Wall Street Breakfast: Must-Know News Dec 24, 2013
Rajesh Desai
Top Stories
W.R. Grace set to exit Chapter 11 after 12 years. W.R. Grace & Co (GRA) has agreed to pay a group of bank lenders $1.1B in a deal that will settle the last remaining appeal against the specialty chemical manufacturer's plan to exit Chapter 11 after an astonishing 12 years. Grace filed for bankruptcy protection in 2001 following an asbestos leak at one of its mines, which prompted a wave of lawsuits. Since then, the firm has survived two recessions and prospered as a result of the shale revolution.
Chinese credit squeeze eases following PBOC move. China's seven-day repurchase rate has dived 3.44 percentage points to 5.4% after the People's Bank of China injected 29B yuan ($4.8B) into the money markets via regular open-market operations. The benchmark rate had skied to 8.84% over the previous five days due to the PBOC refraining from open-market activity since the start of December as part of its attempt to rein in soaring debt. Emergency liquidity injections last week had failed to ease the credit squeeze, which had hit stocks also.
Carlyle nears deal to buy $4B J&J diagnostics unit. Carlyle Group (CG) is reportedly leading the race to acquire Johnson & Johnson's (JNJ) ortho clinical diagnostics unit, and is set to beat out private-equity peer Blackstone (BK) and its partner Danaher (DHR). The size of Carlyle's offer is not known, but a deal would probably fetch $4B and could be completed within the next two weeks. The J&J business makes blood-screening equipment and laboratory blood tests; it's a small player in a market led by Roche (OTCQX:RHHBY, OTC:RHHBF), Siemens (SI), Abbott Labs (ABT) and Danaher.
Top Stock News
Shell aims to sell up to $30B in assets after profits tumble. Shell (RDS.A, RDS.B) intends to start divesting as much as $30B of assets next year, including a $7B stake in Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY), oil assets in the Niger Delta worth $2B and other interests totaling $20B, according to oil and gas analysts at JPMorgan Cazenove. The disposal plan would represent around 17% of Shell's $178B of total net assets. The report comes after weak refining margins and oil theft in Nigeria caused a sharp fall in Shell's profits this year.
Target's legal problems start to build up following data breach. Target (TGT) has received requests for information from attorneys general from several states about the massive data breach it suffered recently, including from New York, Massachusetts and Connecticut. The retailer also faces at least 15 lawsuits over the cyber-attack, in which hackers stole data from up to 40M payment cards. Meanwhile, two senators have called for a federal probe.
Israeli researchers find flaw in Samsung security platform. Israeli cyber-security experts have found a vulnerability in Samsung's (OTC:SSNLF, OTC:SSNGY) Knox security platform when enabled on the best-selling Galaxy S4 smartphone. In a worst-case scenario, the researchers say, the flaw could allow malicious software to cause havoc within a secured network, although Samsung doesn't believe the problem is as serious as all that. Still, it might not go down too well in the Pentagon, where the Korean company is trying to gain approval for Knox so that it can compete with BlackBerry (BBRY) for government deals.
Blackstone to exit London property in $2.8B deal. Blackstone (BX) has agreed to sell its 50% stake in London's Broadgate office and retail complex to Singapore's sovereign wealth fund, GIC, for £1.7B ($2.8B). Blackstone looks like it will make a tidy profit from the investment: the U.S. private-equity firm bought the holding in the 30-acre site, which is in London's City financial district, from British Land (OTCPK:BRLAF) four years ago in a deal that valued the complex at £2.1B.
Blackstone eyes hat-trick of hotel IPOs. Blackstone (BX) portfolio company La Quinta Holdings has filed for an IPO under the JOBS Act as the hotel operator looks to capitalize on a recovery in vacancies and increasing stock prices. La Quinta, which Blackstone bought for $3B in 2006, didn't say how many shares it would sell, nor at what price. La Quinta's flotation would follow the strong IPOs of other Blackstone hotel companies, Hilton Worldwide (HLT) and Extended Stay (STAY).
KKR draws in $1.5B for first property fund. KKR (KKR) has raised $1.5B for its first property fund, which will invest mostly in North America but also up to 25% in Europe. The establishment of KKR Real Estate Partners Americas comes after the private-equity firm formed a property unit in 2011, since when it has completed 14 deals. It also adds to the trend of P-E companies increasing their focus on real estate.
Top Economic & Other News
China poised to keep growth target at 7.5%. China is likely to set a GDP growth goal of 7.5% for 2014, the same as this year, sources at a commerce ministry think tank have told Reuters. The government expects a recovery in exports to help drive the expansion, due to stronger demand from rebounding developed economies. China's leaders are aiming to keep growth steady even as they try to implement deep structural reforms.
Obamacare deadline postponed by a day. Amid a last-minute crush to buy health-insurance coverage, the White House has extended by 24 hours to today the deadline for signing up for plans. Over 1M people had logged onto the much maligned HealthCare.gov Web site by 5 pm yesterday, causing sluggishness and long waiting times. The postponement is the latest example of how the government has arbitrarily moved deadlines and changed the parameters of Obamacare, causing huge uncertainty for insurers and consumers.
Alpha-Rich Stock Movers and Great Calls
1) On December 11, buysider Andreas cited Willdan's (WLDN) cash flow, growth, and balance sheet in projecting 160% upside for the civil engineering firm's shares. The stock is already +37.3% since his call. Read article »
2) Weighing Machine wrote on October 25 that shares of logistics provider ModusLink (MLNK) were poised to gain thanks to new management, an activist shareholder, and a huge deferred tax asset. Shares are +46.9% since his call. Read article »
Alpha-Rich Stocks To Watch
1) Hedge fund Kingsley Park Capital calls for a rebound in shares of NovaCopper (NCQ), citing ETF liquidation, a misguided critical article, and tax-loss selling as catalysts for recent, undeserved selling pressure. Read article »
2) Industrial distributor MSC Industrial Direct (MSM) is poised to benefit from industry consolidation, led by first-rate management, writes Daniel Phillips. Read article »
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Today's Markets:
In Asia, Japan +0.1% to 15889, a six-year high. Hong Kong +1.1% to 23180. China +0.15% to 2093. India -0.3% to 21044.
In Europe, at midday, London +0.3%. Paris flat. Frankfurt closed.
Futures at 6:20: Dow +0.1%. S&P +0.05%. Nasdaq flat. Crude +0.2% to $99.08. Gold +0.05% to $1197.60.
Ten-year Treasury Yield +1 bps to 2.95%.
Today's economic calendar:
7:45 ICSC Retail Store Sales
8:30 Durable Goods
8:55 Redbook Chain Store Sales
9:00 FHFA House Price Index
10:00 Richmond Fed Mfg.
10:00 New Home Sales
CA. Rajesh Desai