Wall Street Breakfast: ChemChina Makes $43B Offer For Syngenta

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Includes: AGN, AMZN, APA, CLR, CMG, CVX, DOW, DVN, EOG, F, GGP, GILD, HES, ILMN, KORS, MMM, MON, MRO, MRVL, MUR, NLNK, PFE, QQQ, SIRI, SNY, SPY, SWN, SYT, TM, UPS, VLKAY, XOM, YHOO
by: Wall Street Breakfast
Wall Street Breakfast
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ChemChina is offering to buy Switzerland's Syngenta (NYSE:SYT) in a deal worth more than $43B - a move that would translate into the largest ever international takeover by a Chinese company. Syngenta's board has recommended the 480 francs per share deal (a 20% premium based on Tuesday's closing price) to shareholders. If completed, the transaction would help ChemChina transform into the world's biggest supplier of pesticides and agrochemicals, while snatching an asset that was once the target of St. Louis-based Monsanto (NYSE:MON). SYT +4% premarket.

Economy

Japanese shares led losses across Asia today, amid ongoing volatility in the oil market, a stronger yen, and weak earnings from Nomura that hit brokerages. The downturn also reflects fading expectations that the Bank of Japan will take supportive steps after its decision to introduce negative interest rates late last week. Minutes released by the BOJ overnight showed an intense debate by board members over Friday's sub-zero measures. Nikkei -3.2%.

Washington, Seoul and Tokyo have condemned Pyongyang's decision to launch a long-range rocket this month, after North Korea notified United Nations agencies of the plan. The announcement comes as the U.N. Security Council considers how to respond to the country's fourth nuclear test in January, including the option for a fresh round of sanctions. South Korean defense stocks soared today on the latest news.

The first known case of Zika virus transmission in the U.S. has been reported by the Centers for Disease Control and Prevention, which confirmed it was contracted through sex and not a mosquito bite. Zika had been thought to be spread only by mosquitoes of the Aedes genus, so sexual contact as a mode of transmission would be a potentially alarming development. Sanofi (NYSE:SNY) and NewLink Genetics (NASDAQ:NLNK) have both recently announced project launches to develop a vaccine against the disease.

Looking to return to the international capital markets, Argentina has agreed to pay $1.35B to a group of Italian investors whose bonds the country defaulted on in 2001, marking the first time the Latin American nation has reached an accord with holdout creditors. The deal sets a tough precedent for parallel negotiations taking place in New York between Argentina and another group of holdouts led by billionaire Paul Singer's Elliott Management, who are seeking to be paid around $3.50 on the dollar, or a total of around $9B.

The European Union and United States have reached a deal over trans-Atlantic data sharing that would potentially extinguish the risk of costly litigation against companies by consumers worried about their privacy. The two sides have been trying to forge an agreement since October, when Europe's top court struck down the previous pact in existence since 2000, known as the Safe Harbor agreement. Separately, the EU and U.S. are trying to bring the Transatlantic Trade and Investment Partnership (a free trade deal that could deliver benefits of more than $100B for both economies) to a close by the summer.

The eurozone's manufacturing and services industries cut prices at the fastest pace in almost a year in January, underlining concerns about weak inflation in the region. Markit's composite PMI declined to 53.6 - a four-month low - from 54.3 in December, and the measure of output prices dropped to the lowest since March. ECB President Mario Draghi has said the Governing Council will review its stimulus again next month amid signs that falling oil prices will push the region's inflation rate back to zero.

The Fed's adding a new twist to its severely adverse scenario in this year's stress test - asking lenders how they would handle a prolonged period of rates below zero. Ninety-day bill rates slipped below 0% a number of times over the past few years, but never stayed there for very long. Negative rates, of course, are breaking out all over Europe, and the Bank of Japan last week introduced negative deposit rates as part of its latest attempt to spur the economy into faster growth.

Stocks

Yahoo is officially exploring "strategic alternatives" as part of a restructuring that will eliminate roughly 15% of its workforce. The announcement came alongside a dismal fourth-quarter report card in which Yahoo (NASDAQ:YHOO) took a $4.5B charge to write down the value of several units including Tumblr. What about the company's core business? Yahoo said it was open to offers for the assets, while also proceeding with a plan to spin them off, representing the end of the firm as an independent entity.

Activist investor Starboard Value has taken a 6.7% stake in Marvell Technology (NASDAQ:MRVL) and is betting the beleaguered semiconductor firm can boost margins among other improvements, WSJ reports. The position adds to pressure on Marvell, which is facing investigations into its accounting amid a sharp fall in its stock price. Shares of the company are down 44% over the past 12 months.

In what would be a curious move for Jeff Bezos, Amazon (NASDAQ:AMZN) is planning on opening hundreds of physical book stores across the country. Speaking on his company's post-earnings conference call yesterday, General Growth Properties (NYSE:GGP) CEO Sandeep Mathrani said his understanding is that Amazon's goal is to open 300-400 stores nationwide. Amazon in November opened a physical bookstore in Seattle, where it sells company devices along with books.

Toyota Motor Credit has agreed to pay up to $21.9M in restitution to thousands of African-American, Asian and Pacific Islander customers, for charging them higher interest rates on auto loans than white borrowers with comparable creditworthiness. The automaker is also recalling 320K vehicles for safety issues related to side-curtain shield air bags, which could deploy from the roof in some crashes. Toyota's (NYSE:TM) January 2016 sales were down 4.7%.

The California Air Resources Board said late Tuesday that Volkswagen (OTCPK:VLKAY) submitted a recall fix plan for 3.0 liter diesel SUVs and cars that emit up to 9x legally allowable pollution. The proposal comes after VW reported a decline in U.S. sales for the third straight month due to its severe emissions scandal. The brand's deliveries slid 15% in January, after dropping 9.1% in December and 25% in November.

Ford plans to eliminate hundreds of jobs and kill off some less-lucrative models in Europe as part of a plan to maintain profits in the region."The goal is very simple," said Jim Farley, Ford's (NYSE:F) European chief. "It is vibrant and sustainable profitability, that we make a return in good times and bad." The automaker expects to offer voluntary buyouts to most of its 10,000 salaried employees in Europe, saving it $200M annually.

Just ten days after Moody's put over half a trillion dollars in energy debt on review for downgrade, S&P decided it wanted to be the first one out of the gate. Companies that saw their ratings cut by one notch: Chevron (NYSE:CVX), Apache (NYSE:APA), Continental Resources (NYSE:CLR), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Hess (NYSE:HES), Hunt Oil, Marathon Oil (NYSE:MRO), Murphy Oil (NYSE:MUR) and Southwestern Energy (NYSE:SWN). Oil futures settled below $30 a barrel again yesterday, but prices have taken a positive turn this morning after two days of steep declines.

3M has raised its quarterly dividend 8.3% to $1.025, while announcing a new buyback program of up to $10B worth of shares. At Tuesday's close of 147.87, the maker of Scotch tape and Post-it notes would be able to repurchase about 67.6M, or 11%, of its total outstanding shares. 3M (NYSE:MMM) said the new buyback plan replaces its existing program and does not have a pre-established closing date.

Pfizer is insisting that its $160B takeover of Allergan (NYSE:AGN) will not be thwarted by political opposition, amid criticism that the so-called tax inversion would cost the U.S. Treasury billions of dollars in future revenues. "Under current law, I do not believe there is any reason why the deal will not close - full stop," Pfizer (NYSE:PFE) CEO Ian Read declared. He also reiterated a plan to delay until 2018 a decision on whether to break the enlarged Pfizer-Allergan into two or three smaller companies, but said he would be open to offers for its generics business.

A federal criminal probe linked to a food-safety incident at Chipotle (NYSE:CMG) has widened into a national investigation, sending the burrito chain's shares down 8.6% to $437 after yesterday's closing bell. The stock has plunged in recent months amid an outbreak of E.coli and norovirus at its restaurants that sickened dozens, with same-store sales tumbling 14.6% in Q4. Chipotle also reported its first quarterly revenue decline (-6.8% to $997.5M) in its history as a public company.

Tuesday's Key Earnings

Chipotle (CMG) -8.6% AH following a national criminal investigation.
Dow Chemical (NYSE:DOW) +5.8% on positive results, CEO resignation.
Exxon Mobil (NYSE:XOM) -2.2% after profit dropped 58%.
Gilead Sciences (NASDAQ:GILD) +0.6% AH on Q4 beat, dividend boost and buyback.
Illumina (NASDAQ:ILMN) -7.8% AH on shrinking gross margin, soft guidance.
Michael Kors (NYSE:KORS) +24% after impressive earnings.
Pfizer (PFE) -0.1% on a disappointing outlook.
Sirius XM (NASDAQ:SIRI) -4% following in-line profits.
UPS (NYSE:UPS) +0.7% on increasing revenue, shipments.
Yahoo (YHOO) -1.6% AH after a major goodwill writedown.

Today's Markets

In Asia, Japan -3.2% to 17191. Hong Kong -2.3% to 18992. China -0.4% to 2739. India -1.3% to 24223.
In Europe, at midday, London -0.5%. Paris -0.3%. Frankfurt -1%.
Futures at 6:20 Dow flat. S&P flat. Nasdaq -0.2%. Crude +1.7% to $30.38. Gold +0.2% to $1129.50.
Ten-year Treasury Yield flat at 1.86%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Gallup U.S. Job Creation Index
8:30 Treasury Refunding Quarterly Announcement
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:30 EIA Petroleum Inventories

Companies reporting earnings today