Wall Street Breakfast: Danone Buys WhiteWave In Mega Food Deal

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Includes: ALIZF, AVG, AVST, BA, CC, CVX, DANOY, DD, EADSY, GOOG, GOOGL, ICE, JPM, QQQ, SPY, TSLA, TWTR, WBA, WWAV
by: Wall Street Breakfast
Wall Street Breakfast
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Danone, the world's largest yogurt maker, has agreed to buy U.S. health group WhiteWave Foods (NYSE:WWAV) in what would be the French company's largest acquisition in 10 years. The offer equates to $56.25 per share in cash, resulting in an enterprise value of around $12.5B, and would double the size of Danone's (OTCQX:DANOY) U.S. business. WWAV +18% premarket.

Economy

The Fed didn't raise its benchmark interest rate last month because officials worried about the "surprisingly weak May employment report," according to the minutes of the June meeting. And that was before the Brexit vote. The outlook continues what has become a familiar pattern at the Fed: The central bank enters the year predicting stronger growth and a gradual return to higher interest rates, but then pares its forecasts as data disappoints.

Aides to Bernie Sanders are negotiating with Hillary Clinton's campaign on an endorsement from the Vermont senator next week in a major step toward unifying the party against Donald Trump before the Democratic convention. While Sanders has said he would vote for Clinton in November, he has withheld his endorsement to press for policy commitments and influence the party's agenda.

Sterling is at a 31-year low in the area of $1.30, but it's got another 7-11% downside, say the big banks, with Goldman and Citi seeing a bottom around $1.20, and Deutsche $1.15 by year-end. Some even think the pound will reach parity with the dollar unless Britain comes up with a Plan B that includes an EU free trade deal. Allianz's (OTCQX:ALIZF) Mohamed El-Erian believes sterling is facing a "double whammy (current account and capital account) with no strong anchor".

Australia faces the prospect of losing its vaunted AAA rating, after S&P lowered its outlook on the nation's debt to negative. The agency cited a combination of the government's budget deficits and the likelihood of a political stalemate as the country awaits the outcome of a very tight election. According to the latest tallies, the Liberal-National coalition looks set to win a slim majority but in many constituencies the results remain too close to call.

China news roundup: The country's foreign exchange reserves rose $20B last month to $3.21T, rebounding from a 5-year low in May. Deal-hungry Chinese buyers also led to a record M&A spree in the first half of 2016, taking less than six months for the volume of announced outbound deals to surpass last year's total of $120B. Meanwhile, the yuan has depreciated 1.5% since the Brexit vote to its lowest level since November 2010 (6.68 per dollar).

The world risks becoming ever more reliant on Middle Eastern oil as lower prices derail government efforts to curb demand, IEA's Fatih Birol told FT. According to the leading energy body, ME producers now make up 34% of global output, pumping 31M barrels a day. That is the highest proportion since the Arab fuel embargo of the 1970s when it hit 36%. In 1985, when North Sea production accelerated, their share fell to as little as 19%.

Stocks

Four more U.K. property funds have frozen withdrawals as investors look to dump real estate holdings in the aftermath of the Brexit vote. Columbia Threadneedle, Henderson and Canada Life have suspended trading in the investment vehicles, while Aberdeen Fund Managers cut the value of its U.K. Property Fund by 17% and halted redemptions for 24 hours. The development leaves £18B frozen in the biggest seizing up of funds since the 2008 financial crisis.

Looking to speed up early morning trading in times of market stress, the SEC has approved plans by the NYSE (NYSE:ICE) to eliminate Rule 48 and instead set up specific guidelines for when shares could open after a trading halt. The exchange had asked for the rules after disorderly trading on Aug. 24, 2015, when there was a record intraday drop in the Dow Jones.

JPMorgan could be forced to move thousands of staff out of Britain if the country loses its "passport rule," or the automatic right to sell financial services to the EU, Jamie Dimon told Il Sole 24 Ore. The bank currently has 16K employees across the U.K. Those locations helped JPMorgan (NYSE:JPM) produce $14.2B worth of revenue last year.

Derivative issues at European banks are a hundred times more risky than Italy's non-performing loan issues, according to Prime Minister Matteo Renzi. Italian bank shares have crumpled over the past 10 days, totaling some €360B in losses, with investors fearing a possible financial disaster in the eurozone's third-largest economy.

A House panel will debate legislation today that could block a sale by Boeing (NYSE:BA) to Iran Air with a list price of $17.6B. Three measures will be considered, including one preventing the Treasury from licensing the sale, another stopping transactions tied to aircraft export and a third barring the Ex-Im bank from providing financing for deals with the Islamic Republic. New laws would affect Airbus (OTCPK:EADSY) as well as other firms, since virtually all modern jets have more than 10% U.S. content and thus require export licenses.

The Niger Delta Avengers blew up three Chevron (NYSE:CVX) manifolds late last night, continuing the attacks which escalated over the weekend. The militant group accuses Nigerian President Muhammadu Buhari of favoring oil interests over those living in the Delta and aims to create a sovereign state in the region. Twitter (NYSE:TWTR) suspended the account of NDA earlier this week.

Several more Tesla owners have told the WSJ that they have been in accidents caused by Autopilot. The incidents, which didn't involve major injuries, run the gamut from over-reliance by drivers on Autopilot to alleged failure in the system to recognize its surroundings. A source reveals that Tesla (NASDAQ:TSLA) is considering an upgrade that would disengage the service if too many system warnings are ignored.

A U.S. jury has ordered DuPont to pay $5.1M to a man who said he developed testicular cancer from exposure to a toxic chemical used to make Teflon at one of its plants. It is the second time jurors in Ohio federal court have found against DuPont (NYSE:DD), which is facing more than 3,400 lawsuits linked to perfluorooctanoic acid, or C-8. Spinoff Chemours (NYSE:CC), which must bear the costs, plunged 22% during the final hour of trade on Wednesday.

The annual Allen & Co. conference, gathering some 300 media and tech CEOs, plus some of the most powerful investors in the world, is underway in Sun Valley, Idaho. Details about the gathering are typically kept secret, but insiders have described the event as a "summer camp for billionaires." Among the big names on the guest list: Mark Zuckerberg, Jeff Bezos, Tim Cook, Bill Gates, Warren Buffett, Bob Iger, James Murdoch and Shari Restone.

Six months after it warned that 2016 would be a tough year, Samsung Electronics (OTC:SSNLF) is showing that new technology is beginning to pay off. The South Korean conglomerate said its Q2 operating profit likely rose 17.4% from a year earlier to 8.1T won ($7B) - its highest in more than two years - driven by Galaxy S7 smartphone sales.

Avast Software has agreed to buy AVG Technologies (NYSE:AVG) for $1.3B in cash to expand its geographical reach, internet security opportunities and tap into newer areas such as Internet of Things. Avast (Private:AVST), which provides free and paid software for personal computers and mobile devices, has more than 230M users worldwide.

Google is working on two Android Wear smartwatches, according to a new report from Android Police. The two devices - one codenamed Angelfish, the other Swordfish - are said to place a heavy focus on the Google (GOOG, GOOGL) assistant artificial intelligence "bot" that headlined the company's recent I/O keynote. The gadgets may arrive after the new Nexus phones are introduced, but could very well be branded as Nexus watches.

Wednesday's Key Earnings

Walgreens (NASDAQ:WBA) -2.4% on Brexit, Rite Aid deal uncertainty.

Today's Markets

In Asia, Japan -0.7% to 15276. Hong Kong +1% to 20707. China flat at 3017. India +0.1% to 27201.
In Europe, at midday, London +1.4%. Paris +1.6%. Frankfurt +1.1%.
Futures at 6:20, Dow +0.1%. S&P flat. Nasdaq +0.1%. Crude +1.1% to $47.97. Gold flat at $1366.80.
Ten-year Treasury Yield -1 bps to 1.37%

Today's Economic Calendar

Chain Store Sales
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
8:30 Gallup Good Jobs Rate
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »