Merger Monday

Merger Monday

April 11, 2011

Equity markets are opening slightly up this morning as earnings season gets under way and merger Monday keeps its moniker. In the telecommunications sector two names left over from the tech bubble, Level 3 Communications and Global Crossing, announced a merger today, and both stocks are up significantly. Endo Pharmaceuticals agreed to buy American Medical Systems for $2.9 billion, a 34% premium to Friday’s close. Additionally, French domiciled Schneider Electric is contemplating a $22 billion takeover of Tyco International, a deal which would make it the largest maker of security systems.

The IMF has lowered its forecast for economic growth in both the US and Japan due to rising commodity prices and the aftermath of the earthquake and tsunami. The report, which will be released later today, said that deficit reduction strategies in the US and Japan lack credibility.

The NYSE rejected a takeover bid from NASDAQ and said that an offer from Deutsche Boerse is more likely to gain regulatory approval and create more long-term value for shareholders. NASDAQ is considering a proxy fight in their unsolicited offer to acquire NYSE.

The US government avoided a shutdown as lawmakers came to agreement late Friday on a package of cuts totaling $38.5 billion. The next battle will undoubtedly come later this spring over the debt ceiling, now at $14.3 trillion and growing by $125 billion per month. Republicans are posturing to use the debt ceiling battle to cut potentially trillions from future budgets. In a reversal of position, President Obama has promised to outline a plan this week to control long term deficits. His initial budget released eight weeks ago didn’t contemplate addressing the long term deficit, but political pressure has seemingly forced his hand.

It’s no surprise that pump prices have been rising dramatically. This past week a station in Palo Alto, CA had premium at $5.17 per gallon. Yesterday I went to a station that was out of both regular and middle grade. People were out of their cars, yelling at the attendant.

Libyan leader Muammar Qaddafi agreed to a proposal by the African Union for a cease-fire, however, the rebel coalition has rejected the deal. “We reject any initiative that provides for Qaddafi and his children to stay on” a Muslim Brotherhood spokesman said.

Copper is weak this morning after the China Non-ferrous Metals Industry Association (say that three times fast) indicated that China may have accumulated as much as 1 million tons of copper, three times what was previously estimated.

UK regulators are recommending that banks “ring-fence” retail banking from investment banking. They did not recommend a complete separation of the entities. Will we ever get some sanity back in banking? It’s time to repeal Gramm-Leach-Bliley and bring back Glass Steagall.

China reported its first annual trade deficit in seven years as a result of surging import prices, which rose 33%.

Rory McElroy delivered the biggest collapse in golf since his namesake, Roy McElroy, blowing a 4-shot lead in the final round of the Masters. McElroy shot an 80 yesterday, his payday being cut from $1.4 million to $128K. Ouch.

Have a great Monday

Ned