Wall Street Breakfast: Bayer Confirms Takeover Talks With Monsanto

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Includes: AMZN, BAYRY, CRM, CSCO, CZR, DB, EADSY, FB, FTI, GM, LOW, MON, NFLX, QQQ, SPLS, SPY, TGT, THERA, TKPPY, TSLA, TWTR, VALE, VIA, VIAB
by: Wall Street Breakfast
Wall Street Breakfast
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German drug and chemicals giant Bayer has made an unsolicited takeover offer for Monsanto (NYSE:MON), as high inventories and low commodity prices spur consolidation in the global agrichemicals industry. A tie-up would result in the world's largest seed and crop-chemical company, with $67B in annual sales. Monsanto said in a statement its board is reviewing Bayer's (OTCPK:BAYRY) proposal, which is subject to due diligence, regulatory approvals and other conditions. MON +8.1% premarket.

Economy

Global stocks fell to a six-week low, sovereign bonds slumped and the dollar held gains after minutes of the Fed's last meeting put the prospect of a June rate hike firmly on the table so long as economic data continues to show positive signs. Oil is under pressure from the financial movement, in addition to EIA data published on Wednesday showing a build in U.S. crude inventories, as well as surging output from Iran to Europe and Asia.

The Philippine economy expanded 6.9% in the first quarter of this year, dislodging China as Asia's fastest growing country. The GDP figure was bolstered by strong investment growth as well as higher construction and domestic consumption ahead of elections in May. Incoming President Rodrigo Duterte has pledged to retain the economic priorities of the outgoing Aquino administration, policies that led to the nation's first investment-grade ratings and its best period of growth since the 1970s.

House Republicans have reached a tentative deal with the Treasury Department on a rescue package to ease Puerto Rico's debt crisis, according to House Natural Resources Chairman Rob Bishop, who has been leading negotiations. The revised bill would create a control board to help manage the U.S. territory's financial obligations and oversee some debt restructuring, but wouldn't commit any federal money - a critical requirement to win support of conservatives.

The World Health Organization is sounding off another Zika alarm, stating the virus is likely to spread to parts of Europe this summer, although the likelihood of an outbreak is low to moderate. Areas most at risk include the Black Sea coast of Russia and Georgia and the island of Madeira. Countries with a moderate risk include France, Spain, Italy and Greece, while the threat in the U.K. is low.

Stocks

An EgyptAir flight from Paris to Cairo disappeared from radar in the early hours of Thursday morning, prompting search operations by Egyptian authorities over the Mediterranean Sea. There are understood to be 56 passengers, 7 crew and 3 security personnel on board. The Airbus A320 (OTCPK:EADSY) was flying at 37,000 feet when it went missing, and the last contact with the pilots took place about 10 minutes before the aircraft vanished.

Sixteen prominent conservatives met with Mark Zuckerberg yesterday to air concerns about allegations of political bias at the world’s largest social network, in a session that several attendees described as a productive start to dialogue that should continue. "I wanted to hear their concerns personally and have an open conversation about how we can build trust," Zuck wrote on Facebook (NASDAQ:FB). "I want to do everything I can to make sure our teams uphold the integrity of our products."

Netflix and Amazon's video streaming services could be forced to devote "at least" 20% of their catalogs to European films and TV shows as part of an overhaul of EU broadcasting rules. Under a Brussels plan to be unveiled next week, video-on-demand groups would also be obliged to "ensure prominence" of any European works, FT reports. Netflix (NASDAQ:NFLX) has already warned that rules requiring a minimum of European content would distort the market and create a "perverse incentive" for operators to buy cheap titles. AMZN -0.6% premarket.

Snow White just landed in the 21st century... Microsoft (NASDAQ:MSFT) has unveiled a Magic Mirror - a so-called smart mirror that can recognize and greet users, and display the weather, time and other information. The device was showcased at InnovFest Unbound 2016, a digital technology conference in Singapore, and contains a hidden facial-recognition camera that can detect eight human emotions. Features such as news and Facebook (FB)/Twitter (NYSE:TWTR) feeds are expected to be added soon.

Under continuing pressure, the board of Viacom (VIA, VIAB) has voted to stop paying chairman emeritus Sumner Redstone, sources told WSJ. The company had considered another pay cut after a mental competency suit against the mogul was thrown out last week. Viacom previously cut compensation to Redstone by 85% in January, and shortly thereafter named Philippe Dauman to replace him as executive chairman.

The bankrupt operating unit of Caesars Entertainment (NASDAQ:CZR) has unveiled a new proposal to emerge from Chapter 11 that includes a $4B contribution from its parent. A smaller initial agreement was widely opposed by creditors, who are collectively owed $18.4B. They allege that Caesars Entertainment stripped away many of the best hotel casinos - such as The Linq Hotel on the Strip - and put them out of reach for debt collecting.

Despite formally stepping down at the lender's annual meeting today, Deutsche Bank (NYSE:DB) co-chief executive Juergen Fitschen will continue to work for the bank in a different role. He will concentrate on the German and Asian businesses, and support the institution with "key corporate client" contacts. Deutsche Bank (DB) also expects additional legal costs this year to deal with a raft of scandals that have hurt profits and dogged its reputation.

Tesla fell 2.2% in extended trading on Wednesday after announcing it would raise capital to finance the accelerated launch of its new Model 3 electric sedan. A chunk of the new $2B investment will come from CEO Elon Musk, who will buy around 5.5M shares from Tesla (NASDAQ:TSLA), 2.77M of which he will sell publicly to cover the taxes he owes on his purchase. The net amount Tesla earns from Musk exercising his options is around $600M, leaving the company the remaining $1.4B to raise publicly through secondary stock offerings.

General Motors plans to compensate about 130K American owners of SUVs that had inflated fuel economy labels, revealing itself as the latest automaker to misstate gas mileage. GM will disclose a program to reimburse the owners for the difference in miles per gallon in the coming week, and will temporarily halt sales of about 60K new 2016 U.S. vehicles.

Lower energy prices are continuing to drive consolidation in the oil services sector, with France's Technip (OTCQX:TKPPY) announcing an all-stock merger with U.S. rival FMC Technologies (NYSE:FTI). "Together, TechnipFMC can add more value across Subsea, Surface and Onshore/Offshore, enabling us to accelerate our growth," Technip CEO Thierry Pilenko declared. The transaction is expected to deliver annual pretax savings of at least $400M by 2019 and boost EPS significantly. FTI +2.4% premarket.

Iron ore mining giant Vale delivered a stark, three-pronged warning overnight: 1) this year's dramatic run-up isn't fully justified by the fundamentals; 2) watch out as low-cost supply is set to pick up; 3) the company is ready to compete at any price level. "We'll have to prepare for tougher periods," Vale's (NYSE:VALE) Claudio Alves said. "The price less than one month ago was more than $70. When you come back three months ago, it was $38. This shows there's a big volatility."

Troubled biotech startup Theranos has told federal health regulators that it voided two years of results from the blood tests that it once staked its future on, WSJ reports. All results taken from its Edison blood-testing devices in 2014 and 2015 were thrown out and updated reports sent to doctors. The Edison blood test was considered disruptive because they relied on a drop of blood from a finger prick, and was one of the main reasons Theranos (THER) achieved a $9B valuation in 2014.

Wednesday's Key Earnings

Cisco (NASDAQ:CSCO) +4.8% AH topping estimates, solid guidance.
Lowe's (NYSE:LOW) +3.3% following a comparable-store sales boost.
Salesforce (NYSE:CRM) +6.1% AH on strong growth, upbeat forecast.
Staples (NASDAQ:SPLS) -0.5% as sales dropped 1.2% in Q1.
Target (NYSE:TGT) -7.6% stung by low traffic, weak outlook.

Today's Markets

In Asia, Japan flat at 16647. Hong Kong -0.7% to 19694. China flat at 2807. India -1.2% to 25399.
In Europe, at midday, London -1.4%. Paris -0.9%. Frankfurt -1.2%.
Futures at 6:20, Dow -0.4%. S&P -0.4%. Nasdaq -0.4%. Crude -1.9% to $47.27. Gold -1.5% to $1255.10.
Ten-year Treasury Yield flat at 1.87%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
8:30 Chicago Fed National Activity Index
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
10:30 Fed's Williams Speech
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »