Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
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.

  • Hellish flight sends Southwest diving. Southwest Airlines (NYSE:LUV) plans to complete tomorrow the inspections of dozens of 737-300 jets it grounded over the weekend after an emergency landing in Arizona when a Southwest plane tore open. Widespread fuselage cracks and fatigue were found on the jet, and small cracks were found on two other planes. By Sunday, Southwest had inspected 19 jets and returned them to service. Since the incident on Friday, the company has canceled and delayed hundreds of flights, and anticipates it will call off 175 today. The grounding of the planes is likely to cost the airline millions of dollars. Premarket LUV -5.7%.
  • Vivendi to take full control of SFR in €7.95B deal. Vivendi (OTCPK:VIVEF) has agreed to acquire Vodafone's (NASDAQ:VOD) 44% stake in French mobile operator SFR for €7.95B ($11.3B), a long-awaited move that will give the French conglomerate 100% control of SFR. The unit generates more revenue for Vivendi than any other division, and the acquisition will significantly boost its adjusted net income and enable it to raise its dividend. The transaction, which the companies expect to complete in June, is part of Vodafone's program of selling minority interests. The U.K. group will use €4.5B of the purchase price for a share buyback - increasing an existing program to €7.7B in total - and the rest to reduce debt.
  • China's Minmetal bids $6.5B for Equinox. China has taken another step in its program of buying up raw material assets to feed its economic growth, with state-controlled Minmetal Resources making a $6.5B bid for Perth-based Equinox Minerals (OTC:EQNMF). The deal would give Minmetals control of copper mines in Zambia and Saudi Arabia, and would add to the more than $30B that Chinese companies spent last year buying mining assets and oil deposits. Mining companies are competing to secure resources after a lack of new projects and demand from China drove copper prices to a record this year. The Minmetal bid depends on Equinox dropping its C$4.4B offer for Canada’s Lundin Mining (OTCPK:LUNMF).
  • Deutsche Boerse: No decision on improved NYSE Euronext bid. Deutsche Boerse (OTCPK:DBOEY) hasn't decided whether to sweeten its $10.2B offer for NYSE Euronext (NYSE:NYX) in reaction to an $11.3B bid that Nasdaq (NASDAQ:NDAQ) and IntercontinentalExchange (NYSE:ICE) made on Friday, sources say. The German exchanges operator is waiting for reactions to the rival offer from NYSE's board and from credit rating agencies. A German newspaper reported earlier on Monday that Deutsche Boerse doesn't intend to sweeten its proposal.
  • BP could restart Gulf drilling in July. BP (NYSE:BP) could resume drilling in the Gulf of Mexico in July, less than 15 months after an explosion that killed 11 workers and led to a massive oil spill. While BP won't be allowed to drill new wells, sources say regulators will permit it to recommence work on 10 wells where drilling was underway before the accident happened. In exchange, BP will provide 24-hour access to government overseers. As of yesterday, the U.S. Bureau of Ocean Energy Management said it hasn't struck an agreement with BP. Separately, BP said it will sell its ARCO Aluminum unit to a Japanese consortium for $680M. The transaction is part of a $30B divestment program to recoup expected costs of $40B from the Gulf spill. Including the ARCO deal, BP has entered into divestment agreements valued at over $24B.
  • Sanofi gains control of Genzyme. French drugmaker Sanofi-Aventis (NYSE:SNY) has completed its improved $20.1B offer for Genzyme (GENZ) after 84.6% of the U.S. company's stock was tendered. Sanofi-Aventis will give Genzyme's remaining shareholders a further four days to tender their shares. The completion of the deal allows Sanofi-Aventis to start merging the U.S. biotech's operations into its business and add products for rare diseases to its growth areas.
  • Citigroup receives $2B bids for unit. Citigroup (NYSE:C) has received at least three offers of about $2B for its consumer finance business from private equity groups, sources say. One group of bidders in the second round of the auction for the unit comprises Blackstone Group (NYSE:BX), Carlyle and Brysam Global Partners; another is made up of Clayton Dubilier & Rice and Onyx; and the third consortium includes JC Flowers and Apollo Management. The bank will hold a third round before asking for final bids.
  • Belgium's Solvay bids €3.4B for France's Rhodia. Belgian chemicals group Solvay (OTCPK:SVYZY) has bid €3.4B for French rival Rhodia (OTC:RHAYY), whose board has recommended the deal. The transaction will significantly lift Solvay's exposure to emerging markets, including Brazil and China, and still leaves it with cash for further acquisitions. The chemicals sector is proving fertile ground for M&A as firms seek higher-margin businesses and shift away from traditional low-margin bulk chemicals production.
  • GOP plan to cut $4T over 10 years. Paul Ryan and fellow House Republicans intend to introduce a plan for the 2012 budget that will cut $4T from the deficit over the next ten years, more than the president's debt commission has proposed. The program, to be released on Tuesday, includes a statutory cap on actual discretionary spending as a percentage of the economy, blocking state grants for Medicaid, and a "premium support system" for Medicare. This would shift more costs to recipients, especially what Ryan calls "wealthy seniors." In addition, the program's authors want to lower taxes while broadening the tax base. However, Democrats doubt whether the scheme can achieve its targets without causing damage to social programs.
  • SEC to charge Wachovia. The SEC is preparing to bring civil charges against Wachovia for allegedly applying excessive markups on mortgage-bond deals that didn't reflect the diminishing value of their underlying loans, sources say. The inquiry into Wachovia, now owned by Wells Fargo (NYSE:WFC), is part of a broader SEC probe into sales by Wall Street firms of about $1T worth of collateralized debt obligations, which are a type of security created by packaging mortgages.
  • Larry Page starts his new job at Google. Google (NASDAQ:GOOG) co-founder Larry Page today formally becomes the search giant's CEO, ten years after relinquishing the role to Eric Schmidt, who was brought in to provide 'adult supervision.' Schmidt become executive chairman and Sergey Brin retains his role as co-founder. Sources have said that Page wants Google to operate more like it did as a 200-person company than it does now as a 24,000-employee behemoth. He aims to roll back red tape, quicken decision making and make company executives more accessible to workers.

Today's Markets

  • Asia: Japan +0.1%. Hong Kong +1.5%. China +1.3%. India +1.4%.
  • Europe at midday: London +0.1%. Paris flat. Frankfurt flat.
  • Futures at 7:00 AM: S&P +0.23%. 10-yr -0.04%. Euro -0.08% vs. dollar. Crude +0.44% to $108.41. Gold +0.6% to $1437.50.

Monday's Economic Calendar

The SA Currents team contributed to this post.

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