: SLM) and Huntsman Corp. (NYSE: HUN).
BCE Inc. (NYSE: BCE) shares are jumping over 10% in premarket trading after Canada's Supreme Court overturned a Quebec Court decision, clearing the way for the $52 billion leveraged buyout by Ontario Teachers' Pension Plan and U.S. private equity firms. The buyers might still negotiate the price down though.
Halliburton (NYSE: HAL) withdrew a $3.6 billion offer for Britain's Expro International after the U.K. oil services firm stuck by a smaller bid from a private-equity consortium.
Some analyst calls this morning:
J.C. Penney Co. (NYSE: JCP) was upgraded by Deutsche Bank to Buy from Hold and the price target upped to $46 from $45.
Motorola Inc. (NYSE: MOT) was downgraded by Piper Jaffray to Sell from Neutral on continued weakness in North American market. The target price was cut to $7 from $9.75. Shares are down over 2% in premarket trading.
First Solar (NYSE: FSLR) price target was upped at Lehman Brothers from $280 to $335. Shares are up over 2.5% in premarket trading.
Back on May 21st, the $34.1 billion buyout deal for BCE (NYSE: BCE) looked bleak. A Quebec court ruled that the process had to stop -- so as to evaluate the impact on bondholders. As a result, BCE's stock price plunged from $37.83 to $33.10.
Of course, the decision was immediately appealed to Canada's Supreme Court. And, it was a savvy move. Today, the high court agreed to allow the BCE deal to move forward (this is according to a report in the Wall Street Journal, which is a paid publication). In fact, there was no rationale provided (instead, this will be provided at a later date).
However, there are still headwinds on the buyout. Simply put, the credit crunch is still lingering and making it extremely difficult to pull off mega financings. The banks on the deal include Citigroup (NYSE: C), Deutsche Bank (NYSE: DB), Royal Bank of Scotland, and Toronto-Dominion Bank. Of course, they don't want to sustain any more losses on their balance sheets.
Then again, this does not mean the deal will fall apart. Rather, there will likely be pressure to renegotiate the price tag on the transaction. After all, this is what happened with the buyout of Clear Channel.
BCE Inc (NYSE: BCE) is trading at $34 in pre-open trading, above its close of $32.71.
BCE will ask Supreme Court of Canada on June 17, 2008 to overturn an appeals court ruling that the takeover of the company by an investment arm of Ontario Teachers Pension, Providence Partners and Madison Dearborn Partners didn't adequately consider the negative effect on bondholders.
BCE July option implied volatility of 35 is near its 26-week average according to Track Data, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Just last week, it looked like the $52.9 billion buyout of BCE (NYSE: BCE) was dead after a Canadian court ruled that the company must look at the interests of bondholders as well. The upshot: the deal was stopped.
Well, things are looking somewhat better now as the Supreme Court of Canada is going to expedite the process to determine the validity of the ruling.
True, there's no guarantee that the court will reverse the ruling, but then again, at least BCE will get a quick resolution, which is important in light of the June 30th deadline on the deal (when the private equity sponsors can walk away from the deal without paying a break-up fee).
Yet, the BCE transaction still has other major hurdles. The banks are nervous about extending the massive loans for the deal. Keep in mind that there is a November deadline after which the bankers are not required to fund the deal.
In light of all this, it seems a good bet that there'll be a renegotiation on the terms of the deal.
So far in today's trading, BCE's shares are up nearly 4% to $35.27.
Jonathan Nelson, the CEO of Providence Equity Partners, was recently on the front cover of Fortune. The headline was: "The Biggest Deal Ever."
Unfortunately, that deal – the $52.9 billion buyout of BCE (NYSE: BCE) – is imploding.
Of course, one big issue has been the grueling credit crunch. Simply put, US banks are trying to bolster their balance sheets – not take on risky loans.
And, today we learned about another pesky problem; that is, the Quebec Court of Appeal ruled in favor of BCE's bondholders to stop the deal (they thought they were getting a raw deal).
Actually, it was a surprising decision (but strange things can happen with mega deals). While it's possible that BCE will prevail, it might be a pyrrhic victory. Basically, the more time that passes, the harder it is to close the deal. In other words, to salvage things, BCE may have to renegotiate the price (which would put less pressure on bondholders).
So far in today's trading, BCE's shares are down 13% to $32.74.
It seems that the BCE (NYSE: BCE) buyout plan, has hit yet another bump on the road, only this one could not be as easy to overcome. A Quebec appeals court reversed a lower court and rejected the $33 billion buyout plan accepting the claim of a group of bondholders that the deal is unfair to them. BCE shares are plunging nearly 15% in premarket trading.
Earnings today are due from Barnes & Noble (NYSE: BKS) -- just after the company said it was interested in buying Borders (NYSE: BGP) -- and Gap (NYSE: GPS) -- a day after the clothing retailer announced an expansion in Russia.
Suntech Power Holdings Co. (NYSE: STP) shares are jumping over 7.5% in premarket trading after the solar energy company reported that first-quarter earnings more than doubled on 76% higher revenue. Earnings reached $55.8 million, or 33 cents an American depositary share and revenue reached $434.5. Analysts estimated 28 cents for the quarter.
BCE Inc (NYSE: BCE) a Quebec Canadian appeals court rejected the buyout of Canadian telecommunication company BCE.
BCE bondholders claimed the deal is unfair to them. BCE, Canada's largest telecommunications company, announced on June 30, 2007, it agreed to be acquired by an investment arm of Ontario Teachers Pension, Providence Partners and Madison Dearborn Partners for an announced deal price of $42.75 per share. The transaction is scheduled to close by June 30.
BCE July option implied volatility of 28 is below its 26-week average of 33 according to Track Data.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
It looked like the deal to take BCE (NYSE: BCE), the parent of Bell Canada, private would be hung up by the unwillingness of banks to take on huge amounts of debt during a credit crisis. Instead, the $35.4 billion deal will probably be killed by the Canadian courts.
Some BCE shareholders sued the company, saying the deal was unfair to them. The debt holders who brought the suit may be fools, but they won. According toReuters, "the Quebec Court of Appeal said that BCE, Canada's largest telecommunications group, failed to prove that a buyout could have been structured to provide a satisfactory price for the company's shares while avoiding an adverse effect on the debenture holders."
If the entire deal for the BCE buyout fails, all parties who hold a piece of the company may be hurt. But, the debt holders have certainly put the stockholders in a very ugly place. The court ruling may give banks some excuses to walk away from the transaction. Providence Equity Partners, Madison Dearborn, and other institutions who put the deal together may have to watch all of those fees disappear in smoke.
And, a buyout that normally would have ended up in court because banks wanted to break their words may be killed because one class of stakeholders bested another.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 newsletter.
If we needed another sign that private equity is passe, we need go no further than to look at the current issue of Fortune, which shares a parent, Time Warner Inc. (NYSE: TWX), with BloggingStocks. To be fair, Fortune added an update to its web site about the tottering deal. It's a shame because the Fortune article paints such a glowing portrait of Providence Equity Partner's CEO Jonathan Nelson and praises him for doing the biggest deal ever -- the $51 billion takeover of Bell Canada parent BCE (NYSE: BCE) whose stock is down 5.7% this morning.
Regrettably for Nelson and Fortune, the New York Times reports this morning that the deal looks to be imperiled. It quotes one executive who read the revised bank terms: "It's patently obvious that the banks have no intention of closing the deal." These banks -- led by Citigroup Inc. (NYSE: C), Deutsche Bank, and the Royal Bank of Scotland -- sent revised terms to the consortium of buyers. which included higher interest rates, tighter loan restrictions and stronger protections for the banks, far exceeding the original terms.
Fortune has a photo of Nelson sitting in a comfortable chair with his hands in a position that communicates "I am smarter than you." It will be interesting to see whether he can use those smarts to close this $51 billion deal. If he does, then he will certainly deserve the encomiums that Fortune heaps on him. Fifteen months ago I appeared on CNBC to discuss whether private equity had peaked. I think Fortune's Private Money 2008 package answers that question in the affirmative -- with the cover story jinx.
It is the last big buyout left from 2007, the leveraged deal to take Bell Canada (NYSE: BCE) private. The transaction is worth almost $52 billion. Like several LBOs before it, banks are negotiating to get a better price, or kill the deal.
According toThe New York Times, "The negotiations over the Bell Canada buyout began to fray late Friday." Banks in the deal, including Citigroup (NYSE: C), want higher interest rates and other concessions. The private equity firms trying to close the transaction, which include Providence Equity Partners and Madison Dearborn Partners, may elect to sue the banks to close. The tactic was used in the buyout of Clear Channel (NYSE: CCU). It worked, but the price still ended up lower than the original offer.
Since the banks have no shame in walking away from these deals, in many cases, observers probably hope courts will force closing on the terms that each party signed up for. But that is merely a child's fantasy. BCE trades at just under $39 after hitting $44 last November.
After hard negotiating and a threat of court visits, watch for a deal to get done below $40.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.
If you ever wondered what a quick stealth 1,000 point move in the DJIA looks like, you just have to look at the move from last week's lows. Today's economic reports came out fairly dismal again, although the deterioration in "some" areas was not quite as bad as expected. Enjoy tomorrow's tryptophan laziness after turkey on Thanksgiving.
This week, we've seen two major buyout deals come undone: the 
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Back on May 21st, the $34.1 billion buyout deal for 
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Just last week, it looked like the $52.9 billion buyout of 
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