- Citi bids farewell to TARP. Citigroup (C) said Monday it will sell $17B in shares and $3.5B in tangible equity units to repay the $20B in TARP funds it owes. The Treasury will sell up to $5B of its Citi shares concurrently, and will exit its entire 34% stake over the next 6-12 months. Citi will also terminate its $250B loss-sharing agreement with the government, and will no longer be considered a beneficiary of "exceptional financial assistance" under TARP beginning in 2010. Citi also said it will issue another $1.7B in shares to employees in lieu of cash they would have otherwise received. The move will lower Citi's amortization expense by $0.5B/year, and its interest expenses by $0.1B/year. CEO Pandit: "We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need." Shares -2.5% premarket.
- Dubai gets $10B lifeline. Dubai was saved from the brink of default Monday after neighboring Abu Dhabi intervened with a $10B lifeline and eased broader fears about the city-state's precarious financial situation. It will use $4.1B to repay its Nakheel property division's Islamic bond maturing today, and the rest to finance Dubai World's obligations through the end of April. In a statement, Dubai said it will also announce today "a comprehensive reorganization law... that is based upon internationally accepted standards for transparency and creditor protection." Bankers welcomed the eleventh-hour intervention as a sign that the seven-member UAE was taking a united approach to tackling Dubai's problems.
- Google dials up its own smartphone. Sources say Google (GOOG) will begin selling a new phone, the Nexus One, as soon as next year, bypassing wireless carriers and selling to customers directly online; users will choose their carrier separately. Unlike current Android-based phones, Google (GOOG) has designed "virtually the entire software experience" of this HTC-manufactured model. In a blog post Saturday, Google confirmed it is dogfooding a new device "that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities." While Google (GOOG) plans to sell its phone directly, sources say it has turned to carriers to help it market the Nexus One. So far only T-Mobile (DT) has signed on, which reportedly impacted Google's decision to go with GSM and not CDMA - to the exclusion of Verizon Wireless (VZ, VOD).
- Cadbury denounces Kraft offer. Cadbury (CBY) came out swinging Monday, making its case for rejecting Kraft's (KFT) hostile bid, while raising its sales and margin targets for the next four years. Repeating prior accusations that Kraft's £9.9B ($16.08B) bid is an attempt to buy the confectioner on the cheap, Cadbury urged shareholders not to let Kraft "steal your company with its derisory offer." So far Kraft's bid is the only one on the table, but sources say Hershey (HSY) has had private talks with Cadbury (CBY) about a possible friendly bid that includes a higher cash portion than Kraft's cash-and-share offer.
- Standalone AOL looks to dish off ICQ. AOL (AOL) is in early talks to sell its ICQ instant-messaging service to Digital Sky Technologies, the Russian Internet investment group best known in the U.S. for its investment in Facebook. AOL, which went public last week, is looking to pocket between $200M and $300M from the sale, sources say. Although ICQ has been overtaken by other services in the U.S., it remains popular overseas. In October, its largest markets were Germany, with 12.6M unique visitors, and Russia, with 8.4M unique visitors. AOL CEO Tim Armstrong said last week at a conference that the firm may shed some of its assets "that don't make sense" with the company's new focus.
- Beijing buys Saab models; Spyker leads bidders. GM is in talks to sell Saab to Dutch luxury sports car maker Spyker Cars, sources say. The sale hinges on GM securing Sweden's guarantee and EU approval for a €400M ($585M) loan from the European Investment Bank. GM has said it will decide by the end of this month whether to sell or shut the unit. Separately, GM struck a deal to sell some technologies for Saab's 9-3 and 9-5 models to Beijing Automotive Industry.
- Obama calls out "fat cat" banks. U.S. bankers should prepare for an earful when they meet with President Obama today, after he lashed out at a culture he declaimed as greedy and out of touch with mainstream America in an interview on 60 Minutes. "I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Obama said. The administration has been angered by the industry's big bonuses at a time of severe unemployment and reluctance to lend. Obama is due to meet with top bankers such as Goldman's (GS) Lloyd Blankfein, JPMorgan's (JPM) Jamie Dimon and Bank of America's (BAC) Ken Lewis today to hash out ideas on increasing lending; the financial-industry regulatory bill moving through Congress; and bankers' compensation.
- Kelly to BofA: Pay up. Sources say Robert Kelly, CEO of Bank of New York Mellon (BK), is the front-runner for CEO at Bank of America (BAC), but Kelly wants more than BofA's offering, even as the U.S. government fumes over Wall Street "fat cats" and BofA has just slipped the noose of remuneration restraints. While BofA hasn't officially offered Kelly the top job, the gap between the executive and the bank's board "is down to compensation now," a source said.
- Shell puts more assets up for sale. Royal Dutch Shell (RDS.A) has hired the investment bank Lazard (LAZ) to help it sell its Swedish arm and network of more than 400 gas stations, sources say. The company hopes to fetch some $750M from the sale, which is part of a three-year restructuring plan the company started to help profitability and efficiency. It plans to sell about 15% of its global refining capacity, or about 600,000 barrels/day of capacity. BP (BP) also put its French gas stations up for sale.
- U.S., Japan shoot for clear skies. In a deal that could potentially benefit Delta Air Lines (DAL) and AMR's (AMR) American Airlines, the U.S. and Japan reached an "open-skies" pact late Friday that would ease restrictions on cross-border flights and enable alliances among the major airlines of both countries. However, any deal could take six or more months to close because Japan Airlines and All Nippon Airways must first win antitrust approval to complete any joint ventures with large U.S. carriers, which want to expand in the lucrative Asian markets. ANA, Japan's No. 2 airline, wants to deepen existing ties with UAL's (UAUA) United Airlines and Continental Airlines (CAL). Other potential roadblocks could include Japan's proposed caps on U.S. carriers' access to new slots at Tokyo's two airports, which are slated to expand their capacity significantly next year.
- AMP, AXA up offer for wealth advisor. AMP, Australia's second-largest asset manager, and the French insurer AXA (AXA), increased their offer for Axa Asia Pacific by 53% to A$12.9B ($11.8B), calling it their final offer and giving Melbourne-based wealth manager had one week to respond. Analysts said the improved terms should be enough to seal a deal. Axa, which owns 54% of Axa Asia Pacific, plans to sell its stake to AMP, and then buy back the units in eight Asian countries for A$9.1B as it seeks to tap the region's rising wealth. The two companies hiked the cash portion of the bid by $0.54 to A$1.92 a share, leaving the stock portion unchanged. AAP said it will consider the offer.
- Japan's mixed recovery. Japan's bellwether on business sentiment, the quarterly Tankan survey, offered a mixed picture of the country's fragile recovery. The survey showed better-than-expected sentiment but deteriorating capital-outlay expectations among Japanese companies. The "large manufacturers diffusion index," which measures sentiment among companies' top executives, stood at -24, better than the consensus forecast of -27 and an improvement from the -33 reading in September. Sentiment at large non-manufacturers also edged up, rising to -22 from a reading of -24 in the previous survey. The key large-manufacturers index improved for the third straight survey, after hitting a record low of -58 in the March survey. Companies expect the index to remain on an uptrend, predicting a reading of -18 for the March 2010 Tankan. (ETF: EWJ)
- Germany sees bank bonus advantage. Germany's decision not to copy Britain or France in taxing bank bonuses should help the country's position as a financial hub, said Deutsche Bank's (DB) CEO in an interview over the weekend. Late last week, the German finance minister and top German banks agreed to abide by the G-20's so-called self-discipline accord, rather than impose a new tax. The accord discourages bonus guarantees longer than one year, encourages companies to defer bonuses for senior executives and other key employees and enables banks to claw back pay if losses occur at a later date. Last week, Britain said it would impose a one-time 50% tax on bonuses of more than £25K and France said it will take similar steps. (ETF: EWG)
- Morgan Stanley nabs Fleming. In one of his first big hires following a reshuffling of the firm's top ranks last week, in-coming Morgan Stanley (MS) CEO James Gorman is bringing former Merrill Lynch President Gregory Fleming on board to head the firm's investment-management arm. Fleming, who starts in February, will focus on helping the investment management business regain momentum after the financial crisis.
- Greenspan sees hiring spike. Speaking on NBC's Meet the Press over the weekend, former Fed chairman Alan Greenspan said companies will be forced to start hiring soon to keep up with production needs after cutting jobs to the bone in prior months. "We have a level of employment at this stage which is barely adequate to staff the level of output," Greenspan said. But even as companies start replenishing payrolls, the unemployment rate may continue to rise because the economy needs to add 100,000 jobs per month simply to keep even with population growth, he said, noting that people who gave up looking are likely to start job-hunting again, rolling them back into unemployment statistics. Unemployment dropped to 10% in November from 10.2% in October, the highest in 26 years.
- Jobs before deficit. With one government official acknowledging that it would be "suicide" to put the deficit before jobs, top White House adviser Larry Summers said creating jobs would take priority over tackling the ballooning federal deficit and suggested that employment growth could kick in by spring, which was more optimistic than prior forecasts. The federal deficit stood at $1.4T for the year ended Sept. 30, and Congress will debate this month whether to raise the $12.1T ceiling on the federal debt to ensure the U.S. doesn't default.
Asia stocks were mixed Monday. Europe markets and U.S. futures have moved higher following the news of Abu Dhabi's Dubai bailout, and Citigroup's TARP exit.
- Asia: Nikkei flat at 10106. Hang Seng +0.8% to 22086. Shanghai +1.7% to 3303. BSE -0.1% to 17098.
- Europe at midday: FTSE +0.7% to 5299. CAC +0.5% to 3821. DAX +0.6% to 5793.
- Futures: Dow +0.4% to 10467. S&P +0.4% to 1108. Nasdaq +0.5%.
Crude -0.9% to $69.25. Gold flat at $1,119.50.
Treasurys are flat.
Euro +0.1% vs. dollar. Yen +0.5%. Pound -0.2%.
Monday's Economic Calendar
- -- Pres. Obama meets with bank heads
-- GAO rules on BAE and Navistar vs. Oshkosh
- Notable post-market earnings: PAY
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