Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
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.

Top Stories
Microsoft buying Nokia's phone unit as part of $7.2B deal. It's the end of an era: Nokia's (NYSE:NOK) shares jumped 39% premarket following news that Microsoft (NASDAQ:MSFT) has agreed to acquire the Finnish company's mobile handset unit for $5B and license its patents and mapping services for $2.2B. Nokia CEO Stephen Elop and other senior Nokia executives will join Microsoft, as will 32,000 workers. Seeking Alpha authors Charles Fox and Jacob Steinberg aren't particularly happy with the price for the mobile unit, which Fox says "seems like chump change for a...division that once ruled the phone market" and could come back.

Verizon to raise $61B bridge for $130B deal. Verizon Communications (NYSE:VZ) has reportedly started syndicating a $61B one-year bridge loan that will support the company's $130B acquisition of 45% of Verizon Wireless from Vodafone (NASDAQ:VOD), which was announced yesterday. Verizon intends to help pay for the deal with $49B in bonds and $14B in other debt, but might need the bridge loan if it can't issue the bonds by the time the transaction closes. Vodafone plans to use some of the proceeds from the deal to launch Project Spring, a £6B ($9.3B) scheme to invest in 4G infrastructure and fiber-optic cables.

CBS seen as victorious in new TWC deal. Time Warner Cable (TWC) has resumed broadcasting CBS (NYSE:CBS) programming after the two companies agreed to a new deal on transmission fees following a month-long blackout. While the terms weren't disclosed, CBS reportedly won a big increase in tariffs, although below the $2 a month per subscriber it was seeking. It also looks as if the digital-rights element of the deal favored CBS's position more than TWC's, although it's not clear.

Top Stock News
Asian shares rise, Europe falls. European and Asian stocks have taken mostly divergent paths today, with the latter boosted by strong PMI data out of China and Europe (see below). However, EU shares were largely in the red at the time of writing after a strong rally yesterday. U.S. stock futures were higher following the long Labor Day weekend, with equities needing to catch up on various developments.

Citigroup sells over $6B in P-E, hedge-fund assets. Citigroup (NYSE:C) has reportedly sold more than $6B in private-equity and hedge-fund assets over the past month as it seeks to comply with prospective Volcker rule requirements limiting banks' alternative investments. Citigroup has divested a $4.3B P-E fund called Citi Venture Capital International to Rohatyn Group for an undisclosed amount, and a $1.9B emerging-markets hedge fund to the vehicle's managers. Citigroup is trying to sell another $2.5B P-E fund as well.

Jarden to buy Yankee Candle for $1.75B. Jarden (NYSE:JAH) has reportedly agreed to acquire Yankee Candle, the biggest maker of scented candles in the U.S., for $1.75B from private-equity owner Madison Dearborn Partners. The deal could be announced today. The transaction fits in with Jarden's strategy of operating leading brands in specialized niches, such as Crock-Pot slow cookers and Rawlings baseball equipment. Yankee Candle earned a profit of $56.3M in 2012 on sales of $844.2M.

BofA selling remaining stake in CCB in deal worth up to $1.5B. Bank of America (NYSE:BAC) is reportedly selling its remaining stake in China Construction Bank Corp. (CCB). The sale comes eight years after BofA invested $3B for a 9.9% holding in the Chinese firm before the latter's IPO and two years after the U.S. company sold $14.9B worth of shares in CCB. BofA has offered 2B Hong-Kong traded shares at HK$5.63-$5.81 ($0.73-0.75) each, up to 5.1% below today's close of HK$5.93. At the offered price, BofA would generate HK$11.26-11.62B ($1.45-1.5B).

Jacobs in talks to buy Australian firm in A$1B+ deal. Jacobs Engineering (NYSE:JEC) is reportedly in negotiations to acquire Australian engineering consulting company Sinclair Knight Merz in a deal worth over A$1B (US$893M). The closely held firm, whose last reported sales were A$1.3B, has 40 offices across Asia Pacific, the Americas and EMEA. Any deal would follow Jacobs' acquisition in June of Atlanta-based wireless telecommunications company Compass Technology Services.

Top Economic & Other News
Chinese PMI services, manufacturing shows growth. China's non-manufacturing PMI slipped to 53.9 in August from 54.1 in July but stayed firmly in expansion territory. The reading adds to official and HSBC data indicating that China's manufacturing industry is growing as well. The latter survey implies that the sector has "started to stabilize on the back of a modest rebound of new orders and output," HSBC said. "We expect some upside surprises to China's growth in the coming months."

Eurozone manufacturing activity hits two-year high. Eurozone manufacturing PMI rose to a 26-month high of 51.4 in August from 50.3 in July. The upturn was broad-based, with PMIs rising in all countries except France. Manufacturing in Germany, the Netherlands, Austria, Spain and Italy rose at the fastest for at least two years, while Greece's 48.7 represented a 44-month high. A pickup in new-orders growth suggests the "upturn will be sustained into September," says Markit, although companies remain reluctant to hire.

Australia leaves key interest rate at 2.5%. As expected, the Reserve Bank of Australia has left its cash rate unchanged at 2.5%. The RBA reiterated that it expects the economy to continue running at a "bit below trend" in the near term as it "adjusts to lower levels of mining investment." In a change from previous statements, the RBA did not say that inflation - which has been consistent with the medium-term target - could provide some scope for further easing if necessary. Instead, the bank said it will "adjust policy as needed."

Alpha-Rich Stock Movers and Great Calls
1) On Friday, Shaun Currie said ZipRealty (NASDAQ:ZIPR) was nearing an inflection point with 60% upside as a possible result. The shares closed +7.2%. Read article »
2) On December 21 of last year, David Weinstein said Electronic Arts (NASDAQ:EA) was on the verge of a turnaround, with the potential to double in the next 12-18 months. The stock has almost achieved that and sits +91.1% from where it was when the article was published. Read article »

Alpha-Rich Stocks To Watch
1) Cooper Tires (NYSE:CTB) still trades at a wide spread to its buyout price, and hedge fund manager Chris DeMuth thinks that makes for a nice investment. Read article »
2) Mattson Technology's (NASDAQ:MTSN) revenue and free cash flow could spike up sharply as cyclical semiconductor spending picks up, with 35-50% upside to fair value. Read article »

Alpha-Rich articles are the best long and short ideas on Seeking Alpha. SA Pro subscribers receive early access to these Alpha-Rich articles, which often move markets. For more information about SA Pro and becoming a subscriber, click here.

Today's Markets:
In Asia, Japan +3% to 13978. Hong Kong +1% to 22395. China +1.2% to 2123. India -3.45% to 18235.
In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.7%.
Futures at 6:20: Dow +0.6%. S&P +0.8%. Nasdaq +0.6%. Crude -0.4% to $107.20. Gold -0.1% to $1394.30.

Today's economic calendar:
9:00 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending

Notable earnings after today's close: GWRE, HRB, PIKE, SIGM

See full real-time earnings coverage »

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