Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.
  • $10, and that's final! JPMorgan (NYSE:JPM) quintupled its offer for Bear Stearns (NYSE:BSC) from $2 to $10.13 a share in an effort to ward off Bear shareholder opposition. Bear's board also sold JPMorgan a 39.5% stake at the deal price, which should cinch majority shareholder approval. In exchange for the government dropping its opposition to the deal (the Fed/Treasury feared a higher price would make it look more like a bailout), JPMorgan agreed to swallow the first $1B of any losses accruing to the $30B of toxic Bear assets that the Fed guaranteed. Economists argued whether the amended move created a so-called "moral hazard" in which one bailout encourages other firms to take unnecessary risks. JPM shares gained 1.3%. BSC shares closed at $11.25, which some traders said reflected short covering and not expectations of a yet-higher bid.
  • Home resales jump on wave of foreclosures. Sales of foreclosed houses accounted for up to 40% of all home sales in recent months, driving median prices down 8.2% from a year ago, and resulting in a 2.9% jump in home resales. About 2% of all home loans are in foreclosure, double the average rate. Still, with home prices just 10% lower than their mid-2006 peak, prices may still have a lot further to drop to fall into line with historical income ratios.
  • Chesapeake energizes outlook. Natural gas company Chesapeake Energy (NYSE:CHK) boosted its production outlook for 2008-9, citing higher recovery expectations and increased drilling activity. It also announced a new discovery in Louisiana that could benefit the company more than any other play to date. CHK will move from 4 to 10 rigs by year-end and add more in 2009. To facilitate additional drilling, it will increase capital expenditure by $275 million and $675 million for 2008 and 2009. In a departure, it said it is now developing four oil projects. A note of caution from energy analyst David Heikkinen: "Whenever we hear an increase in activity levels by the largest North American driller, that ought to bear a bit of caution for the gas markets."
  • Vodafone to sell shares in Qatar business. Vodafone (NASDAQ:VOD) confirms it will float its Qatar unit, and plans to sell about 20% of the shares before year-end. Vodafone got the rights to break Qatar's mobile phone monopoly in December, and says it expects to be operational in the country by the end of 2008. A recent mobile carrier IPO in the region (Saudi Arabia's #3 carrier Zain) raised $1.8B in a heavily oversubscribed sale; keep in mind, though, that SA is a much bigger market than Qatar (27M vs. 1M). Vodafone holds 51% of the unit's license; a non-profit government entity holds the remainder.
  • Tomorrow's the day... Ford (NYSE:F) will announce the closing of the $2B sale of its Jaguar and Land Rover brands to Tata Motors (NYSE:TTM) on Wednesday. Fiat CEO Sergio Marchionne says he'll collaborate with the unit if the sale goes through, perhaps in developing rear-wheel drive versions of its Alfa Romeo, which it is reintroducing to the U.S. Marchionne says he's talked with all three major U.S. car makers (F, GM, Chrysler) about setting up local production lines.
  • DoJ plays SIRI/XM's song. The Department of Justice finally approved the proposed $13B merger of satellite radio operators Sirius (NASDAQ:SIRI) and XM (XMSR), leaving just the FCC to sign off before the deal closes. FCC Chairman Kevin Martin has said he was pleased by proposed post-merger pricing plans. Janco analyst April Horace says a combined company could save $4B in operating expenses over six years.
  • 3Com connects. Shares of 3Com (COMS) surged 7% in extended trading after FQ3 EPS of $0.08 more than doubled consensus estimates of $0.03. Revenue of $336M was $3M higher than expectations. Looking ahead, the networking equipment maker sees FQ4 EPS of $0.04-0.07 (vs. $0.02 consensus) and revenue of $310-315M (vs. $323 consensus). A deal to take the company private for $2.2B recently fell through.
  • Icahn rejects Motorola's peace offering. Activist Motorola (MOT) shareholder (6.3%) Carl Icahn rejected the company's offer of two board seats. Instead, he sued the telecom giant for access to critical board documents relating to corporate strategy, financial performance, and the hiring of senior executives. The two are now on course for a major proxy battle at the May shareholder meeting; Icahn wants four seats on the board. He calls recent moves by Motorola indecisive, and chastised management for making empty promises.
  • SEC looks to ease overseas investing. The SEC is weighing steps to make it easier for U.S. investors to access overseas markets, including formalized cross-border regulatory agreements and lowering the $100M minimum to deal with non-U.S. brokers. Some cheer what they see as long-overdue reform as investors clamor to find non-domestic investment opportunities; others think the SEC is rushing the issue to push changes through before the election.
  • Fit for flight. The FAA is imposing new aircraft checks on Boeing (NYSE:BA) 737 fleets, a move that will likely trigger similar moves in other countries.
  • GE may buy $3.5B Boeing 737s. General Electric (NYSE:GE) is in talks with Boeing to buy 40-50 737s (not withstanding previous story) to meet demand from airlines upgrading their fleets. The order has a list worth of as much as $3.53B. Aircraft lessors are experiencing record rates as airline demand exceeds the amount of planes Boeing and Airbus are currently producing.
  • SiRF sees softness. SiRF Technology (SIRF) issued downside guidance. For Q1, it now sees revenue of $60-62M vs. analyst expectations of $74M. SiRF says it has seen greater-than-expected softness in demand, particularly for personal navigation devices. Due to continued economic uncertainties and expected weak consumer demand, SiRF is downsizing its workforce, closing two offices, and cancelling certain projects.
  • Thornburg changes by-law to ease fund-raising. In a scramble to raise almost $1B this week, Thornburg Mortgage (TMA) amended its by-laws to allow a single investor to buy up to $300M in its shares without forfeiting its tax-friendly REIT status, up from a previous 10%. Thornburg said on March 19 it needed to raise at least $1B through sales of 12% convertible notes in order to avoid margin calls.

Today's Markets

  • Stocks rose sharply in Asia Tuesday. Nikkei +2.12% to 12,745. Hang Seng +6.43% to 22,465. Shanghai +0.09% to 3,630. BSE Sensex +6.07% to 16,217.
  • Markets in Europe echoed strong gains at midday. FTSE +3.44% to 5,684. CAC +3.55% to 6,518. DAX +3.15% to 6,518. Markets were closed yesterday.
  • In the U.S., futures gains are mild. Dow +0.27% to 12,574. S&P +0.33% to 1,356. Nasdaq +0.36% to 1,825.75.

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