- General Growth rebuffs what Simon says. Late yesterday, bankrupt General Growth Properties (GGWPQ.PK) rebuffed an unsolicited $10B buyout offer that Simon Property Group (NYSE:SPG) had made earlier in the day. General Growth said the offer was incomplete and insufficient, and that it will provide information about the company to potential suitors which may help Simon "better understand the company, get to a higher valuation and provide a fully documented offer.” Simon's offer would have given creditors $7B and paid shareholders more than $9/share. General Growth closed up 27.9% yesterday to $12.02.
- HSBC implicated in tax evasion case. A wealthy U.S. investor pleaded guilty yesterday to criminal tax evasion via an international bank, and sources say the bank is HSBC (HBC). If so, the case is significant because it indicates U.S. regulators are expanding their investigation of tax evasion beyond UBS (NYSE:UBS), with Credit Suisse (NYSE:CS) and HSBC reportedly among the targets. The details of the case also suggest that HSBC took steps to hide its operations after the assault on UBS.
- Toyota's troubles mount. Toyota (NYSE:TM) President Akio Toyoda held a press conference this morning in which he announced the creation of a global quality-control task force, but that will do little to address the growing fallout from the company's recalls. Toyota faces 44 class-action lawsuits in the U.S., which by some estimates could cost Toyota as much as $3.6B. Toyota also faces increased scrutiny by regulators who stepped up their investigation yesterday, requesting documents from the company to determine if it initiated recalls "in a timely manner." Separately, Toyota said it plans to halt production at two U.S. plants to adjust inventory levels as the recalls affect sales, and it will modify its brake-override system on all models.
- Tax dispute stalls Alico sale. AIG's (NYSE:AIG) sale of Alico to MetLife (NYSE:MET) is reportedly being held up because of a tax dispute that may require IRS involvement. Since Alico is domiciled in Delaware but does nearly all its business abroad, it has considered itself exempt from a 2004 IRS ruling requiring insurers to withhold U.S. taxes on income distributed to foreign clients who own their annuities and life-insurance products. The purchase of Alico could therefore leave MetLife exposed to a large tax liability. The issue is further complicated by the fact that the Treasury, which oversees the IRS, is actively trying to recoup the billions of dollars taxpayers invested in AIG.
- Icahn wants more of Lions Gate. Carl Icahn launched a tender offer to increase his share of Lions Gate Entertainment (NYSE:LGF) to around 30% from 18%. Icahn's $79M offer, which is worth $6 per share, pushed Lions Gate's stock up nearly 6% yesterday to $5.53. However, before the offer can be approved, Icahn must negotiate a waiver with lenders to avoid accelerating payments on around $340M of debt.
- Verizon enables Skype on smartphones. Verizon (NYSE:VZ) will allow smartphone users with data plans to make and receive unlimited Skype-to-Skype calls, and to make heavily discounted international calls via Skype. Though this is the latest sign that Verizon is willing to lose voice revenue to get customers onto data plans, it may not be the game-changer it seems to be since customers will still have to pay some Verizon voice charges.
- Stimulus averted Great Depression II. Timed for today's one-year anniversary of the American Recovery and Reinvestment Act, the White House released a report saying the government's stimulus measures prevented a second Great Depression and saved or created 2M jobs. Republican lawmakers responded that "self-congratulatory 'stimulus' spin from this administration is hopelessly out of touch with reality." Notably, only around a third of the $787B stimulus budget was paid out during the stimulus program's first year, and much of it was used to maintain existing social services and government jobs. Entering its second year, additional funds will be spent on tax cuts and infrastructure, though economists say there will likely be little impact on the unemployment rate.
- Obama to create deficit commission. Officials say Obama will sign an executive order tomorrow to create a bipartisan commission that will discuss ways to lower the deficit. In a speech yesterday, Kansas City Federal Reserve President Thomas Hoenig warned that U.S. fiscal policy is on an "unsustainable course" and that if "pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis."
- Buffett rejiggers portfolio. Berkshire Hathaway (NYSE:BRK.A) juggled its portfolio holdings in Q4, reducing several of its biggest investments according to a report it filed yesterday with the SEC. The company slashed its stake in Exxon Mobil (NYSE:XOM) by 67% and in ConocoPhillips (NYSE:COP) by 34%. It also reduced its holdings of Johnson & Johnson (NYSE:JNJ) and Procter & Gamble (NYSE:PG), while increasing its stakes in Wells Fargo (NYSE:WFC) and Iron Mountain (NYSE:IRM).
- Banks turn to mortgage short sales. Major banks including Bank of America (NYSE:BAC), Wells Fargo (WFC), JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) are trying to offload souring mortgages from their books by turning to "short sales." Short sales occur when homeowners settle debts by selling their properties for less than the mortgage value, and the number of short sales is expected to rise sharply this year as foreclosures climb.
- ING falls short in Q4. ING Group (NYSE:ING) reported a Q4 loss this morning of €712M ($978M), narrowing the loss from €3.71B the year before. The bank set aside €930M for additional payments to the Netherlands after receiving state aid. Excluding divestments and special items, ING had a €74M profit in Q4. Shares +2.8% premarket (7:00 ET).
- Japan becomes top Treasury holder. Foreign demand for Treasurys fell by a record amount in December. China sold $34.2B in Treasury holdings, paring its holdings to $755.4B. This made Japan into the largest holder of U.S. government debt with $768.8B, the first time it has claimed the top spot since August 2008. Though China's sales don't necessarily reflect a loss of confidence in the U.S., economists have long worried what would happen if China ever chose to give up its role as one of the country's key creditors.
- Japan real estate weighs on Morgan Stanley. During the height of the property boom, Morgan Stanley (NYSE:MS) was among the most aggressive buyers of real estate in Japan. Now sources say the bank may have to give up a $2.4B Japanese hotel chain to creditors when the debt comes due in April. The main lenders in the hotel purchase are pushing Morgan Stanley to invest more equity to give the devalued holdings more security, but Morgan Stanley has thus far resisted. Another lender is reportedly in talks to take over the hotels, wiping out Morgan Stanley's equity investment in the process.
- Coinstar ends lawsuit, reaches distribution deal. Redbox, and its owner Coinstar (CSTR), reached a multi-year distribution deal with Warner Bros. (NYSE:TWX) and settled a lawsuit over release windows. It's an important step for Coinstar, since recent quarterly guidance has been tempered by concerns over DVD costs. Coinstar reaffirmed its fiscal 2010 outlook of $1.50-1.65 earnings per share on revenue of $1.465B-1.565B.
- NAHB sees improvement. NAHB's Housing Market Index rose 2 points to 17, rebounding from a seven-month low. Current sales conditions rose 2 points to 17 and sales expectations for the next six months rose 1 point to 27, though prospective buyer traffic stayed flat at 12. Chief Economist David Crowe said builders are just starting to see the effects of the tax credit but "several limiting factors" still weigh on expectations.
Earnings: Wednesday Before Open
- Host Hotels & Resorts, Inc. (NYSE:HST): Q4 EPS of $0.19 in-line. Revenue of $1.3B (-16.8%) in-line. (PR)
Earnings: Tuesday After Close
- FMC Technologies (NYSE:FTI): Q4 EPS of $0.75 beats by $0.01. Revenue of $1.16B (-3.7%) vs. $1.09B. Shares -2.3% AH. (PR)
- Jarden (NYSE:JAH): Q4 EPS of $0.77 beats by $0.01. Revenue of $1.39B (+3.2%) vs. $1.35B. Shares -0.1% AH. (PR)
- Nabors Industries (NYSE:NBR): Q4 EPS of $0.18 beats by $0.02. Revenue of $841M vs. $825M. Shares +0.2% AH. (PR)
- Rackspace Hosting (NYSE:RAX): Q4 EPS of $0.06, in-line. Revenue of $169M (+18.4%) vs. $168M. Shares -2.3% AH. (PR, earnings call transcript)
- Regal Entertainment Group (NYSE:RGC): Q4 EPS of $0.27 beats by $0.04. Revenue of $766M (+8%) vs. $746M. (PR, earnings call transcript)
- Whole Foods Market (WFMI): FQ1 EPS of $0.32 beats by $0.06. Revenue of $2.6B (+7%) in-line. Same-store sales up 3.5%. Raises full-year EPS outlook to $1.20-1.25 from $1.05-1.10, vs. $1.10. Raises fiscal 2010 sales outlook to growth of 8.5-10%, comparable-store sales +3.5-5.5%, identical-store sales growth of 2.9-4.9%. The company "still in the early stages of recovery but believes it is reasonable to expect some sales momentum to continue for the remainder of the year." Shares +7.8% AH. (PR, earnings call transcript)
- In Asia, Nikkei +2.7% to 10307. Hang Seng +1.3% to 20534. Shanghai +1.1% to 3018. BSE +1.3% to 16429.
- In Europe at midday, London +0.5% to 5271. Paris +1.6% to 3726. Frankfurt +0.9% to 5645.
- Futures: Dow +0.25% to 10267. S&P +0.37% to 1097. Nasdaq +0.29%. Crude flat at $80.62. Gold -0.26% to $1170.90.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
7:45 ICSC Retail Store Sales
8:30 Housing Starts
8:30 Import/Export Prices
8:55 Redbook Chain Store Sales
9:15 Industrial Production
12:45 PM Fed's Plosser: Lessons of the Financial Crisis
2:00 PM FOMC Minutes
2:00 PM Treasury Budget
- Notable earnings before Wednesday's open: DE, DVN, GENZ, HL, HST, IAG, OMX, XTO
- Notable earnings after Wednesday's close: AAP, ADI, AEM, AMAT, CAR, CECO, CHK, CLF, CYH, HPQ, KEG, KGC, LVS, NHP, NTAP, NVDA, ORLY, PCLN, SNPS, STR, TEX
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.