Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -3.80; 1,413.60
NASDAQ 100: -4.50; 1,763.75
Dow: -19.00; 12,365.00
NIKKEI 225: +0.75%; 17,292.39 (+128.35)
HANG SENG: +1.61%; 19,442.42 (+307.54)
S&P/ASX 200: +1.04%; 5,891.00 (+60.80)
BSE SENSEX 30: +0.14%; 12,902.63 (+17.64)
FTSE 100: +0.02%; 6,246.60 (+1.40)
CAC 40: -0.85%; 5,491.03 (-46.81)
XETRA-DAX: -0.04%; 6,713.76 (-2.76)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -1.28%; $59.28 (-$0.77)
Gold: +0.45%; $653.00 (+$2.90)
Natural Gas: -1.79%; $6.96 (-$0.13)
Silver: +0.35%; $13.050 (+$0.045)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Schering-Plough to Buy Organon Biosciences for $14.4 Billion
Schering-Plough agreed today to purchase the Organon Biosciences unit of Dutch company Akzo Nobel for 11 billion euros ($14.4 billion) cash. Akzo shares reached a five-year high on the news. Organon is the third-largest manufacturer of birth-control pills in the world. In addition to the contraceptive pill Marvelon and birth-control implant Implanon, five experimental drugs in advanced clinical trials will be added to Schering-Plough's roster by the transaction as well as "a number of promising projects'' at earlier stages. Akzo elected to sell Organon after sales disappointed last year and its asenapine schizophrenia drug, considered by analysts to have blockbuster potential, was delayed -- a development that may have steered Akzo's management away from an IPO of Organon, which it had also been considering. Schering-Plough forecasts the deal will raise EPS by $0.10 in the first year after one-time costs and adjustments. The company expects annual synergies of $500 million within three years. The transaction is expected to close by the end of this year.
Sources: Bloomberg, MarketWatch
Commentary: Jim Cramer's Stop Trading! Stock Picks and Comments, Feb. 15 • Top Picks for 2007 from JPMorgan HealthCare Analysts • Searching for Value Investments in the Drug Stock Universe
Stocks/ETFs to watch: Schering-Plough Corp. (SGP), Akzo Nobel N.V. [ADR] (OTCQX:AKZOY). Competitors: BASF AG (BF), PPG Industries Inc. (NYSE:PPG), Wyeth (WYE), Glaxosmithkline plc (NYSE:GSK), Johnson & Johnson (NYSE:JNJ), Sanofi-Aventis (NYSE:SNY). ETFs: iShares MSCI Netherlands Index (NYSEARCA:EWN), SPDR S&P Pharmaceuticals (NYSEARCA:XPH), iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE), Pharmaceutical HOLDRs (NYSEARCA:PPH)
Dollar General to Be Taken Private for $22/Share
Dollar General Corp., which has the most stores (8,260 as of March 2) of any retailer in the U.S., said this morning it has agreed to be acquired by Kohlberg Kravis Roberts & Co. private equity group for about $7.3 billion. KKR will pay $22/share in cash, and will also assume about $380 million in debt. The price represents a 31% premium over Dollar General's Friday close of $16.78. The deal is expected to close in Q3 2007. David Perdue, Dollar General CEO: "Our board of directors firmly believes that this is the right transaction for our shareholders, employees and customers." Michael Calbert of KKR: "Dollar General is an outstanding company with a strong market presence and a rich legacy... we look forward to partnering with the Dollar General team to position the company for future growth." Dollar General shares are up 28% to $21.50 in pre-market trading.
Sources: Press Release, Bloomberg,
Commentary: Is Prudence Passé? Private Equity and LBO Cyclical Sector Targets • Jim Cramer's Take on DG
Stocks/ETFs to watch: Dollar General Corp. (NYSE:DG). Competitors: Dollar Tree Stores Inc. (NASDAQ:DLTR), Family Dollar Stores Inc. (NYSE:FDO), Fred's, Inc. (NASDAQ:FRED), Wal-Mart Stores Inc. (NYSE:WMT), 99 Cents Only Stores (NYSE:NDN). ETFs: Retail HOLDRS ETF (NYSEARCA:RTH), SPDR S&P Retail (NYSEARCA:XRT), PowerShares Dynamic Retail (NYSEARCA:PMR)
UnitedHealth to Buy Sierra Health for $43.50 a Share
UnitedHealth Group Inc., #1 health insurance provider in the U.S., announced this morning it has agreed to buy Sierra Health Services Inc. for $43.50/share -- a 21% premium on Sierra's Friday close of $35.90. The cash deal puts Sierra's price tag at $2.6 billion. UnitedHealth says the purchase will add up to $30 million to its present earnings, without consideration of any potential synergies, and more after that. Las Vegas based Sierra will help UnitedHealth expand its Southwest coverage. The transaction is expected to close by the end of 2007 or sooner. Sierra Health shares are up 18% to $42.50 in pre-market trading. UnitedHealth shares are up $0.12 to $53.12.
Sources: Press Release, Bloomberg, MarketWatch
Commentary: Sierra Health Services Underestimates Drug Costs • Sounds Like a Bargain: UnitedHealth Group Restates Its Earnings • UnitedHealth Robust Despite Backdating - Barron's
Stocks/ETFs to watch: UnitedHealth Group Inc. (NYSE:UNH), Sierra Health Services Inc. (SIE). Competitors: Aetna Inc. (NYSE:AET), WellPoint Health Networks Inc. (WLP), Caremark Rx Inc. (CMX). ETFs: streetTRACKS KBW Insurance (NYSEARCA:KIE), PowerShares Dynamic Insurance Portfolio ETF (NYSEARCA:PIC), iShares Dow Jones U.S. Insurance (NYSEARCA:IAK)
Citi's Bid for Nikko Could Be Stalled as Tokyo Exchange Keeps Nikko's Listing
After a stream of reports Nikko Cordial's four largest shareholders were rejecting Citigroup's $10.8 billion bid at ¥1,350/share ($11.40 at ¥118.4/$1), the latest news that the Tokyo Stock Exchange has decided not to delist Nikko comes as a surprise and means its offer will probably fail. Reuters notes Nikko will remain a Nikkei 225 component, "a move that will likely force index-tracking funds that have already sold out on expectations of a delisting to buy back the stock." A Tokyo-based analyst comments, "Institutional investors and arbitrageurs can be expected to buy back shares, and the market generally should react positively to the news." Nikko lost 0.43% to ¥1,404 ($11.86) in Monday trading ahead of the TSE's decision. Nikko faced a delisting due to an accounting scandal which the TSE said it "couldn't confirm that Nikko Cordial as a whole company was involved." Three of Nikko's four largest shareholders have said Nikko is worth at least ¥2,000 ($16.89) per share and the fourth values it at ¥1,700 - ¥1,800. Nikko's pink sheet traded ADRs closed at $12.05 on Friday.
Sources: Associated Press, Bloomberg, Forbes-XFN Newswire, Reuters
Commentary: Two More Nikko Shareholders Claim Citi's Bid Unacceptable • Second Nikko Shareholder Says Citi's Bid Too Low, Shares Trade Higher • Mizuho's Role In Citi's Bid for Nikko
Stocks/ETFs to watch: Citigroup (NYSE:C), Nikko Cordial (OTC:NIKOY), Mizuho Financial Group (NYSE:MFG). Competitors: Mitsubishi UFJ Financial Group (NYSE:MTU), ABN Amro Holding N.V. (ABN), Nomura Holdings (NYSE:NMR). ETFs: iShares S&P Global Financial Index Fund (NYSEARCA:IXG), iShares Dow Jones US Financial Services (NYSEARCA:IYG), Financial Select Sector SPDR (NYSEARCA:XLF)
China's February Trade Surplus Blows Away Estimates, 2nd Highest Ever
China's General Administration of Customs reported the nation's February trade surplus totaled $23.76 billion, or three times economists' estimates per a Bloomberg survey and was substantially higher than of last February's surplus of $2.5b. BBC News quoted Goldman Sachs analysts, who said, "The significant increase in the trade surplus, both in terms of its levels and the year-on-year growth rate, continues to put the yuan exchange rate under the spotlight." Bloomberg carried comments by Credit Suisse analyst Vincent Chan, the highest ranking China analyst according to a 2006 AsiaMoney poll, who said the surplus "was shocking, and it posts huge pressure on China to allow the yuan to appreciate faster." Exports in February jumped 52%, for their biggest increase since 1995. Bloomberg notes the year to date surplus at $39.6b is more than three times the amount during the same period last year. The governor of China's central bank commented, "China will continue to use a mix of open-market operations, statutory reserve requirements and interest rates to soak up excess liquidity in the financial markets."
Sources: BBC News, Bloomberg, CNBC
Commentary: Beijing Ready to Take on More Risk with Foreign Reserves • Treasury Secretary Paulson's Advice To China: Reform and Open Up • China's Trillion Dollar Question
Stocks/ETFs to watch: iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI), PowerShares Golden Dragon Halter USX China Portfolio (NYSEARCA:PGJ). Bonds: iShares Lehman Aggregate Bond (NYSEARCA:AGG), iShares Lehman 1-3 Year Treasury Bond (NYSEARCA:SHY), iShares Lehman 7-10 Year Treasury (NYSEARCA:IEF), iShares Lehman 20+ Year Treas Bond (NYSEARCA:TLT), iShares Lehman TIPS Bond (NYSEARCA:TIP). Currency: PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV), Euro Currency Trust (NYSEARCA:FXE)
Take-Two's Loss of $0.30 a Share Enough To Beat Estimates
Take-Two Interactive Software reported early Monday that it narrowed its loss in the latest quarter to $21.5 million, good for and EPS loss of $0.30. versus a loss of $29.1 million (negative EPS of $0.41) a year ago. Revenue increased slightly to $277.3 million, up from $265 million in the prior year period. Consensus estimates (Thomson Financial and Reuters) were expecting a quarterly loss of $0.33 cents a share and on revenue of $269.7 million. Take-Two's one-time items in the quarter included a more than $6 million expense related to an ongoing stock options probe. The company will not be holding a conference call to discuss its latest results.
• Sources: Press Release, Reuters, MarketWatch
• Commentary: Take-Two Interactive: Investor Group Forms, Wants Six Board Nominations • Take Two Jumps as Board Faces Ouster by Investors, But Can They Fix It? • Take-Two's Shares Jump as Investor Group Plans to Take Action
• Stocks and ETFs to watch: Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Competitors: Activision (NASDAQ:ATVI), Electronic Arts (ERTS), Konami (NYSE:KNM), Nintendo (OTCPK:NTDOY), Sony (NYSE:SNE)
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Gain for a Third Day; Sony, Canon Rise on U.S. Jobs Data, Yen Asian stocks rose for a third day after Japan reported economic growth that beat estimates and U.S. unemployment unexpectedly fell.
• Japan's Economy Expands at Fastest Pace in Three Years on Capital Spending Japan's economy expanded 5.5 percent in the fourth quarter, the fastest pace in three years, as surging exports prompted companies to increase spending on factories and machinery.
• Yen May Fall as Higher Foreign Yields Lure Japanese Pensions, Mutual Funds The world's best-performing currency against the dollar in the past month may lose its 3.1 percent gain as Japanese pensioners pursue higher returns at the start of the country's fiscal year.
European Headlines (via Bloomberg.com)
• European Stocks Extend Gains on Acquisitions; Alliance Boots, Akzo Advance European stocks extended last week's advance after Kohlberg Kravis Roberts & Co. offered to buy Alliance Boots Plc for $18.8 billion and Akzo Nobel NV (OTCQX:AKZOY) said it will sell its drug division.
• Swisscom Offers $4.9 Billion for Italy's FastWeb to Add Internet Accounts Swisscom AG (NYSE:SCM), Switzerland's largest telephone company, offered to buy FastWeb SpA for 3.7 billion euros ($4.9 billion) in cash to add a million broadband Internet customers in Italy as growth at home slows.
• Alliance Boots Shares Rise After $18.8 Billion Offer From KKR and Pessina Shares of Alliance Boots Plc (OTC:ABOYY) rose after Kohlberg Kravis Roberts & Co. and Italian billionaire Stefano Pessina offered 9.7 billion pounds ($18.8 billion) for the largest U.K. drugstore chain.
• U.K. Factories Raise Prices for Third Month as Raw-Materials Costs Rebound U.K. factories raised prices for a third month in February as raw material costs rebounded, adding to the case for the Bank of England to increase interest rates again.