GE Eying UK's Hallmark Channel -- Telegraph
The UK's Telegraph reports NBC Universal, a unit of General Electric, is preparing to buy Sparrowhawk Media, the private-equity backed owner of the Hallmark channel, for £175 million ($351M). Sources say NBC and private equity firms 3i and Providence, are "close to concluding talks." The private equity partners acquired Sparrowhawk for £120 million ($242M) in 2005. An acquisition of Sparrowhawk supports NBC's target of growing international revenues as a percent of net income to 30%, from 20% at present, according to the Telegraph. Sparrowhawk will add the Hallmark channel (60 million subscribers in 152 territories), recently launched Movies 24, children's broadcasting channel Kids Co and a forthcoming UK woman's lifestyle channel, Diva, to NBC's current European broadcast lineup consisting of CNBC, Sci Fi and 13th Street. Sparrowhawk's film library includes such classics as Moby Dick and Gulliver's Travels. With the acquisition, NBC will be one of the largest pay-TV channel owners in the UK, says the Telegraph. Shares of General Electric gained 0.7% to $39.41 on Friday.
Commentary: Does NBC want to expand overseas? • GE Covered Calls: Shelter From A Stormy Market • Eight Top Movie Stocks Worth Viewing
Stocks/ETFs to watch: GE. Competitors: CBS, VIA, NWS, DIS
Earnings call transcripts: General Electric Q2 2007
Goldman Sachs to Buy Tiffany's Tokyo Property -- WSJ
Goldman Sachs Group is about to sign a deal to buy luxury jeweler Tiffany & Co.'s flagship property in Tokyo for $318 million, according to the Wall Street Journal. Goldman will then rent the property, located in Tokyo's Ginza area, back to Tiffany. Tiffany bought the property for $140 million four years ago. Foreign investment is driving up prices of commercial land in some Japanese cities, while in other cities prices continue to decline (although at a slower pace: commercial land prices outside major metropolitan areas fell 2.8% in 2006 after dropping 5.5% in 2005). In major cities, commercial land prices climbed 2.3% last year. A few months ago, Morgan Stanley bought 13 hotels from All Nippon Airways for $2.4 billion. That bank has invested approximately $17 billion in Japanese real estate. Last year, Goldman raised over $1 billion in shares sold for the Accordia Gold Co., which it set up to manage a portfolio of golf courses in Japan.
Sources: Diamonds.net, Wall Street Journal, Reuters, MarketWatch
Commentary: Morgan Stanley to Buy 13 Japanese Hotels • Goldman Sachs: Spin Doctors or Funds Managers? • GS Quant Fund Bounces Back
Stocks/ETFs to watch: TIF, GS. Competitors: JPM, MER, MS. ETFs: IAI, PKW, RCD
Earnings call transcripts: Goldman Sachs F2Q07
TRANSPORT AND AEROSPACE
Ford, GM: We’ll Leave Detroit If Union Won’t Bend
U.S. auto manufacturers Ford and GM have threatened to take their operations overseas if the United Auto Workers refuse to accept huge pay cuts. The threat is ominous for Detroit, which is struggling to weather a sharp downturn and manage the effects of the subprime mortgage implosion. For each vehicle manufactured, Ford and GM pay workers about $27 per hour and then pay another $44 per hour in pension and healthcare costs for retirees. The companies say they must reduce total per-vehicle costs by about 30%. If a deal is not reached, they claim they will be forced to relocate to Latin America or Asia. Dave Cole, chairman of the think tank Centre for Automotive Research: "This threat [of leaving Detroit] is very real and the UAW is aware of it. Both GM and Ford have made it clear to the union that you do whatever you have to do to stay in business." The UAW's only means of resistance might be a strike, which would bolster the union's standing with its own members but could kill both it and its employers. As 24/7 Wall Street noted, "Detroit cannot have its capacity off-line for any period that would allow the Japanese to pick up more market share."
Sources: Observer, 24/7 Wall Street, BloggingStocks.com
Commentary: GM Cuts Production on Pickups, SUVs • July Auto Sales Hit Nine-Year Low • Auto Retail Industry Changing Faster Than Most Can Keep Up With • The Slowdown In Housing Does Indeed Affect Auto Sales
Stocks/ETFs to watch: F, GM, DCX. Competitors: TM. ETFs: PRFG, RPV
Earnings call transcripts: Ford Q2 2007, General Motors Q2 2007
ENERGY AND MATERIALS
U.S. Steel to Buy Stelco for $1.1B
United States Steel Corporation announced it has definitively agreed to acquire Canada's Stelco Inc. for $1.1 billion, or C$38.50/share ($36.62), which represents a 43% premium over its Friday close of C$26.93 in Toronto. In a press release, U.S. Steel said it expects the acquisition "to strengthen its position as a premier supplier of flat-rolled steel products to the North American market." The combined entity will have annual raw steel capability of approximately 33M net tons, ranking it as one of the largest steelmakers globally. U.S. Steel projects post-merger annualized pre-tax synergies of more than $100M by the end of 2008, and said the transaction will be accretive to EPS in 2008 (excluding synergies and the impact of purchase accounting adjustments). The transaction is expected to close before the end of 2007, subject to antitrust review in the U.S. and Canada. U.S. Steel said shareholders owning 76% of Stelco have already agreed to irrevocably commit to support the transaction. Shares of U.S. Steel gained 2.85% to $93.39 on Friday.
Sources: Press release, Bloomberg, Reuters, Wall Street Journal
Commentary: Scrap Metal: A Hot Commodity • US Steel Surges on Unsubstantiated Thyssen/Severstal Merger Speculation • U.S. Steel to Acquire Lone Star Technologies for $2.1B
Stocks/ETFs to watch: X. Competitors: AKS, NUE, MT. ETFs: SLX, XME
Sinopec Posts 65% Jump in H1 Net
China Petroleum & Chemical Corp., otherwise known as Sinopec, reported a 65% rise in H1 net earnings on lower crude costs and higher fuel prices. It also lowered its full-year 2007 refining forecast. The company posted H1 net profit of 36.19 billion yuan ($4.78 billion), up from 21.87 billion yuan a year ago. Revenue was up to 566.83 billion yuan from 491.22 billion yuan. Bloomberg broke out the company's Q2 net profit at 16.8 billion yuan ($2.2 billion), a 36% rise from the year-ago period. Sinopec's crude costs fell 7% to $60.80 a barrel from a year ago, in part because it processed a higher proportion of lower-quality crude. The company warned its refining operations could lose money if oil prices stayed above $60 a barrel. "Earnings growth momentum has clearly peaked, with refining margin deteriorating rapidly since late in the second quarter," said Gordon Kwan, China energy research head at CLSA. Sinopec has a 55.56% share in Sinopec Shanghai Petrochemical, the largest ethylene producer in China, which posted a leap in H1 net profit to 1.79 billion yuan from 5.7 million yuan. That company noted that in H2, "the average cost of crude oil...may increase significantly as compared with the first half of 2007, while the major production facilities will undergo large-scale inspection and maintenance." It nevertheless forecasts that it will swing to a profit in the period, thanks primarily to the substantial H1 gain.
Sources: Press release, Bloomberg, Wall Street Journal I, II, MarketWatch
Commentary: Expecting Upside In Chinese Energy Stocks • China Shares Regain All Losses
Stocks/ETFs to watch: SNP, SNI. Competitors: CEO, PTR
Coal Pollution May Stint China Growth
A World Bank study conducted in spring 2007 estimates that 750,000 people die annually in China from diseases related to pollution. Of that total, 350,000-400,00 die from outdoor air pollution, 300,000 from indoor air pollution, and 60,000 from water pollution. The World Bank study is consistent with prior estimates by the World Health Organization, but is an underestimate according to Chinese experts. China's state apparatus underprices water, electricity, and oil. As a result, Chinese industry uses 4-10 times more water per unit of production than industrialized nations and consistently more energy: 20% more energy for steel production, 45% more for cement and 70% more for ethylene. China's building boom exacerbates the problem because buildings lack insulation, requiring twice as much energy for heating and cooling than those in the U.S and Europe. Over two thirds of China's energy needs are met by coal. Small and medium coal-powered plants, using cheaper but outdated and inefficient technology, accounted for most of the 66 gigawatts of power production added in 2005 and the 102 gigawatts added in 2006 -- the latter equivalent to the entire energy output of France. China already consumes more coal than the U.S., Europe and Japan combined, and in 2005 became the leading source of sulfur dioxide pollution globally. The International Energy Agency estimates that China will overtake the U.S.A. as the leading producer of greenhouse gases by the end of this year, while the Netherlands Environment Assessment Agency says it already has. China's air pollution is about three times the maximum level considered safe by Europe and the U.S. China's official efforts to curb pollution have failed, due to unwillingness to use market-based incentives at the cost of growth, and a lack of central control over local officials.
Sources: New York Times
Commentary: China, U.S. and India Driving Water Infrastructure Spending • The Long Case for Sinoenergy • Chinese Energy Sector Plays: Oil and Gas Good, Coal Not So Good
Stocks/ETFs to watch: SYNM, YZC, BTU, PBW, FTEK, FEEC.OB. ETFs: FXI, PGJ, IXC
MUST-READS ON SEEKING ALPHA TODAY
Have Wall Street Breakfast emailed to you every morning before the market opens.