Wall Street Breakfast: Must-Know News

• Liberty Global pays €3.5B for Germany's Unitymedia. Liberty Global (LBTYA) agreed to acquire Germany's #2 cable operator, Unitymedia, from its private-equity owners BC Partners and Apollo Management for a total of €3.5B including debt. Liberty said it's paying 7.4x 2010e Ebitda to acquire Unity, which will complement its "existing European footprint, and has significant untapped growth potential in one of the fastest-growing cable markets in Europe." Unity's competitors include Deutsche Telekom (DT) and Sky Deutschland (NWS). Liberty's global cable footprint including Unitymedia will exceed 40M homes.
• BA, Iberia to merge. British Airways (BAIRY.PK) and Iberia (IBRLF.PK) agreed to a complex, $7B "merger of equals." BA shareholders will own 55% of the new airline, which will be the world's third-biggest by revenue. Named TopCo, it will be led by BA CEO Willie Walsh, registered in Madrid, house its main offices in London, and will not be subject to U.K. takeover laws. The pair estimate €400M in synergies by the end of year-five, and expect to close the deal in late 2010. The merger will meld BA's web of U.S. routes with Iberia's Latin America services, extending its leading trans-Atlantic position and consolidating its #3 status in Europe. Shares of both were up 3-5% in early trading.
• Europe returns to growth, at a canter. The euro zone returned to growth in Q3, but quarterly GDP came in at a weaker than expected +0.4% (consensus: +0.6%), up from -0.2% in Q2. Year-on-year GDP contraction narrowed to -4.1% (consensus: -3.9%) from -4.8% in Q2. The consensus miss was expected after France and Germany announced Q3 growth that undershot estimates - +0.7% vs. +0.8% expected for Germany, and +0.3% vs. +0.7% expected for France. Economists were underwhelmed by the results, and warned growth could reverse in coming quarters once car scrapping and other stimulus schemes fade.
• Yuan will rise with time. A top Chinese central banker told Asia-Pacific officials Friday that Beijing wants to let the yuan move more freely, but that any change will be very gradual, and that China will not bow to external pressure. The APEC meetings have been noteworthy for their focus on the weak dollar, but officials - including Tim Geithner - have refrained from pressuring Beijing to unhitch the yuan from its informal dollar peg. "The U.S. and China depend too much on each other and this has to change," the banker said.
• Dell announces first smartphone. Dell (DELL) announced it will enter the smartphone business, sealing initial partnerships with two of the world's largest mobile operators - China Mobile (CHL) and Claro (AMX). The Mini 3 smartphones will be designed around the Android (GOOG) platform. "Our entry into the smart phone category is a logical extension of Dell's consumer product evolution over the past two years," Dell said. "We are developing smaller and smarter mobile products that enable our customers to take their internet experience out of the home and do the things they want to do whenever and wherever they want."
• AMD cashes in its chips. Archrivals Intel (INTC) and Advanced Micro Devices (AMD) announced a game-changing settlement to their antitrust and patent infringement dispute, including a $1.25B payment from Intel to AMD and a five-year cross-licensing agreement. Intel also agreed not to induce competitors to shun AMD, but Intel has denied ever doing so. Numerous government lawsuits and private class-action litigation against Intel will not go away as a result of the deal, but Intel did eliminate its exposure to AMD-related charges. Intel CEO Paul Otellini called the pact a good deal for Intel shareholders, a sentiment shared by analysts who believe a court ruling could have cost it more. AMD CEO Dirk Meyer said the agreement proves to its customers, once and for all, "that AMD will survive and continue to offer them a choice of suppliers."
• White House sure of debt increase. The Treasury is confident Congress will raise the U.S. debt limit by year-end, and not allow a showdown similar to one that shuttered parts of the government in 1995. Sources say the White House is looking for a $1-1.5T increase beyond its current $12.1T limit. The request is higher than a proposed increase already passed in the House, but would get the government through the November 2010 midterm congressional elections without needing another increase. Geithner has repeatedly stressed the need to bring deficits down to sustainable levels, but in the short-term he's more worried about the need to keep up spending until unemployment recedes.
• Barofsky bets on TARP losses. TARP will "almost certainly" result in a loss to taxpayers, Neil Barofsky, the special inspector general for the $700B U.S. financial-industry bailout, said Thursday. "We need to temper or be realistic about our expectations, a dollar-for-dollar return is just highly unrealistic." Barofsky also said he's conducting 65 investigations of possible TARP fraud.
• Boeing fixes one problem, finds another. Boeing (BA) finally finished fixing the problem that postponed the maiden flight of its long-delayed 787 Dreamliner, but in doing so discovered another issue with the plane's wings. Metal bolts inside the wings of one of the six test airplanes were found to have slightly cracked the surrounding material, which engineers cited as another reason to keep the plane grounded. Still, Boeing says it's "on track to fly by the end of the year."
• Iconix gets a read on Playboy. Iconix Brand Group (ICON), owner of London Fog, is reportedly in talks to buy Playboy Enterprises (PLA), and has looked at its books. Iconix CEO Neil Cole is thought to be looking to add more brands that it can license to retailers and manufacturers. 56-year-old Playboy, which was worth about $100M before yesterday, has been looking to sell itself since Scott Flanders replaced Christie Hefner as CEO in June. Her father, Hugh, owns 70% of Playboy's voting shares and 28% of the Class B shares.
• FHA's razor-thin reserves. The FHA's capital reserves are almost depleted, making it likely the goverment-controlled housing market lender will require a taxpayer bailout. The FHA has said for months that its reserves for unexpected loan losses would fall short of the required 2% level by this fall, but an audit released Thursday showed that reserves have been depleted much faster than expected; its capital-reserve fund fell to $3.6B as of Sept. 30, down 72% from a year earlier, leaving reserves at just 0.53% of the $685B in total loans insured by the FHA.
• FDIC orders banks to prepay $45B. The FDIC's board approved Thursday $45B of bank premium prepayments that it needs after its deposit insurance fund slipped into a deficit at the end of Q3. The prepayments - which equate to three years of dues - will satisfy the fund's "need for liquidity without imposing undue burden on the industry," FDIC Chairman Sheila Bair said. A surge in failures - 120 so far this year - has pushed the industry-supported fund into a deficit for the first time since 1991.

Earnings: Fri. Before Open

• Abercrombie & Fitch (ANF): Q3 EPS of $0.30 beats by $0.10. Revenue of $765M (-14.6%) in-line. Same-store sales -18%. Shares +7.5% premarket. (PR)
• Mizuho Financial Group (MFG): FH1 profit of ¥87.8B ($974M) vs. ¥56.3B expected and -7.1% from ¥94.6B a year ago. Revenue of ¥1.49T (-21.6%). Q2 net income of ¥92.3B vs. ¥69B expected and -¥38.4B a year ago. Bad loan charges -38% to ¥85.8B. (MW, Bloomberg)
• Yingli Green Energy (YGE): Q3 EPS of $0.18 beats by $0.01. Revenue of $326M (+1%) vs. $329M. Shares +1.3% premarket. (PR)

Earnings: Thur. After Close

• Blockbuster (BBI): Q3 EPS of -$0.20 misses by $0.09. Revenue of $910.5M (-21%) vs. $1B. Shares -13.2% AH. (PR)
• Disney (DIS): FQ4 EPS of $0.46 beats by $0.05. Revenue of $9.9B (+4%) vs. $9.3B. Shares +2.2% AH. (PR)
• Nordstrom (JWN): Q3 EPS of $0.38 misses by $0.01. Revenue of $2B (-5%) vs. $1.9B. Same-store sales -1.2%. Raises full-year EPS guidance to $1.83-1.88 from $1.50-1.65, vs. $1.81 and expects full-year same-store sales down 6-7%. Shares -4.8% AH. (PR)

Today's Markets

Asia and Europe stocks were mostly higher Friday, fueling modest gains in overnight futures trading.

• Asia: Nikkei -0.3% to 9770. Hang Seng +0.7% to 22554. Shanghai +0.5% to 3188. BSE +0.9% to 16849.
• Europe at midday: FTSE +0.3% to 5290. CAC -0.2% to 3801. DAX +0.2% to 5675.
• Futures: Dow +0.3%. S&P +0.4% to 1091.50. Nasdaq +0.3%. Dec. crude +0.5% to $77.31. Gold +0.2% to $1,109. Treasurys are flat. Euro +0.3% vs. dollar. Yen +0.4%. Pound +0.6%.

Friday's Calendar

• 8:30 Trade Balance
  8:30 Import/Export Prices
  9:40 Kenneth Feinberg speaks
  9:55 Reuters/UofM Consumer Sentiment
  10:30 EIA Natural Gas Inventory
  11:30 Fed's Evans: Asset Price Bubbles and Monetary Policy
  8:30 PM Never Again? Building a Stronger Financial System
• Notable premarket earnings: ANF, A, JCP, TK, YGE

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Comments

[AndrewBaker:]

TARP will be a loss to taxpayers! Surely not! How could this be when we've had so many public spirited bank bosses and politicians working around the clock trying their very best to put money into the pockets of the poor overburdened taxpayer by rescuing the banks and financial companies using their own money (well, the governments really, but they think its their own) and without taking anything for themselves nor wanting any accolades for so doing!

We should all be chastened by their actions and so grateful for all that they have done for us. And let's not be churlish by thinking that they may have some thoughts in the back of their minds that they could get something out of it for themselves. Shame on you!

Nov 13 08:45 AM

[bottoms-up:]

As I predicted yesterday...

seekingalpha.com/artic...

CNBC is reporting this morning, "Futures Edge Higher, Retailers in Focus." No real surprise...

Sorry, equities in particular, and almost every other form of investment in general, from gold to bonds, are being manipulated on a scale never before seen on this Earth by the G-20.

If you are an investor, you are "making love with an elephant."

Nov 13 08:55 AM

[Bill38119:]

I was concerned when about Rachel's departure but Mr. Hoffman has not missed a beat.

Nov 13 09:24 AM

[bottoms-up:]

If you look at the Dow in the first few minutes today it looks like Ben and Tim are shooting a Myocardial infarction victim with lots of nitroglycerin.

Wow! Talk about arrhythmia!

Nov 13 09:58 AM

[bottoms-up:]

Here's some news:

"Consumer Sentiment in U.S. Unexpectedly Decrease" (With unemployment above 10 percent, I think some economists must be living in some type of shell, or under a rock is more descriptive).

OH! BUT WAIT! The Dow is up 80 points and the most active by volume include (SURPRISE! SURPRISE!):

CITIGROUP INC
SPDR TRUST SER 1
BANK OF AMERICA

Does ever a day go by when these three are not included in "the most active by volume"?

Nov 13 10:55 AM

[ebworthen:]

"White House sure of debt increase"

12.1 Trillion (T) isn't enough debt? We need to increase it 1-1.5 Trillion?

Let's make it 13.13 Trillion just for good luck, that should make it all better.

FHA has no reserves and FDIC deposit insurance fund is all spent.

Such good news - I see sunshine and roses in the future - don't you?

Let's buy some equities! Nothing could possibly go wrong here.

Nov 13 11:00 AM

[doubleguns:]

Boeing says it's "on track to fly by the end of the year."

Yea, but will it land?

Missing a wing?

Nov 13 01:13 PM

[bbowen7:]

To: Bill38119. Before the constellations were the elements. And before the elements was Eli.

Nov 13 06:47 PM

[BerkeleyBob:]

AndrewBaker makes me feel warm all over towards the toiling selfless bankers. Let's make sure that Hammerin' Hank Greenberg gets back in the game to finish to good work and maybe we ought to let Mozillo have a free pass too.

Nov 13 06:55 PM