Wall Street Breakfast

Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby

Sweeping healthcare overhaul approved. In a 219-212 vote late yesterday, the House of Representatives approved the largest healthcare overhaul in four decades. The bill, which failed to garner a single Republican vote, will be signed into law by Obama, who called it "a victory for the American people." All told, the healthcare measures will cost $940B over ten years and cover 32M uninsured Americans. The bill is a mixed bag for insurers, who stand to gain over 20M new customers but are unhappy the bill doesn't substantially address the problem of rising healthcare costs and further reduces government subsidies to the industry. Pharmaceutical companies, on the other hand, emerge as clear winners from the bill, while large businesses are worried about higher costs and stricter coverage rules.

Shell, PetroChina buy Arrow Energy. Royal Dutch Shell (RDS.A) and PetroChina (PTR) agreed to buy Australia's Arrow Energy for A$3.5B ($3.2B) in cash, a 35% premium to Arrow's stock before deal talks began. Investors will also get shares in a new company holding Arrow’s gas assets in China, Indonesia, India and Vietnam. Arrow's shares fell 2.6% in Australia, reflecting disappointment among investors who had expected a bigger increase from Shell/PetroChina's original A$3.3B offer. Premarket: RDS. A -1.2% (7:00 ET).

Novell says no to Elliott bid. On Saturday, Novell (NOVL) rejected Elliott Associates' $1.8B bid to take it private, calling the offer "inadequate," and saying it "undervalues the company's franchise and growth prospects." Some have questioned whether Novell is really worth that much, but others say it could be worth even more considering its $1.82B in assets. Novell plans to initiate a review of alternatives, including a share buyback, cash dividend, joint ventures, recapitalization, alliances or an outright sale. Premarket: NOVL +0.2% (7:00 ET).

Bernanke on the Fed's role and TBTF. Speaking to a bankers' convention on Saturday, Bernanke said it's "unconscionable that the fate of the world economy should be so closely tied to the fortunes of a relatively small number of giant financial firms," a line which generated some mockery among critics wondering if Bernanke only reached this conclusion now. Bernanke also reiterated that the Federal Reserve should retain oversight of financial firms large and small, noting that "a supervisory agency that focused only on the largest banking institutions, without knowledge of community banks, would get a limited and potentially distorted picture."

IMF: Wealthiest nations face debt problems. IMF official John Lipsky issued a grim prognosis for the world's wealthiest nations yesterday, warning the debt-to-GDP ratio for five of the G-7 countries (not Germany or Canada) will approach or exceed 100% by 2014. If left unaddressed, the rising debt "could undermine confidence in the economic recovery." For the U.S. specifically, Lipsky said a higher public savings rate will be necessary to ensure long-term fiscal sustainability.

Consol Energy increases CNX holdings. T. Rowe Price (TROW), on behalf of its investment advisory clients, agreed to tender 9.5M shares of gas producer CNX Gas Corp. (CXG) to Consol Energy (CNX) for $38.25/share in cash. The stake represents around 37% of the CNX shares that Consol doesn't already own. Consol, which currently holds around 83.3% of CNX's shares, plans to start a tender offer by May 5 to buy the rest of CNX's common stock.

EMI may license music to rivals. EMI Group has reportedly held early-stage talks with rival record labels, including Warner Music Group (WMG) and Sony Music (SNE), to license its music in North America. EMI has approached the firms with the possibility of a five-year licensing deal, which could bring in up to £100M ($150M) per year. The firm is under pressure to raise funds quickly; if it can't come up with £120M ($182M) by June 14, it could be taken over by lender Citigroup (C).

New iron ore pricing system in the works. Global mining companies have reached a tentative deal with Japanese steelmakers to replace the 40-year-old iron ore pricing system that relies on annual contracts and drawn-out negotiations. Instead, the two sides are talking about moving to quarterly pricing and contracts linked to the spot market. Miners, including BHP Billiton (BHP) and Rio Tinto (RTP), have been pushing for these changes, but sources said the miners still have significant obstacles to resolve before reaching a final agreement. A final deal could be reached by the end of the month. Premarket: RTP -1.6%, BHP -0.5% (7:00 ET).

China-U.S. spat continues over yuan valuation. China's commerce minister warned the U.S. against imposing trade sanctions because of the yuan, saying China "won't turn a blind eye" to such actions and that, in any case, China is likely to report a trade deficit in March. "Strong pressure on a nation's currency isn't mutually beneficial, it's a type of irrational choice," said Minister of Commerce Chen Deming.

IPO hopes rise this week. Six initial public offerings are set to launch this week. Though six IPOs wouldn't be noteworthy in previous years, it marks the most in a single week so far this year and is also notable for the level of positive chatter surrounding the offerings.

Virgin readies RBS bid. Virgin Money has secured financial backing from Abu Dhabi-based sovereign wealth funds and private equity firm Blackstone (BX) in order to bid for the 320 branches that Royal Bank of Scotland (RBS) is being forced to sell. Other bidders expected to submit offers by the April 6 deadline include National Australia Bank and Banco Santander (STD).

Friday's failures. Regulators closed seven banks on Friday, the most closures in a single day since October 2009 and bringing this year's total to 37. Failures in Alabama, Minnesota, Utah, Ohio and Georgia (I, II, III) will cost the FDIC's insurance fund an estimated $1.28B.