Wall Street Breakfast: Must-Know News

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Includes: AKZOY, APC, BASFY, BCS, BP, BRK.A, BVF, DIA, FWONA, GLD, GS, INGR, JPM, LEHMQ, QQQ, QVCA, SPY, USO, VRX
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.

  • Valeant merges with Biovail. Specialty pharmaceutical companies Valeant Pharmaceuticals International (NYSE:VRX) and Biovail (BVF) agreed to merge to expand their presence and focus on neurological products, dermatology and generic medicines in Canada and emerging markets. The deal's terms represent a 15% premium for Biovail stockholders, based on the stock's last 10 trading days. Premarket: VRX +0.8% (7:00 ET).
  • Corn Products buys National Starch. Corn Products International (CPO) agreed to buy AkzoNobel's (OTCQX:AKZOY) National Starch business for $1.3B in cash. For Corn Products, the deal will create a new sugars-and-starch giant with $5B in revenues, and will be the company's first major deal since its aborted attempt to sell itself two years ago. AkzoNobel plans to use the proceeds "for both selective acquisitions and organic growth."
  • BP: Lawsuits, liability caps, and a new pointman. BP (NYSE:BP) Managing Director Bob Dudley will take over as point man on BP's spill response, ostensibly to let CEO Tony Hayward focus on running the company but more likely because of Hayward's disastrous public relations gaffes, including his attendance at a yachting race over the weekend. Responding to a media report that BP plans to sue Anadarko (NYSE:APC), a minority partner in the leaking Gulf well, for shirking responsibility for its share of the liabilities, BP said it hasn't yet reached a decision (though Anadarko is said to be considering a counter-suit already). According to a separate media report, BP is apparently preparing to raise $50B from a bond sale, asset sales and from banks to help cover spill costs, which continue to rise along with estimates of the spill's size (costs to date at $2B, and the spill rate as high as 100,000 barrels of oil per day according to BP's worst-case scenario). Ken Feinberg, the independent administrator of BP's newly created $20B fund, said investors should take some comfort from the fund's existence, as it partially limits the company's liability and is "a way for BP to avoid lawsuits in the end." Premarket: BP -3.4% (7:00 ET).
  • China pledges yuan flexibility. On Saturday, ahead of this week's G-20 summit, China released a statement pledging to "increase the renminbi’s exchange-rate flexibility" following an improvement in the economy. China didn't set a timeline for the change, and ruled out a one-off revaluation, saying there is no basis for “large-scale appreciation." The announcement should buy China some time, effectively shifting the focus of the G-20 meeting from currency policy to the burgeoning budget deficits of developed nations. Asian stocks climbed the most in seven months in today's trading (see below), on speculation that a more flexible yuan will help boost China's growth, while the yuan rose the most in five years, though the reference rate for the day's trading remained the same as Friday's.
  • BASF ready to move on Cognis. Chemical giant BASF (OTCQX:BASFY) is said to be poised to buy German specialty chemicals maker Cognis for at least €3.3B ($4.1B), after Cognis reportedly rejected a higher offer from Lubrizol (LZ) over the weekend. A deal, which is expected to be announced this week, would be BASF's biggest since September 2008, and comes as deal-making in Europe begins to recover from the global slowdown. Cognis is owned by Goldman Sachs (NYSE:GS) and Permira Advisors.
  • Liberty Media to spin off units. Liberty Media (LINTA) plans to spin off two of its units, partly in response to criticism that its structure is too opaque. The units are investment arm Liberty Capital (LCAPA) and pay TV and Hollywood studio unit Liberty Starz (LSTZA), and the goal of the spin-off is to create more transparency and to help the company "better pursue our strategic objectives, including acquisitions using stock."
  • China, Australia load up on commercial deals. China and Australia signed commercial deals worth more than $8.8B today. Australian Prime Minister Kevin Rudd noted that as the majority of the deals are in the mining sector, Australia's controversial new mining tax has obviously not deterred investments. "It is important to separate the facts of what's going on from some of the fear that is being pushed by some companies who object to paying a bit more tax," said Rudd.
  • JPMorgan in talks on Brazilian fund. JPMorgan (NYSE:JPM) is said to be in advanced talks to buy Brazilian hedge fund and private equity group Gavea Investimentos. The deal for Gavea could still collapse, but the fact that JPMorgan is pursuing the deal at all signals its confidence that the final financial reform bill won't prevent banks from owning hedge funds. An announcement could come as soon as next month.
  • Saudi news helps boost gold. News that Saudi Arabia's central bank is holding nearly twice as much gold as previously thought helped lift the metal to a fresh high of almost $1,265 per troy ounce. Though analysts suggested that an accounting revision is partially responsible for the rise in Saudi Arabia's holdings to 322.9M tons compared to the 143M tons reported in March, the disclosure comes as emerging economies are increasingly adding gold to their reserves and private investors are piling into the metal.
  • Barclays execs testify in Lehman suit. Barclays' (NYSE:BCS) top two executives, John Varley and Bob Diamond, will take the stand today in a lawsuit brought against the British bank by Lehman Brothers (OTC:LEHMQ). Lehman claims that Barclays underpaid by at least $11B for its North American brokerage. Lehman is also suing former clearing agent JPMorgan (JPM), as the failed bank tries to recover the $50B-75B of value it claims was lost during its chaotic winddown.
  • Friday's failure. A bank closure in Nevada brings this year's total failures to 83 so far. The closure will cost the FDIC's insurance fund an estimated $80.9M.

Today's Markets

  • In Asia, Japan +2.4% to 10238. Hong Kong +3.1% to 20912. China +2.9% to 2586. India +1.7% to 17877.
  • In Europe, at midday, London +1.1%. Paris +1.6%. Frankfurt +1.5%.
  • Futures: Dow +1.3%. S&P +1.5%. Nasdaq +1.5%. Crude +1.75% to $78.53. Gold +0.1% to $1259.50.

Monday's Economic Calendar

Seeking Alpha's Market Currents team contributed to this post.


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