Wall Street Breakfast: General Electric In Talks To Sell Appliance Business

by: Wall Street Breakfast
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Due to the recent opening of its energy industry, which has been locked under state monopoly since 1938, Mexico now expects to pull in $50.5B in new private and foreign investment by 2018. Companies will be able to bid on contracts under the so-called "Round One" tender, which will offer up to 169 exploration and extraction blocks. However, state-owned Pemex will still continue to be the dominant player in the market, having received 83% of probable reserves and 21% of prospective resources.

The International Swaps and Derivatives Association is organizing an auction for Aug. 21 to settle CDS deals of Argentine debt. The auction will be run by Creditex and Markit, and establish the payout that holders of protection on Argentine bonds will receive due to the country's default. The price set through the auction will determine the payout on Argentine CDS with a net notional outstanding of $900M.

The U.S. will likely not evacuate the Iraqi civilians trapped on a mountain by Islamic State fighters, says the Pentagon, after an assessment team found a tolerable humanitarian situation and that most refugees had escaped. The U.N. estimates that about 400,000 refugees have fled the Dohuk region, including Yazidis, Christians and other minorities. U.S. forces have also been busy arming Kurdish Peshmerga in order to repel Islamist insurgents who threaten Iraqi Kurdistan's entire border.

Euro-Zone GDP failed to grow in the second quarter following 12 months of weak growth, causing European equity markets to fall and increasing pressure on the ECB to do more to boost growth and inflation. The data released this morning by the European Union's statistics office translates into 0.2% growth in annualized terms, down from the first quarter's 0.8% pace.

General Electric is in talks with Sweden's Electrolux (OTCPK:ELUXY) and Quirky, a consumer-product development startup, over the sale of its century-old appliances business that could fetch $2B. Quirky would partner with private-equity firms to acquire a majority stake, leaving GE (NYSE:GE) with a minority holding. General Electric has been trying to sell its home appliances unit again as CEO Jeffrey Immelt puts a greater focus on industrial operations.

UPS and FedEx have received Chinese licenses to expand their domestic shipping services to Beijing and other cities without needing joint-venture partners. The licenses increase access to a market second in size only to the U.S., says consultancy Deloitte. UPS (NYSE:UPS) and FedEx (NYSE:FDX) have both been waiting for years to establish independent courier operations over their Chinese operations, but a 2009 postal law largely restricted foreign firms from delivering packages from abroad.

Rosneft CEO Igor Sechin has asked the Russian government for $41.6B to help his company withstand western sanctions, says Russia's Vedomosti newspaper. The U.S. and EU have banned credits and loans to Rosneft (OTCPK:RNFTF) with a maturity longer than 90 days, and the company is now seeking Russia's National Wealth Fund to buy Rosneft bonds. Roseneft already has net debt of $44.5B, mainly due to its $54B acquisition of oil company TNK-BP (OTC:TNKBF) last year.

Carlyle Group is considering an IPO for Axalta Coating Systems, only a year and a half after it purchased the company from Dupont (NYSE:DD) for $4.9B. Carlyle (NASDAQ:CG) has already given lead roles to Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) for the potential IPO which could raise as much as $1B. Axalta makes liquid and powder coatings for the automotive and transportation industries.

Cisco posted FQ4 earnings of $0.55 per share, up from $0.51 per share in the year-earlier period. Cutting 8% of its workforce, the company says it will slash 6,000 jobs, and record a $0.14-$0.18 FQ1 GAAP EPS charge. Cisco (NASDAQ:CSCO) guides on its FQ4 CC for flat to 1% Y/Y FQ1 revenue growth and FQ1 EPS of $0.51-$0.53 vs. a consensus for flat growth and EPS of $0.53.

Intel is buying Avago's Axxia network processor unit for $650M in cash. The unit was purchased by Avago (NASDAQ:AVGO) when it bought LSI in December last year for $6.6B. The acquisition broadens Intel's (NASDAQ:INTC) product line within a competitive network processor market that also features Broadcom (BRCM), Marvell (NASDAQ:MRVL), Cavium (NASDAQ:CAVM), and Freescale (NYSE:FSL) and others. The deal is expected to close in Q4.

Restrictions on F-35 fighter jets have again been reduced, allowing the 20+ test planes in the U.S. fleet to fly six hours between engine inspections instead of three. The jets were grounded for three weeks after a June 23 engine failure, and have since been imposed with flight limitations. Contract talks between prime contractor Lockheed Martin (NYSE:LMT), and enginemaker Pratt & Whitney (NYSE:UTX) are said to be now progressing for the next batch of aircraft and engines.

Boeing has broken ground in Washington state to begin clearing the way for a factory that will make composite wings for the company's newest jet, the 777X. The building will be occupied starting in 2016, and Boeing's (NYSE:BA) first new jet, which carries a list price of up to $389M and has garnered 286 orders, is due to be delivered in 2020.

Iliad's $33/share offer to buy a 56.6% stake in T-Mobile USA (NASDAQ:TMUS) is "very flattering," but also "a very inadequate value proposition," says T-Mobile CFO Braxton Carter. However, Carter, whose company just saw Sprint (NYSE:S) abandon its attempt to buy it (for now) due to FCC/DOJ opposition, suggests T-Mobile may be open to a better offer from Iliad (OTCPK:ILIAF). "I think rarely people come with their best bid to start."

American Apparel has appointed Google (GOOG, GOOGL) executive Laura Lee to the company's board of directors, in yet another step of reshuffling the struggling retailer. American Apparel (APP) is still looking for a replacement for former CEO Dov Charney, and delayed filing its full financial results this week saying its new board needed additional time to review them.

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Today's Markets:
In Asia, Japan +0.6% to 15315. Hong Kong -0.4% to 24801. China -0.7% to 2206. India +0.7% to 26103.
In Europe, at midday, London +0.5%. Paris +0.3%. Frankfurt +0.4%.
Futures at 6:20: Dow flat. S&P flat. Nasdaq flat. Crude -0.2% to $97.40. Gold +0.1% to $1316.40.
Ten-year Treasury Yield flat at 2.42%

Today's economic calendar:
8:30 Initial Jobless Claims
8:30 Import/Export Prices
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Notable earnings before today's open: AAP, BGG, DANG, KSS, LRN, OTIV, PLUG, PRGO, PWE, RRGB, RSPP, SFXE, WMT

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