- Bunge and Corn Products to Combine. Bunge (BG) agreed to acquire corn syrup maker Corn Products (CPO) for $4.4B in stock - a 31% premium. CPO gives Bunge a presence in nearly every stage of the corn-value chain. Separately, Bunge (BG) raised its 2008 EPS forecast to $9.35-9.65 from $7.10-7.40. Bunge remains #3 global agribusiness company by revenue, behind Cargill and Archer Daniels Midland (ADM), but it gains a much stronger corn presence. Corn Products shareholders will own 21% of Bunge.
- 6,500 could see pink at Citi. Citigroup (C) will make aggressive layoffs in its investment-banking unit this week, cutting up to 10% of its staff, sources say. Unlike previous cuts, this round will include dozens of senior execs.
- Saudi Arabia boosts oil production; markets yawn. Saudi Arabia said it will bump its oil output by 200K barrels/day to 9.7M in July, and is ready to pump even more oil if needed. King Abdullah says he's committed to "reasonable" oil prices. Some, such as Austrian Economy Minister Martin Bartenstein, say 200K more oil/day won't do the trick, and want Saudi Arabia to open the taps. Others, like OPEC's Khelil, blame speculators - not a lack of supply. In early trading, the oil markets have been unimpressed with Saudi Arabia's pledge: oil is up 0.98% to $136.65.
- Citi bond writing drops out of sight. Citigroup (C), once a powerhouse of the international bond markets, dropped out of the European bond underwriters' top-10 list for the first time in a decade. "It’s a little early to say how this is going to affect them longer term, but once you’re out of the top it starts becoming more difficult to pick up new mandates," a senior debt banker said.
- Allstate gets serious about RBSi bid. Sources say Allstate (ALL) hired Lehman (LEH) to head up its bid for Royal Bank of Scotland's (RBS) £6B insurance arm. The other bidders: Allianz (AZ), Travelers (TRV) and Zurich.
- BCE deal to proceed. The Canada Supreme Court overturned the Quebec Court of Appeal's decision to block the C$34B LBO of BCE (BCE). Lawyer James Morton called the decision a victory for shareholders; holders of BCE's debt had tried to block the deal on grounds it decreased the value of their bonds. "Shareholders are the boss and remain the boss," Morton said. "Now companies and boards of directors, particularly publicly traded companies, will know what the rules are and know how to go ahead." Lenders Toronto Dominion Bank (TD), Citigroup (C), Deutsche Bank (DB) and Royal Bank of Scotland (RBS) could still try to revive efforts to renegotiate the deal's terms.
- Monoline downgrades tighten noose. Moody's five-level downgrade will force bond insurer MBIA (MBI) to use $7.4B of its $15.2B in assets for payouts and collateral postings, it said. The market now sees bond insurers as "exceedingly likely to default in the next few years," Deutsche Bank's co-head of credit trading Boaz Weinstein says.
- SEC chief under fire. SEC chairman Christopher Cox in facing criticism for not playing a more visible role during and after the Bear Stearns breakdown. Some industry watchers say the SEC should have pressured Bear Stearns to raise more capital before things became critical. "If Bear Stearns had had enough capital there never would have been a run on the bank -- because there would have been confidence in the system," former SEC chief accountant Lynn Turner said.
- Oil speculation closely eyed. Speculation now accounts for 70% of all U.S. oil trading, up from 37% in 2000. A Congressional hearing is scheduled for today to discuss the increasing role speculators and investors are playing in the oil futures market.
- Cash-strapped banks running out of options. Investors are tired of buying bank share issues only to see prices drop further. In recent weeks, banks are encountering increasing reluctance by investors to participate in capital raising. "The window for capital-raising is closing," portfolio manager Brad Evans says. "Investing in a bank right now means investing in a large portfolio of loans that are essentially a black box." Banks left short of capital, with a dearth of potential suitors, may come running to the FDIC en masse.
- Ultra Smooth fails to catch on. Altria (MO) is dropping Marlboro Ultra Smooth, which uses high-tech filters to reduce carcinogens, after the cigarettes failed to catch on. Executives are trying in vain to find new products to stem falling sales, which they see declining at 2.5-3% in coming years.
- Inflation worries German businesses. German business confidence fell to a worse-than-expected 101.3, its lowest in two years, over worries about high oil and broad inflation.
- Asia markets were mainly lower Monday. Nikkei -0.61% to 13,857. Hang Seng +0.03% to 22,753. Shanghai -2.52% to 2,760. BSE -1.31% to 14,381.
- In Europe, markets are higher at midday. London +0.49%. Paris +0.24%. Frankfurt +0.46%.
- Futures are higher in the U.S. at 7:20 AM. Dow +0.3%. S&P +0.36%. Nasdaq +0.35%. Crude +0.93% to $136.60. Gold +0.09% to $904.50.
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