Wall Street Breakfast: Alaska Air Clinches Deal For Virgin America

by: Wall Street Breakfast
Wall Street Breakfast
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Alaska Air has agreed to pay $2.6B for Virgin America (NASDAQ:VA), beating rival JetBlue's (NASDAQ:JBLU) bid (and leapfrogging the carrier) to become the fifth-largest U.S. airline by traffic. Alaska's (NYSE:ALK) offer of $57 per share in cash represents a premium of about 47% to Virgin's Friday's close, and will allow it to heavily expand its presence on the U.S. West Coast. Virgin America is 54% owned by Richard Branson's Virgin Group and New York-based Cyrus Capital Partners. VA +36.3% premarket.


In what has been described as the largest data leak in history, over 11M confidential files leaked to Germany's Suddeutsche Zeitung have revealed how the world's rich and powerful hide their wealth through tax havens. The trove includes offshore shell companies linked to 12 current and former world leaders, as well as hidden financial dealings by more than 128 politicians and public officials. The so-called "Panama Papers," came from local law firm Mossack Fonseca, and cover a period of almost 40 years, from 1977 until as recently as last December.

Christine Lagarde has hit back at Greece over claims that the IMF is pushing for a credit crisis to force economic reforms in Athens, responding to a leaked conversation that has sparked fury among the country's politicians. "The IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks," she declared, calling the speculation "simply nonsense." Talks between the EU, IMF and Greece on a bailout review, assessing the latter's progress at implementing money-saving reforms and aimed at unlocking further loans, are due to resume this week.

Meanwhile, Greece has begun returning migrants from the island of Lesbos to Turkey, putting into practice a controversial agreement aimed at stemming the migration flow into Europe. Under the EU-Turkey deal, Ankara will take back all refugees who enter Greece illegally in return for the union taking in thousands of Syrians directly from Turkey and rewarding it with more money, early visa-free travel and progress in its bid for EU membership.

In a revealing interview with the Washington Post, presidential candidate Donald Trump said that economic conditions are so perilous that the country is headed for a "very massive recession" and that "it's a terrible time right now" to invest in the stock market. The billionaire businessman also called the unemployment rate into question, stating that the figure was more likely above 20%. The remarks would challenge Friday's solid U.S. jobs data, which showed nonfarm payrolls increasing 215K in March, and an unemployment rate of 5%.

Speaking of jobs data...Unemployment across the eurozone improved slightly in February, continuing its slow decline as the economy grows at a modest pace. Figures from Eurostat showed that the jobless rate fell to 10.3% from 10.4% in January. Across the broader 28-country EU, the figure was 8.9%, unchanged from the month before.

The cost of buying insurance against a fall in the value of the pound after the EU referendum in June has soared to levels higher than those seen during the financial crisis, according to the FT. The moves suggest investors and companies are becoming less complacent and beginning to take seriously the prospect that Britain might be on a clear path to leave the EU within three months. On a trade-weighted basis, sterling's value has slumped 7% so far this year.

Yemeni President Abd-Rabbu Mansour Hadi has carried out a major cabinet shakeup ahead of peace talks later this month, appointing a new vice president and prime minister. The country has been torn by civil war since 2014, when Shiite rebels known as Houthis allied with a former president and captured large swaths of the country, including the capital, San'a. Over the weekend, Saudi Arabia's deputy crown prince Mohammed bin Salman said the warring parties were close to resolving the conflict, which has become symbolic of the kingdom's new foreign policy ambitions.

In comments following last week's Nuclear Security Summit in Washington, President Obama denied speculation that the U.S. would ease rules preventing dollars from being used in financial transactions with Iran. Instead, he claimed that Tehran's troubles even after the lifting of sanctions under the nuclear deal were due to its continued support of Hezbollah, ballistic missile tests and other aggressive behavior. "Iran so far has followed the letter of the agreement, but the spirit of the agreement involves Iran also sending signals to the world community and businesses that it is not going to be engaging in a range of provocative actions."

Crude prices headed further south overnight after Iranian oil minister Bijan Zanganeh said the country's oil exports jumped in March to surpass 2M barrels a day, according to the official Shana news service. Prices also remained under pressure following Saudi Arabia's announcement on Friday that backed away from a commitment and stated it was only on board to freeze production if major producers, including Iran, did the same. Is an April 17 output freeze meeting still in sight?


More bankruptcy bells chiming...SunEdison (SUNE) is looking to sell all of its Indian assets or find partners for them, several sources told the Mint newspaper. The news follows reports that the solar company is preparing a chapter 11 filing and is in talks with two creditor groups to obtain a loan to fund its operations during the process. SunEdison's two yieldcos, TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL), don't plan to file for bankruptcy protection, but bidders are said to have inquired about purchasing SUNE's stakes in both of the entities. SUNE -37.4% premarket.

Deutsche Bank has lost its position as a top three global investment bank, after the weak euro and a major restructuring relegated Germany's biggest bank into fifth place in a benchmark industry league table. Data from research firm Coalition, which ranks global investment banks by total revenue from fees and trading, shows the institution now behind JPMorgan (NYSE:JPM), Goldman (NYSE:GS), Citigroup (NYSE:C) and BofA (NYSE:BAC). Deutsche (NYSE:DB) previously held the number three accolade since before the financial crisis.

The SEC is examining alleged policy breaches that prompted JPMorgan's (JPM) U.S. head of government-bond trading and another employee to leave the firm this year, FT reports. Andy Lombara and the other trader were "permitted to resign" in January following a disagreement with the bank's valuation committee over the amount of reserves taken for certain Treasury trades known as strips. Industry watchdog FINRA has already been looking into the traders' termination.

After shooting down a rumor stating it was looking into Brazilian shopping mall operator BR Malls Participacoes, Blackstone (NYSE:BX) is setting its sights on India. The U.S. asset manager is paying up to $1.1B to buy MphasiS from Hewlett Packard Enterprise (NYSE:HPE), underscoring a bullish outlook on the Indian IT outsourcing business. In December, Blackstone purchased a minority stake in India's IBS Software for $170M.

South Africa's Competition Commission will fail to meet tomorrow's deadline for completing an investigation into Anheuser-Busch InBev's (NYSE:BUD) takeover of SABMiller (OTCPK:SBMRY) and will extend the probe. "There is still work that needs to be done and a number of issues that needs to be considered," said Itumeleng Lesofe, spokesman for the antitrust regulator. London-based SABMiller, which started selling brew to gold miners in Johannesburg in 1895, controls 90% of South Africa's beer market.

Staples has found a new use for some of its roomy office-supply stores. The retailer is joining other chains including Sears (NASDAQ:SHLD) and Macy's (NYSE:M) that have carved off sections of their outlets as rentable office space in an effort to improve store productivity and to give shoppers another reason to stop by. Staples (NASDAQ:SPLS) is expected to unveil a new partnership with startup Workbar today to open communal workspace at three Boston-area stores.

After successfully cracking the San Bernardino shooter's iPhone last week, the FBI has assured law enforcement across the U.S. that it will help unlock mobile devices involved in investigations when it is allowed by law and policy. But according to Apple (NASDAQ:AAPL) engineers, the agency's method for breaking into the locked iPhone 5c is unlikely to stay secret for long. Once it is exposed, the company should be able to plug the encryption hole, comforting iPhone users worried that losing physical possession of their devices will leave them vulnerable to hackers.

A shipping delay is holding up some early orders of the highly anticipated Oculus Rift VR headset, which was released on March 28 following years of hype and development. "We've been working through an unexpected component shortage, and unfortunately, that issue has impacted the original shipping estimates for some early customers," wrote Oculus (NASDAQ:FB) in an email. The good news is the company is making up for the delay by covering shipping costs for all pre-orders, including international.

Intel executive Aicha Evans is leaving the company less than a year into her tenure as head of the company's struggling mobile phone division. According to Bloomberg, Evans has already handed in her notice of resignation. The departure comes amid speculation that Intel's (NASDAQ:INTC) mobile unit is close to a breakthrough by becoming a supplier of parts for Apple's iPhone (AAPL).

China's ZTE Corp.'s board will meet early next week to replace three of its most senior executives, in an apparent bid to see U.S. restrictions on its business lifted after it was accused of violating sanctions against Iran. ZTE (OTCPK:ZTCOY) Chief Executive Shi Lirong and executive vice presidents Tian Wenguo and Qiu Weizhao will step down, with Chief Technology Officer Zhao Xianming expected to assume the role of CEO and chairman.

Jeff Bezos' space transportation company Blue Origin has successfully launched and landed for the third time a suborbital rocket capable of carrying six passengers, increasing the pressure on Elon Musk's SpaceX (Private:SPACE). Bezos, the founder of Amazon.com (NASDAQ:AMZN), said earlier this month that Blue Origin expects to begin crewed test flights of the New Shepard rocket next year and begin flying paying passengers as early as 2018.

Volkswagen management extended an olive branch on Saturday to American car dealers hit by its emissions-testing scandal, pledging to "redefine" the company’s tarnished image and "relaunch" the VW (OTCPK:VLKAY) brand. Herbert Diess, head of the automaker's passenger-car brand, met with hundreds of dealers for 90 minutes at an annual conference in Las Vegas. The crux of his message: Volkswagen aims to be a mass-market player in the U.S. market, willing to chase volume at the expense of exclusivity.

Orders for Tesla Motors' new Model 3 electric sedan topped 276K by the end of Saturday, a fast start for the company's first mass-market vehicle, which may not begin to reach customers for another 18 months or more. With a base price of $35K, the weekend pre-orders for the model are bound to put another $10B in Tesla's (NASDAQ:TSLA) bank account. Elon Musk has also promised another update on Wednesday to share the first full week’s order figures. TSLA +4.2% premarket.

Today's Markets

In Asia, Japan -0.3% to 16123. Hong Kong closed. China closed. India +0.5% to 25400.
In Europe, at midday, London +0.6%. Paris +1%. Frankfurt +1%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude -0.3% to $36.67. Gold -0.5% to $1217.90.
Ten-year Treasury Yield -1 bps to 1.77%

Today's Economic Calendar

8:30 Gallup US Consumer Spending Measure
10:00 Labor market condition index
10:00 Factory Orders
10:15 Fed's Rosengren: "A View on Cybersecurity and Financial Stability from the CEO"
12:30 PM TD Ameritrade IMX
5:15 PM Fed's Kashkari: “Too Big to Fail”

Companies reporting earnings today