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Wall Street Breakfast: Must-Know News

Mar 1 2010, 07:20 by: SA Editor Rachael Granby  |  includes: AIG, AMAG, BID, BRK.A, DIA, DISH, DOW, GLD, GOOG, HBC, IPI, ISIS, KMI, KWK, ME, MIL, MSFT, PSA, PUK, QQQ, RDS.A, SOA, SPY, TM, TMO, USO, USU, WCRX

  • Prudential buys AIG unit. AIG (AIG) has agreed to sell AIA, its Asian life insurance unit, to Britain's Prudential (PUK). AIG had been planning a Hong Kong IPO for the unit, but opted instead for Pru's $35.5B cash-and-stock offer. The acquisition will be financed in part by a $20B capital raise - one of the biggest cash calls ever, and nearly equal to PUK's $23B market cap. Investors and analysts say they need to know more about AIA's finances before judging whether the deal justifies such a massive cash call. AIG +9.8% premarket (7:00 ET).
  • Merck moves on Millipore. Germany's Merck agreed to buy Millipore (MIL) for $107/share, or approximately $7.2B, edging out a reported $6B bid from rival Thermo Fisher Scientific (TMO). Merck's offer represents almost a 50% premium to Millipore's share price before takeover talks began. The deal will boost Merck's share of revenue from chemicals to 35% from 25%, and will expand its presence globally. Millipore +14.4% premarket (4:30 ET).
  • TPG is lead bidder for Dow Chemical unit. Private-equity firm TPG Capital is said to be the lead bidder for Dow Chemical's (DOW) Styron plastics business. Dow has been trying to sell the unit for several months, and is expected to receive over $1.5B for it. A deal could be announced as soon as this week.
  • HSBC profit misses estimates. HSBC (HBC) reported a smaller-than-expected profit for 2009, with earnings of $5.83B vs. consensus of $7.76B. Impairment charges and other risk provisions rose to $26.5B for the year from $24.9B in 2008. Chairman Stephen Green acknowledged that "huge challenges and risks remain for all of us," though "our track record of delivering results through adversity, and at all stages of the economic cycle, remains intact." Shares -6.9% premarket (7:00 ET).
  • Greece works on cuts, waits for bailout. EU officials will visit Greece today as the country prepares additional austerity measures. Greek officials said Germany and France are spearheading a bailout plan that could include up to €30B ($41B) in aid, and a deal could be finalized by the end of the week, though Germany denied that such a plan exists. French Finance Minister Christine Lagarde confirmed rescue talks were underway and said they could involve "either private partners, or public partners or both." Meanwhile, the IMF is being kept on the sidelines and the euro is facing "the most difficult phase since it was created."
  • Oracle of Omaha's annual report. Berkshire Hathaway (BRK.A) released its annual report on Saturday, showing a rise in Q4 net income to $3.06B ($1,969/share) from $117M ($76/share) in Q4 2008, thanks in part to a recovery in derivatives. "We’ve put a lot of money to work during the chaos of the last two years," said Buffett, because "a climate of fear is [investors'] best friend.” Among other points in the report, Buffett predicts the housing market will recover by 2011, says he should have bought more "ridiculously cheap" corporate and muni bonds, and calls on bank CEOs to take responsibility.
  • Shell looks to sell non-core assets. Royal Dutch Shell (RDS.A) is trying to raise $2B-3B by offloading non-core assets in order to help cover its $28B in capital spending this year. Buyout groups Axa Private Equity, Bain Capital and PAI are bidding on Shell's European liquid petroleum gas business, which could bring in around €1B ($1.4B). Shell is also looking to sell its North Sea fields, but hasn't received any bids for the business yet.
  • Financial reform stalls. Despite weekend talks, there's been no "real progress" on a financial reform bill, sources said, as neither Republicans nor Democrats have embraced Sen. Chris Dodd's proposal to scale back Obama's Consumer Financial Protection Agency. Though lawmakers say they remain hopeful a compromise can be reached, time is becoming a factor; between now and the midterm elections in November, Congress will have 23 in-session weeks to get a bill approved by the Senate Banking Committee, debate and vote on the bill in the Senate, and reconcile the bill with the version passed by the House of Representatives.
  • Google battles MSFT on antitrust. After Google (GOOG) tried to collect unpaid advertising bills from a small internet company, the firm responded with an antitrust suit accusing Google of monopolistic abuses. Notably, the firm's legal counsel is Charles "Rick" Rule, who has been Microsoft's (MSFT) chief outside counsel on competition issues for years. Taken along with a recent antitrust suit in Europe following complaints, in part, by a Microsoft subsidiary, Google argues that Microsoft is engaging in a proxy war through unrelated cases to set the stage for a broader antitrust assault on Google.
  • Solutia to buy Etimex Solar. Solutia (SOA) agreed to buy closely-held Etimex Solar for €240M ($326M). Most of Solutia's $1.7B in annual sales come from the auto and construction industries, so it will have to convince investors of the wisdom in acquiring Etimex, which makes chemicals used in solar panels.
  • Toyoda heads to China. Toyota (TM) President Akio Toyoda will hold a press conference in China today to address quality concerns. Toyota was struggling in China's booming automobile market even before its recent recall troubles.
  • Friday's failures. Two more banks were closed on Friday, bringing this year's failures up to 22. The closures of the banks, located in Nevada and Washington, are expected to cost the FDIC's insurance fund $103.1M.

Earnings: Monday Before Open

  • AMAG Pharmaceuticals, Inc. (AMAG): Q4 EPS of -$1.07 beats by $0.01. Revenue of $13.1M (+2083%) vs. $12.4M. (PR)
  • DISH Network (DISH): Q4 EPS of $0.40 beats by $0.07. Revenue of $2.9B (+1.4%) in-line. (PR)
  • El Paso (EP): Q4 EPS of $0.34 beats by $0.04. Revenue of $1.1B (-11.2%) in-line. (PR)
  • HSBC (HBC): 2009 earnings of $5.83B vs. $7.76B consensus. Impairment charges and other risk provisions rose to $26.5B from $24.9B in 2008. "Huge challenges and risks remain for all of us," but "our track record of delivering results through adversity, and at all stages of the economic cycle, remains intact." Shares -6% premarket. (PR)
  • Intrepid Potash (IPI): Q4 EPS of $0.09 misses by $0.02. Revenue of $73M (-8.1%) vs. $64M. (PR)
  • ISIS Pharmaceuticals (ISIS): Q4 EPS of -$0.16 misses by $0.05. Revenue of $32M (+9.1%) vs. $27M. (PR)
  • Mariner Energy (ME): Q4 EPS of $0.22 beats by $0.12. Revenue of $240M (+1.3%) vs. $229M. (PR)
  • Public Storage (PSA): Q4 EPS of $1.27 beats by $0.14. Revenue of $403M (-3.3%) vs. $384M. (PR)
  • Quicksilver Resources (KWK): Q4 EPS of $0.27 beats by $0.02. Revenue of $234M (+12.1%) vs. $217M. (PR)
  • Sotheby's (BID): Q4 EPS of $1.09 beats by $0.42. Revenue of $218M (+31.4%) vs. $201M. (PR)
  • USEC (USU): Q4 EPS of $0.31 beats by $0.15. Revenue of $468M (+8.3%) vs. $445M. (PR)
  • Warner Chilcott (WCRX): Q4 EPS of $0.65 beats by $0.05. Revenue of $686M (+183%) vs. $588M. (PR)

Today's Markets

  • Asia: Tokyo +0.45% to 10,172. Hong Kong +2.17% to 21,057. China +1.18% to 3,088. India +1.08% to 16,430.
  • Europe at midday: London +0.4%. Paris +0.5%. Frankfurt +1.05%.
  • Futures: Dow +0.3% to 10339. S&P +0.25% to 1106.25. Nasdaq +0.4%.
    Crude +0.1% to $79.73. Gold -0.4% to $1,114.
    30-year Tsy -0.31% to 118-26. 10-year -0.2%. 5-year -0.14%. 2-year -0.03%.
    Euro -0.73% vs. dollar. Yen -0.54%. Pound -2.5%.

Monday's Economic Calendar

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

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