Wall Street Breakfast: Must-Know News

• Krafting a Cadbury deal. Cadbury (CBY) rejected a £10.2B ($16.7B) acquisition offer from Kraft (KFT) yesterday, saying the bid 'fundamentally undervalues' the company and paving the way for possible counteroffers, including from rivals Hershey (HSY) and Nestle (NSRGY.PK). The offer was a 31% premium to Cadbury's Friday close, and Kraft said it remains committed to reaching a deal. However, analysts suggested Kraft may have to raise its offer as much as 40% to get Cadbury to accept. KFT -2.3%, CBY +41% premarket (7:00 ET). (Read Kraft's press release (.pdf))
• U.K. mobile phone merger. Earlier this morning, Deutsche Telekom (DT) and France Telecom (FTE) announced plans to join their U.K. operations in a 'merger of equals,' surpassing Telefonica (TEF) as Britain's largest mobile phone operator. The joint venture will have 30M customers, control 38% of the U.K.'s highly competitive mobile market and generate £4B ($5.7B) of savings. Separately, Telefonica reached an agreement to expand its strategic alliance with China Unicom (CHU), giving the Spanish firm a stronger foothold in the world's largest mobile phone market. (Read the Deutsche Telekom press release)
• G-20 keeps banking reform alive. Over the weekend, G-20 finance ministers and regulators announced new, tougher guidelines that would force banks to raise billions more in capital over the coming months. Full details are not yet finalized, but central bank governors and bank supervisors from 27 countries said they would present concrete proposals by the end of this year. (Read the G-20's plans for strengthening the financial system (.pdf))
• AIG continues to shed units. AIG (AIG) may be looking to take its time on the sale of some major assets, but it's open to quick sales of smaller units. Case-in-point: Saturday's agreement to sell an asset-management division to Hong Kong tycoon Richard Li's Pacific Century Group for $500M, below the $800M price tag potential bidders were discussing several months ago. In its press release, AIG said the deal 'provides fair value' for the unit. Meanwhile, Chinatrust Financial has reportedly outbid rivals by offering $2.4B for AIG's Taiwan Nan Shan Life unit. AIG had targeted the unit to bring in $2B.
• Pro-Linux group closes in on MSFT patents. The Open Invention Network, a group which supports open-source software and includes such giants as IBM (IBM) and Sony (SNE), is nearing an agreement to acquire 22 of Microsoft's (MSFT) patents in an effort to avoid any legal threats that could discourage the adoption of Linux. Microsoft has suggested in the past that the Linux operating system may violate some of its patents. The patents are currently held by Allied Security Trust, which bought the patents from Microsoft earlier this year.
• Abu Dhabi challenges chip firms. Abu Dhabi's Advanced Technology Investment Co. [ATIC] agreed to buy Chartered Semiconductor Manufacturing (CHRT) for $1.8B in cash yesterday. ATIC's second major investment in the industry, the deal will allow its semiconductor joint venture to better compete with Taiwan's leading contract-chip manufacturers, including Taiwan Semiconductor Manufacturing (TSM) and United Microelectronics (UMC). (Read ATIC's press release (.pdf))
• WTO ruling gives Boeing fans ammo. After the WTO's preliminary ruling that Airbus received illegal subsidies from European governments, pro-Boeing (BA) lawmakers in the U.S. are pushing the Pentagon to keep the ruling in mind for its $40B tender to supply tanker planes. However, upside implications of the ruling may be limited, as "we live in a glass house of global subsidies" and future WTO victories may be harder to come by following the U.S. provision of billions of dollars to banks and automakers.
• Google shelves European book plan. Bowing to pressure from European publishers, Google (GOOG) said it will remove all copyright-protected European books from its book scanning program. Google also promised to put two non-U.S. representatives on the governing board of the Books Rights Registry, which will oversee Google's settlement with publishers. Shares +1% premarket (7:00 ET).
• OPEC happy with oil prices. Ahead of tomorrow's OPEC meeting, Saudi Oil Minister Ali al-Naimi said the oil market is in 'good shape' and 'everybody likes' the current price. The group is expected to leave output quotas unchanged. Taking advantage of the production cuts is Russia, which is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse.

Earnings: Tuesday Before Open

• Smithfield Foods (SFD): FQ1 EPS of -$0.56 misses by $0.01. Revenue of $2.7B (-14%) vs. $2.8B. (PR)

Today's Markets

Markets are up across the globe.

• In Asia, Nikkei +0.7% to 10,393. Hang Seng +2.1% to 21,070. Shanghai +1.7% to 2,930. BSE +0.7% to 16,124.
• In Europe at midday, London +0.6%. Paris +0.4%. Frankfurt +0.5%.
• Futures: Dow +0.9%. S&P +1%. Nasdaq +1%. Crude +2.1% to $69.43. Gold +1.1% to $1007.20.

Tuesday's Economic Calendar

• 10:00 Conference Board's Employment Trends
  3:00 PM Consumer Credit
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday's open: SFD
• Notable earnings after Tuesday's close: FCEL

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[markfl:]

On the subject or retail, more accurately retail hiring, Bloomberg reported earlier today on a forward looking indicator. According to Kronos, a maker of payroll technology, the number of retail job applications that resulted in a hire increased from 2.75 out of 100 in January 2009 to 2.99 out of 100 in July. Perhaps this is a sign that retail HR is less uncomfortable or pessimistic than 8 months ago.

Sep 08 07:46 AM

[doubleguns:]

G20 should break the too big to fails up. Everything else is just a bandaid.

Sep 08 07:54 AM

[AndrewBaker:]

If the G20 governments go back to the banks in their home territories and insist on capital raising to increase their financial strength and security, that would mean significant dilution for existing stock holders, suggesting that a stock price reversal is on the cards for the banks. Given that their prices are already in the clouds compared to their true worth and value, I find it hard to see why further increases in their prices are happening. Am I missing something?

Sep 08 08:31 AM

[Old Trader:]

Adding to oil supplies, along with Russia taking advantage of Saudi production cuts, there has been a slip in compliance by smaller OPEC producers from 80% to 70%. Gold now seems to be firmly over $1k/ oz., thanks to dollar weakness and improving investor demand.

Sep 08 08:35 AM

[robert.b.fe...:]

OPEC should be happy with oil prices. Wait till knee cap our trade happens. Demand destruction will be significant in the U.S. market.

Sep 08 08:44 AM

[Anthony Alfidi:]

Cadbury - what a sweet deal! (had to say it)

The G-20 banking reform proposal is only significant if regulators follow through with enforcement. That has not occurred in the U.S. because it would expose the banking system's continued insolvency.

AIG's "major assets" are worth less than nothing, so they're saving the worst for last. Selling the smaller but still valuable stuff first fools the market into thinking AIG's stock price should be anything but zero.

Russian oil output surpassing Saudi Arabia? Uh oh, maybe Ghawar has peaked.

Sep 08 12:09 PM

[bbowen7:]

Perhaps something good will come out of the last year's financial disaster. While the politicians have moved on to other subjects more susceptible to sound bites, the bureaucrats (and I use that term respectfully) have continued to assemble a comprehensive set of proposals which would deal with the international problem on an international basis. The discussion of tools to deal with countries that do not confirm is particularly.

While it would be nice to argue for American independence from international groups, we have certainly ceded that territory in our primary role leading up to 2008s disaster, and in the inability of our politicians to deal with compensation, Fannie/Freddie, rating agencies, and a number of other causes. Finance is international and requires international solutions.

Sep 08 01:17 PM

[Joseph Sherman:]

Kraft's offer to buy Cadbury at a high premium on one hand looks like strategic plan to expand market share. In a press release, Irene B. Rosenfeld, Chairman and CEO of Kraft Foods, said:"This proposed combination is about growth. We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation.... Cadbury's brands, which are highly complementary to our portfolio, would benefit from Kraft Foods' global scope and scale and array of proprietary technologies and processes." Perhaps the two companies will complement each other, or perhaps this is a sign by Kraft of defeat. The rejected offer was at a 42% price primeum from Cadbury's July 3 share price, and a 31% premium on the September 4 share price. This means that for every pound or dollar of share, Kraft is offering 31 to 42 additional cents, or an additional 3.95 Billion USD above Cadbury's 12.74 Market Capitalization. Four Billion Dollars is a significant amount of money that Kraft could use to create new products, improve existing infrastructure and build better marketing campaigns. With nearly four billion Dollars, Kraft could reach out and connect to people, build on its tribe rather than buying a competitor.

Sep 08 04:45 PM

[spald_fr:]

הרוג של ירחים

Sep 08 07:28 PM

[TeresaE:]

No, having hired in retail it is not positive.

It is a sign that highly skilled people are available to work for pennies on the dollar.

I've noticed way too many 40+ professionals working as bag boys and shelf stockers.


On Sep 08 07:46 AM markfl wrote:

> On the subject or retail, more accurately retail hiring, Bloomberg
> reported earlier today on a forward looking indicator. According
> to Kronos, a maker of payroll technology, the number of retail job
> applications that resulted in a hire increased from 2.75 out of 100
> in January 2009 to 2.99 out of 100 in July. Perhaps this is a sign
> that retail HR is less uncomfortable or pessimistic than 8 months
> ago.

Sep 10 01:31 PM