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RETAIL

Home Depot Sells Supply Unit for $10.3B, Boosts Share Buyback

Shares of Home Depot rose 5.2% to $40.27 in after-hours trading, on news it had sold its Supply unit for $10.3b to a private equity group. In addition, Home Depot's board authorized a $22.5b increase in its share repurchase program. The private equity group consists of Bain Capital Partners, The Carlyle Group and Clayton, Dubilier & Rice. The transaction is expected to close in Q3, subject to certain regulatory requirements and contingencies. The surprise share repurchase is a six-fold increase to Home Depot's previously announced $3.5b recapitalization, and represents more than a quarter of the company's market cap. Home Depot has repurchased 19% of its shares since 2002. It will commence "as soon as practicable," and be financed with proceeds from the sale, cash on hand and proceeds from an Home-Depot-HD-chart-06-19-07 anticipated $12b issuance of senior unsecured notes. Moody's and S&P said its credit rating could be hurt by the debt financing. In a press release, Home Depot said it will update its 2007 guidance in July to reflect the impact of the sold unit. Lehman Brothers was Home Depot's exclusive advisor.
Sources: Press release, Bloomberg, Reuters, Wall Street Journal
Commentary: Home Depot to Get $10B Buyout Offers for Supply Unit -- BloombergDow Stocks Year to Date: Who Hasn't Participated In The Run?Home Depot Is Poised For A Turnaround
Stocks/ETFs to watch: The Home Depot Inc. (NYSE:HD), Lehman Brothers Holdings Inc. (LEH). Competitors: Lowe's Companies Inc. (NYSE:LOW). ETFs: Retail HOLDRs (NYSEARCA:RTH), Consumer Discretionary SPDR (NYSEARCA:XLY), SPDR S&P Homebuilders (NYSEARCA:XHB)
Conference call transcripts: Home Depot F1Q07

Kerkorian's Bellagio, CityCenter Buyout Plan Doubtful, Shares Down 10%

The Wall Street Journal reports Kirk Kerkorian was on the verge of withdrawing his plans Tuesday night to acquire MGM Mirage properties Bellagio Hotel and Casino and Project CityCenter, according to people familiar with the matter. Kerkorian announced his intent to purchase the properties on May 22, sending MGM's shares up 27%. However, in thin pre-market trading Wednesday, MGM's shares are down 9.8% to $78 on thin volume. MGM-chart-06-19-07 Valuation was cited as a partial reason for a withdrawal, due to an expected announcement Wednesday of a joint-venture between MGM and Kerzner Int'l. Kerkorian owns 56% of MGM Mirage. The Journal says MGM remains a "ripe target" for private equity, even without a Kerkorian deal, since its valuable portfolio of Las Vegas real estate could be levered up. The anticipated 50:50 JV with the Bahamas-based Kerzner is for a new Las Vegas resort project on 40 acres of land owned by MGM (valued at $20m/acre). Kerzner would head design and operation of the new property.
Sources: Wall Street Journal
Commentary: Kerkorian Puts MGM in Play, Shares Jump 27%, Casino Stocks RallyKerkorian Aims at Bellagio and City Center; MGM Mirage RalliesKerkorian's Tracinda Intends to Purchase MGM Mirage Properties
Stocks/ETFs to watch: MGM Mirage (NYSE:MGM). Competitors: Harrah's Entertainment (HET), Las Vegas Sands (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN), Boyd Gaming (NYSE:BYD), Penn National Gaming (NASDAQ:PENN)

FTC: Whole Foods-Wild Oats Merger Would Thwart Competition

Whole Foods Chairman and CEO John Mackey may have inadvertently cooked the Wild Oats merger's goose through his choice of words in an email to directors of the company advocating the tie-up. That email has since been used by the FTC as evidence of anticompetitive behavior, according to court records released Tuesday. "By buying [Wild Oats]," Mackey wrote, "…we eliminate forever the possibility of Kroger, SuperValu or Safeway using their brand equity to launch a competing natural/organic food chain to rival us...[Wild Oats] is the only existing company that has the brand and number of stores to be a meaningful springboard for another player to get into this space. Eliminating them means eliminating this threat." The FTC filed suit in June against Whole Foods to block the proposed $565 million merger on the grounds that the resulting company would control the natural foods market and squelch competition. Mackey's emailed comments represent "an awesome antitrust admission by the founder and CEO of the company," said antitrust lawyer Robert Doyle. WFMI 20 June 2007 OATS 20 June 2007Mackey has countered that it is disingenuous of the FTC to object to the reduction of competition as the motivation for a merger. "This is so self-evident to me that I really can't understand why the FTC wants to make a big deal out of it," he posted on the company's website. "If the FTC is opposed to the elimination of all competition, then I don't understand why they approve any mergers?"
Sources: Wall Street Journal, CNN.com, Bloomberg, Reuters
Commentary: Whole Foods/Wild Oats to Challenge FTC Opposition to MergerFTC Offers Perplexing Explanation On Whole Foods-Wild Oats MergerFTC Deals Setback To Whole Foods-Wild Oats Merger: Flawed Logic in the Extreme
Stocks/ETFs to watch: Whole Foods Market, Inc. (WFMI), Wild Oats Markets, Inc. (OATS). Competitors: The Kroger Co. (NYSE:KR), SuperValu INC. (NYSE:SVU), Safeway Inc. (NYSE:SWY). ETFs: Consumer Staples Select Sector SPDR (NYSEARCA:XLP), Vanguard Consumer Staples ETF (NYSEARCA:VDC), PowerShares Dynamic Consumer Staples (NYSEARCA:PSL)
Conference call transcripts: Whole Foods Market F2Q07

INTERNET

News Corp. Wants to Swap MySpace for 25% of Yahoo -- London Times

News Corp. is in discussions with Yahoo which would see it swapping its MySpace social network in exchange for a 25% stake in Yahoo, according to The Times of London. A 25% stake in Yahoo, based on its current market cap of about $37 billion, is worth $12.3 billion -- an astonishing jump in the value of MySpace, which was acquired by News Corp. in 2005 for $580 million. Yahoo has been eager to make inroads into social networking. Last year, it was widely reported that it failed in an attempt to acquire social networking site Facebook for $1 billion. Murdoch conceded in a recent Wall Street Journal interview that Facebook was gaining ground on MySpace. When asked whether he felt newspaper readers were spending their time on MySpace instead of reading the news, he joked, "I wish they were. They’re all going to Yahoo 20 06 2007 Chart News Corp 20 06 2007 ChartFacebook." The Times says it is not clear whether Yahoo was willing to accept Murdoch's terms. On Tuesday, Fortune magazine reported billionaire Ron Burkle had proposed a joint bid with Yahoo for the Bancroft family's Dow Jones journalstic empire, which has already received a $60/share, $5 billion bid from News Corp.
Sources: London Times, CNBC
Commentary: Burkle and Yahoo Might Bid for Dow Jones - FortuneIs Rupert Murdoch Overpaying For Dow Jones?Google, Here's Your Chance To Buy Yahoo
Stocks/ETFs to watch: Yahoo! Inc. (NASDAQ:YHOO), News Corp. (NASDAQ:NWS), Dow Jones & Company Inc. (DJ). Competitors: Google Inc. (NASDAQ:GOOG)
Conference call transcript: Dow Jones Q1 2007, Yahoo! Q1 2007, News Corp. F3Q07
Related: Interview: Murdoch's Role as Proprietor, Journalist and Plans for Dow Jones

Google Dominates as Users Move to Search for Navigation -- Hitwise

Google captured 65.1% of the U.S. search market in May U.S., up from 59.3% a year ago, according figures released Tuesday by Hitwise, an online market researcher. Yahoo was used for 20.9% of searches, down from 22%. Microsoft's MSN Search fell to just 8.4% of searches, down from 12.1%. IAC/InterActiveCorp's Ask.com captured 3.9% of the search market, down from 4.4%. The other 49 search engines watched by the company captured a mere 1.7% of the market. The company said search engines Hitwise US Search survey 20 6 07continue to dominate as the way internet users find their way to websites. Key categories such as health and news saw double-digit increases in the share of traffic that comes to them directly via search engines.
Sources: Hitwise, Dow Jones
Commentary: Semel's Departure Could Set Up Yahoo/Microsoft MergerMay comScore Ratings: Yahoo Maintains Lead, Amazon and Ask.com Move UpGoogle Only Search Provider With YoY Gains
Stocks/ETFs to watch: Google Inc. (GOOG), Yahoo! Inc. (YHOO), Microsoft Corp. (NASDAQ:MSFT), IAC/InterActiveCorp (NASDAQ:IACI). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)

TECHNOLOGY

Google Complaint Prompts Microsoft to Change Vista Search Feature

The Dept. of Justice in a regular status report said Microsoft has agreed to alter its Vista operating system desktop search feature, following a complaint by Google in April claiming Vista made it difficult for consumers to use third-party search software. Microsoft initially denied the allegations, but said it would make changes if requested. Microsoft will provide an update allowing easier access to third-party search software as part of its forthcoming Service Pack 1, scheduled for release later this year. In addition, it will provide information to software firms to make their search programs run better on Vista. Google's chief legal officer called the remedies "a step in the right direction," but said "they should be improved further" to allow for greater consumer access to alternate services. Shares of Microsoft lost 0.16% to $30.46 during normal trading, but edged slightly higher in the after-hours on volume of almost 1m shares. Google lost 0.17% to $514.31 and fell by a similar amount to $513.45 in AH trading on 56,000 shares.
Sources: Google-GOOG-chart-06-19-07 Microsoft-MSFT-chart-06-19-07 DoJ status report, Associated Press, Bloomberg, Reuters, Wall Street Journal
Commentary: Justice Department Throws Its Weight Behind Microsoft - NYTGoogle 'Gears' To Bring Its Applications Offline; Increases Pressure on MicrosoftGoogle Only Search Provider With YoY Gains
Stocks/ETFs to watch: Microsoft Corp. (MSFT), Google Inc. (GOOG). ETFs: PowerShares QQQ (QQQQ), Software HOLDRs (NYSE:SWH), iShares Goldman Sachs Tech. (NYSEARCA:IGM), First Trust Dow Jones Internet Index (FDN), First Trust IPOX-100 Index (NYSEARCA:FPX)
Conference call transcripts: Microsoft F3Q07, Google Q1 2007

AT&T Introduces Realtime Wireless Video Sharing

Speaking at the NXTcomm Trade Show in Chicago on Tuesday, AT&T's new CEO and Chairman Randall Stephenson introduced what he claims is the first service allowing callers to share live video during a phone call. The service will be called Video Share. For $0.35 a minute, AT&T subscribers with access to the company's 3G wireless network can talk on speaker phone while simultaneously streaming video their phone is capturing in real time. t Video Share won't be available for the iPhone, which AT&T Wireless has exclusive wireless rights to offer service for, because it uses an older network. Video Share is being rolled out in three markets on a trial basis, and will spread to 200 additional markets if the trial run is successful. Customers can also order 25 minutes of Video Share for $4.99, or 60 minutes for $9.99. According to Stephenson, consumers "should expect this to quickly reach the other two screens, and that's the PC and the television." AT&T shares were up 0.57% to $40.24 Tuesday.
Sources: Press Release, AP, Reuters, Dow Jones Newswires, CNET News.com
Commentary: AT&T Launches Cell Phone Video-sharing -- PC World BlogAT&T: $10-a-Month DSL; Complains to FCC About CablevisionThe Power of the Apple iPhone: Will People Switch to AT&T Just to Get One?
Stocks/ETFs to watch: AT&T (NYSE:T). Competitors: Verizon (NYSE:VZ), Sprint Nextel (NYSE:S), Qwest Communications (NYSE:Q). ETFs: Wireless HOLDRs (NYSEARCA:WMH), Telecom HOLDRs (NYSEARCA:TTH), iShares Dow Jones US Telecom (NYSEARCA:IYZ)
Earnings call transcripts: AT&T Q1 2007
Related: AT&T Video Share

Hewlett-Packard Purchases Security Software Maker SPI Dynamics

Hewlett-Packard announced Tuesday the acquisition of privately-held security software maker SPI Dynamics for an undisclosed sum. The announcement coincided with the company's introduction of HP Secure Advantage promoting a number of security initiatives including AES 256 bit encryption and an anti-phishing toolbar which protects users from online fraud.hpq HP's acquisition of SPI helps it to better serve customers that rely on the Internet for e-commerce security solutions and supply chain systems. According to Jonathan Rende, VP of Quality Management Software at HP, "The number of vulnerabilities to business-critical applications has gone up exponentially with the rise of Web-based applications." SPI has 140 full-time employees and more than 1,000 customers in the federal government, financial services and healthcare industries. The deal is expected to close in the third quarter.
Sources: Press Release I, II, TheStreet.com, AP, Information Week
Commentary: HP, Apple Remain Bright Spots Amid Corporate IT Spending SlowdownEight Security Software Stocks to Help Secure Your PortfolioCramer's Take on HPQ
Stocks/ETFs to watch: Hewlett-Packard Company (NYSE:HPQ). Competitors: Lenovo (OTCPK:LNVGY), Dell (NASDAQ:DELL), Apple (NASDAQ:AAPL), Microsoft (MSFT). ETFs: Internet Architecture HOLDRs (NYSE:IAH), Vanguard Info. Tech. ETF (NYSEARCA:VGT), iShares S&P Global Technology (NYSEARCA:IXN)
Conference call transcripts: Hewlett-Packard F2Q07
Related: SPI Dynamics Homepage

TRANSPORT AND AEROSPACE

United to Hire More Pilots

UAL Corp.'s shares gained 7.4% to close at $37.93 Tuesday on news United Airlines will start hiring new pilots this year for the first time since 2001 to fill a larger international flight schedule. The company also said it is expecting a rise in Q2 revenue. UAUA 20 June 2007The company will begin hiring up to 100 new pilots after furloughed pilots are recalled. In a regulatory filing with the SEC, United said it expects passenger revenue per seat mile to increase 2.75-3.25%. "Our revenue expectations are better than a number of competitors," said CEO Glenn Tilton. "Costs [should be] flat to up 0.5% -- better than the 1% we had previously expected." CFO Jake Brace said last week that May unit revenue had risen 4%, reflecting stronger international revenue. Domestic revenue is slowing as industry capacity rises, and United cut back on domestic flights this month. In related news, Brace told a Merrill conference United is interested in pursuing a merger that would expand its operations in the Northeast and Latin America. United's shares, which remain down 15% on the year, led a 2% gain on the AMEX Airline Index. Shares of U.S. Airways, which is not on the Index, gained 6.8% after an upgrade by UBS.
Sources: Press release, MarketWatch I, II [video], III, IV
Commentary: Airline Consolidation Efforts Heat Up as United, Continental Discuss MergerGoldman: United Airlines, JetBlue Should Outperform PeersSAC Capital: Notable Portfolio Changes
Stocks/ETFs to watch: UAL Corp. (UAUA), US Airways Group Inc. (LCC). Competitors: AMR Corp. (AMR), Delta Air Lines Inc. (NYSE:DAL), Northwest Airlines Corp. (NWA). ETFs: iShares Dow Jones Transportation Index ETF (NYSEARCA:IYT)

ILFC Places Big Order with Boeing, Favors 787 Over A350

AIG subsidiary International Lease Finance Corp. [ILFC], the world's largest plane leasing company, confirmed it ordered 63 planes from Boeing (including 50 new 787s) worth $8.8b at list price. ILFC's chief said he favors the 787's design over Airbus' A350, adding there's "strong leasing demand" globally for the 787. Boeing-Airbus(EADS)-chart-06-19-07 ILFC is the largest 787 customer with 74 planes now on order. At the end of day-two of the Paris Air Show, Airbus had orders for 374 aircraft (including 62 from options and conversions of earlier orders), well ahead of Boeing's 109. However, there are claims Airbus postponed orders until the Show. Boeing says it announces orders as they are made. Airbus accused Boeing of heavily discounting its 787, but acknowledged Airbus itself has offered discounts on the A350. Meanwhile, Airbus issued its first '07 order forecast, for 600 unit sales (vs. 790 last year), while deliveries are forecast at 440-450 and expected to top Boeing. Shares of Boeing fell 0.5% to $96.92. Airbus parent EADS lost 0.1% in Paris.
Sources: Dow Jones I, II, Reuters
Commentary: Airbus Flies High at Paris Air Show; Delta, Boeing Negotiate $20B OrderBoeing Announces 737/777 Orders, Aerospace MOU with Abu DhabiAirbus Secures Large A350 Sale To US Airways, Hopes To Build Momentum
Stocks/ETFs to watch: Boeing (NYSE:BA), EADS (Paris: 005730). ETFs: iShares Dow Jones US Aerospace & Defense (NYSEARCA:ITA), PowerShares Aerospace & Defense (NYSEARCA:PPA)
Conference call transcripts: Boeing Q1 2007
Related: Paris Air Show Notebook [WSJ]

FINANCIAL

Two Bear Stearns Hedge Funds on Brink of Closure

In a turn of events that could reverberate throughout Wall Street, a proposed recapitalization plan designed to rescue two collapsing hedge funds seemed about to disintegrate Tuesday night, according to reports in Bloomberg and the Wall Street Journal. BSC 20 June 2007The funds, run by Bear Stearns, bet heavily on securities backed by subprime mortgages. Merrill Lynch, a creditor of the larger fund, has seized $800 million of its bonds as collateral, and will put it up for auction Wednesday, unnamed sources say. Merrill had postponed the auction for two days while Bear tried to cobble together the now-shelved rescue plan, but has elected to go ahead with it despite Bear's offer to put up $1.5 billion of its own money. Until recently, the two funds managed $20 billion. As the housing market slowed, delinquencies and defaults on subprime loans shot up, diminishing the value of its securities. The larger fund lost nearly a quarter of its value between January and April. According to the Journal, the forced liquidation could set off a wider-scale repricing of mortgage-backed bonds that could result in the implosion of other funds suddenly faced with heavy losses and margin calls. "No one in the subprime business wants to ask the question of whether they need to re-mark [revalue] all the assets," said one analyst, "that would open the floodgates."
Sources: Wall Street Journal, Bloomberg, Reuters
Commentary: Merrill Lynch Postpones Auction of Bear Stearns Fund AssetsBear Stearns Hedge Fund Facing Mortgage Losses -- WSJ
Stocks/ETFs to watch: Bear Stearns Companies Inc. (NYSE:BSC). Competitors: Goldman Sachs Group Inc. (NYSE:GS), Lehman Brothers Holdings Inc. (LEH), Merrill Lynch & Co. Inc. (MER). ETFs: iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), KBW Capital Markets ETF (NYSEARCA:KCE)

Sale of American Express Private Bank Imminent -- Reuters

American Express is in the final stages of selling its private and transaction banking units, called American Express Bank, to another bank, Reuters reported Tuesday. AXP 20 June 2007An unnamed source said the buyer is probably a large global financial institution. "The likes of the three or four big American banks could qualify -- Citigroup, Bank of America and so on -- or an HSBC or a more medium-sized bank," the source said. The private banking business was "barely profitable," according to the source, although the transaction unit made money. Reuters reported earlier in the month that American Express, a charge card and travel services company, had put its private banking business on the market. Analysts estimated that that business, which has funds under management of approximately $20 billion, would be bought for $1-2 billion.
Sources: Reuters
Commentary: American Express to Sell Private Banking Unit Within Weeks -- ReutersThe Little Stock that Beats the Market: Joel Greenblatt's Winning PlanCramer's Take on AXP
Stocks/ETFs to watch: American Express Co. (NYSE:AXP), Citigroup Inc. (NYSE:C), Bank of America Corp. (NYSE:BAC), HSBC Holdings plc [ADR] (HBC), UBS AG (NYSE:UBS), Credit Suisse Group (NYSE:CS), Merrill Lynch & Co. Inc. (MER). ETFs: iShares KLD Select Social Index Fund (NYSEARCA:KLD), Financial Select Sector SPDR ETF (NYSEARCA:XLF), Vanguard Financials VIPERs (NYSEARCA:VFH)

HEALTHCARE/BIOTECH

Plavix Patent Upheld; Bristol-Myers Shares Rise on Renewed Buyout Chatter

Shares of Bristol-Myers Squibb hit a five-year high of $32.07 before closing up 4.2% at $31.58 Tuesday on renewed speculation the company will be taken over now that a federal court has blocked a generic copycat of Plavix, sanofi's blockbuster blood-clot medication. Bristol-Myers co-markets Plavix with sanofi. Plavix, the third-best-selling drug in the world, brought in $6.1 billion in sales last year, behind Pfizer's Lipitor and GlaxoSmithKline's Advair. It is Bristol-Myers's biggest seller. Plavix revenue sank 53% in Q4, however, after Canadian drug manufacturer Apotex flooded the market with over $1 billion worth of a generic version. Apotex claimed the Plavix patent was invalid or unenforceable, an argument rejected by Judge Sidney Stein of Federal District Court. Stein further ruled that sanofi is entitled to a permanent injunction barring Apotex from future infringement of the patent, which will expire in 2011. Stein will schedule a hearing to determine damages owed by Apotex. BMY 20 June 2007 SNY 20 June 2007Now that the Plavix patent is secure, Bristol-Myers, which has an attractive lineup of products in the pipeline, is a more tempting takeover target. Sanofi, AstraZeneca and Pfizer have all been mentioned as potential suitors. A UBS analyst said in a note bids could go as high as $37/share. The company has a $62 billion market cap, however, making it an expensive purchase even without a premium to its current price.
Sources: Bloomberg, New York Times, Wall Street Journal, CNN.com, Business Week, Forbes, Reuters
Commentary: Pharma News: Bristol-Myers, Sanofi Gain Temporary Halt to Generic PlavixSanofi Board Split Over Bristol Myers Merger -- London TimesBristol-Myers, Sanofi Ink Pre-Merger Deal, Newsletter Claims
Stocks/ETFs to watch: Bristol Myers Squibb Co. (NYSE:BMY), sanofi-aventis [ADR] (NYSE:SNY). Competitors: Eli Lilly & Co. (NYSE:LLY), Merck & Co. Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), Novartis AG (NYSEMKT:NVX), GlaxoSmithKline plc [ADR] (NYSE:GSK). ETFs: iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE), Pharmaceutical HOLDRs (NYSEARCA:PPH), SPDR Pharmaceuticals (NYSEARCA:XPH), iShares KLD Select Social Index (KLD)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Market: S&P 500: Energy Only Overbought Sector
Housing: May Housing Starts: An Indicator of What's To Come?
Long Idea: Cal Dive: Surprisingly Undervalued O&G Service Company
Short Idea: Applied Materials, Lam Research to Suffer from DRAM Space Disorder
Internet: Yahoo! Gone in 12 Months?
Telecom: Comtech Telecom: Stellar Record, Big Prospects
Chips: Apple's iPhone and the Future of Infineon
Software: Taleo: Empowering The Extended Enterprise
Gadgets: Introducing The iPhone Buzz Index
Media: The Day Sony's Music Business Died
Healthcare: What's Driving the Trend Towards Retail Medicine?
Biotech: Elbit Medical Imaging: One Company, Three Hot Sectors
Retail: Aldia: Changed Course, Above Par Performance
Transport: Gimme Credit: Ford Faces Eventual Bankruptcy Without Union Concessions
Gold: Gold Decline Nearing Its End
Energy: Pay Attention To the Oil Price Naysayers
Utility: Southern Company: The Value of High Yield Stocks
Financial: NYSE Euronext Weakness Continues
Asia: More Volatility in Sight for China's Markets
ETFs: David Fry's Market Outlook for Wednesday
Hedge Funds: Why Buy Pre-Packaged Alpha & Beta?
Small-Caps: Red Robin Gourmet Burgers: The Early Bird Catches the Worm
Sound Money Tips: Business or Pleasure?
Jim Cramer: Latest stock picks
Earnings Transcripts: Best Buy F1Q08

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