Wall Street Breakfast: Must-Know News

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Includes: BP, CHKP, CKR, CRL, CVX, DIA, DTG, DUK, EMR, EONGY, FNMA, GLD, GS, HTZ, HUM, PPL, QQQ, RDS.A, SPY, UAL, UAUA, USO, WHR, WX, XOM
by: Rachael Granby
Rachael Granby
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.

  • Charles River picks up WuXi PharmaTech. Charles River Laboratories (NYSE:CRL) agreed to buy WuXi PharmaTech (Cayman) Inc. (NYSE:WX) for $21.25 per share, a 28% premium to WuXi's closing price on April 23. The roughly $1.6B deal is the largest foreign takeover of a Chinese company and will allow Charles River to expand in China, where revenue from drug-testing services is growing as much as 30% annually. It also reflects the consolidation trend in the U.S. pharmaceutical industry as research contractors try to broaden the range of services they can offer to drug companies. Premarket: WX +8.7% (7:00 ET).
  • Hertz Global acquires Dollar Thrifty. Hertz Global Holdings (NYSE:HTZ) agreed to buy Dollar Thrifty Automotive Group (NYSE:DTG) for $1.2B in cash and stock, bringing together two of the biggest names in the rental car business. The $41 per share deal marks a 19% premium over Dollar Thrifty's 30-day average share price, and a 5.5% premium over its Friday closing. Hertz is using the acquisition to boost its international presence.
  • Duke set to buy E.On assets. Duke Energy (NYSE:DUK) has reportedly won the right to buy E.On's (OTCPK:EONGY) U.S. business in a deal valued between $6B and $7B, according to several sources. Others say Duke is a potential bidder but PPL (NYSE:PPL) and a consortium including Australia's Macquarie Group are still in the running. The sale is part of E.On's efforts to cut debt by shedding more than €10B in assets by the end of the year.
  • CKE sells itself to Apollo. CKE Restaurants (CKR) said on Saturday that it will sell itself to Apollo Management Group for $694M, or $12.55 per share, after Thomas H. Lee Partners failed to match Apollo's offer. Industry analysts think the deal may be the first in a series of restaurant chain sales.
  • Emerson bids for Chloride Group. Emerson Electric (NYSE:EMR) has offered to buy U.K.-based Chloride Group for $1.1B to help shore up its position in Europe. The all-cash offer is a 34% premium to Chloride's most recent closing price. Emerson said it asked Chloride's board for a response by Sunday evening, but hasn't yet received a reply.
  • United, Continental talks stall. After reports over the weekend that merger talks between United Airlines (UAUA) and Continental (NYSE:CAL) were picking up momentum, with a deal announcement possible in the next few weeks, sources now say that talks have stalled because the two airlines can't agree on a price for the potential stock-to-stock merger. Apparently, Continental wants to use the price of the stock before merger rumors began to circulate, and United wants to use the market price from the day before the deal is signed. The disagreement could be a deal-breaker, causing negotiations between the two airlines to fall apart as they did two years ago.
  • Major antitrust probe of oil firms. The Federal Trade Commission is reportedly investigating whether some of the world's largest oil companies violated antitrust law by colluding to suppress employees' wages. Sources said the previously undisclosed investigation has been going on for years, and involves as many as a dozen companies, including BP (NYSE:BP), Chevron (NYSE:CVX), Royal Dutch Shell (NYSE:RDS.A) and Exxon Mobil (NYSE:XOM). Though the FTC and the firms have failed to reach an agreement regarding a possible settlement, a lawsuit isn't necessarily a given because some of the practices in question may have been ended during the course of the probe. Premarket: BP -0.1%, RDS.A -1% (7:00 ET).
  • IMF speeds up Greek aid. The IMF is accelerating its efforts to provide Greece with aid before €8.5B ($11.3B) of the country's bonds mature on May 19. Officials from the IMF, the European Commission and the European Central Bank will finish talks in the next week or so regarding the terms and conditions of the aid. Among other qualifications, Greece has been asked to provide detailed plans of how it plans to meet its budget deficit reduction targets in 2011 and 2012.
  • Fannie offers loan incentive to reduce foreclosures. Fannie Mae (FNM) is rolling out new rules that incentivize homeowners to avoid foreclosure. Struggling homeowners who choose to voluntarily transfer ownership through a "deed in lieu of foreclosure" or by completing a short sale will be eligible to apply for a new Fannie-backed mortgage in two years rather than the current four years. Yet the new policy may have little impact, as short sales generally have the same effect on a borrower's credit score as foreclosures do, making it unlikely that borrowers will be able to repair their credit quickly enough to take advantage of the reduced waiting period.
  • Goldman points to internal papers as defense. Goldman Sachs (NYSE:GS) released internal documents over the weekend intended to defend the firm against allegations that it made major profits betting against the mortgage market. On Saturday, a Senate panel released several internal Goldman emails, including one from CEO Lloyd Blankfein, who wrote in 2007: "Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts." Goldman contends that lawmakers "cherry-picked" four emails from almost 20M pages of documents, that it didn't generate large profits by betting against the housing market, and that the short positions simply meant the company lost less money than it otherwise would have. Premarket: GS +0.9% (7:00 ET).
  • Financial reform pushes ahead. Lawmakers said yesterday they were close to reaching bipartisan agreement on financial reform legislation. A procedural vote is scheduled for late today to begin debate on the matter; Republicans will likely vote against the debate unless a bipartisan agreement has already been reached, but this would only slow the legislation, not derail it.
  • Friday's failures. Seven banks were closed on Friday, all of them in Illinois, bringing this year's total failures to 57. The failures (I, II, III, IV, V, VI, VII) are expected to cost the FDIC's insurance fund $974M.

Earnings: Monday Before Open

  • Check Point Software (NASDAQ:CHKP): Q1 EPS of $0.55 beats by $0.02. Revenue of $245M (+25.7%) vs. $240.7M. (PR)
  • Humana (NYSE:HUM): Q1 EPS of $1.52 beats by $0.38. Revenue of $8.4B (+9.5%) vs. $8.3B. (PR)
  • Whirlpool (NYSE:WHR): Q1 EPS of $2.13 beats by $0.80. Revenue of $4.3B (+19.4%) vs. $3.8B. Shares +5.2% premarket. (PR)

Today's Markets

  • In Asia, Nikkei +2.3% to 11166. Hang Seng +1.6% to 21587. Shanghai -0.5% to 2970. BSE +0.3% to 17745.
  • In Europe at midday, London +0.7% to 5765. Paris +1.1% to 3993. Frankfurt +0.9% to 6317..
  • Futures: Dow +0.2%. S&P +0.1%. Nasdaq flat. Crude +0.2% to $85.27. Gold +0.2% to $1156.

Monday's Economic Calendar

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.


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