Wall Street Morning News

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

Pfizer to make final bid for Ratiopharm. Pfizer (PFE) is expected to make an offer today for Ratiopharm as part of the final round of bids for the German generic-drug maker. Teva (TEVA) and Iceland's Actavis are also among the final bidders. Sources say Actavis' offer, at around €3B ($4.1B), is thus far the highest. PFE +0.8% premarket (7:00 ET).

Simon readies a second try for GGP. Simon Property Group (SPG) is reportedly preparing a sweetened takeover bid for General Growth Properties (GGP), and will present its improved proposal either late this week or early next. The new offer will have to not only address antitrust questions, but will also have to top the $15/share value in an existing plan from Brookfield Asset Management (BAM) and other GGP investors to recapitalize and split the company.

Blockbuster heading for the chopping block? In a 10-K filing yesterday, Blockbuster (BBI) said it may have to file for bankruptcy as part of a debt exchange, and may pledge Canadian assets as collateral for accounts payable to studios. CEO James Keyes said bankruptcy is unlikely, and the company has been discussing new deals with studios to increase studio revenue share while cutting Blockbuster's DVD costs. Shares fell nearly 28% in after hours trading to $0.29.

Staples to buy rest of Corp. Express Australia. In a long-awaited move, Staples (SPLS) offered to buy the remaining shares it doesn't already own of Corporate Express Australia. Staples holds a 58.6% stake in the company, and its offer values Corporate Express Australia at around $1B Australian ($918M).

CIT posts Q4 loss. In a 10-K filing late yesterday, CIT Group (CIT) said it lost $1B in the fourth quarter, excluding a huge one-time reorganization benefit. Including the reorganization benefit, the company earned $3.2B in Q4. The full-year loss was $4M as losses on bad loans exceeded the financial benefits of CIT's bankruptcy restructuring. Commercial net charge-offs in Q4 totaled $385M, or 4.8% of average finance receivables. Shares rose 2.5% in after hours trading.

Hartford to repay TARP. Hartford Financial Group (HIG) announced its TARP repayment plan yesterday afternoon, which will include an offering of $1.45B in common stock and $500M in mandatory convertible preferred stock, along with debt securities. All told, Hartford will repurchase $3.4B in preferred shares from the Treasury. Shares fell 1.6% in after hours trading.

Harley rises on leveraged buyout rumor. Shares of Harley-Davidson (HOG) rose 7% yesterday on speculation the motorcycle maker may be the target of a leveraged buyout, as traders cited chatter that private-equity firm KKR is a potential bidder. Though the timing of a deal might make sense, many analysts were skeptical, noting that leveraged buyout rumors for several companies have been circulating widely in the last week without any substantiation. One analyst believes that if anything is likely near-term, it will be a "joint venture or fee type of arrangement with a depository institution partner" for Harley's in-house finance unit.

Bernanke pushes for Fed bank oversight. Bernanke will testify in Congress today on the link between the Federal Reserve's bank supervision and monetary policy. He plans to tell lawmakers that the Fed's "wide range of expertise" makes it “uniquely suited to supervise large, complex financial organizations," and that the Fed should retain oversight over smaller institutions as well. According to his prepared testimony, Bernanke will also stress that the central bank's supervisory role complements monetary policy. Paul Volcker will testify at the same hearing.

FOMC maintains rates, language. As widely expected, the Federal Open Market Committee announced that it will keep the federal funds rate at zero to 0.25%. Many were looking to see if the FOMC would change its language on the rate, but its statement was little changed and the committee still expects "exceptionally low levels of the federal funds rate for an extended period." The Fed will move forward with its plan to end its $1.25T of purchases of mortgage backed securities. On the whole, the economy continues to strengthen and labor is stabilizing, but investment in "nonresidential structures" is declining and housing starts are flat and depressed. "Substantial" resource slack should hold down inflation.

Pressure grows for the U.S. to act on yuan. The Senate introduced legislation yesterday that would make it easier for the U.S. to declare currency manipulation and take corrective action, and said China's currency manipulation is hurting the U.S. economy. Even if the bill stalls, this latest policy push may force the White House to take a stronger stance against how the yuan is valued. Meanwhile, China said this morning that it "could not be any clearer" in its repeated commitment to a stable exchange rate, and called on U.S. multinational firms to lobby the White House against taking protectionist measures over China's currency.

Massey Energy to buy Cumberland. Massey Energy (MEE) announced late Tuesday that it's buying private Virginia coal producer Cumberland Resources for $960M in cash and stock. Shares fell 2.15% in after hours trading.

Honda joins the recall train. Honda (HMC) plans to recall 412,000 vehicles in the U.S. because of brake-related defects. The company received customer complaints that the brake pedals may feel soft and slip closer to the floor over time.

Rescap piques buyer interest. BlackRock (BLK) and Blackstone Group (BX) are said to be among the buyers showing early interest in GMAC's Residential Capital unit. Investor Wilbur Ross is also said to be interested, and GMAC has hired Citigroup (C) and Goldman Sachs (GS) as advisors. A deal would be difficult to pull off, however, as heavy losses at the mortgage unit mean a buyer would have to find a way to both pay for the acquisition and fund the business going forward, as well as deal with liabilities from warranties to Fannie Mae (FNM) and Freddie Mac (FRE).

Nissan wants to be the third wheel. Nissan (NSANY.PK) may join Renault and Daimler (DAI) in discussions about an equity tie-up as part of a possible longer-term partnership. The discussions between Renault and Daimler were reported yesterday, citing unnamed sources on the matter, and Nissan's interest was reported today in the Nikkei business daily.

Reliance targets U.S. shale. India's Reliance Industries is said to be in late-stage talks with Atlas Energy (ATLS) to buy a big stake in a U.S. natural-gas field in the Marcellus Shale. Reliance would pay between $1B and $1.5B to take a joint venture stake with Atlas, which has sought a partner for months.

U.K. unemployment much better than expected. U.K. unemployment claims released this morning showed a drop of 32,300 in February, vs. an expected increase of 6,000. January's +23,500 was revised down to a much more mild +5,300, ending concerns that January's large increase signaled a weaker-than-expected economy. The pound is +0.7% against the dollar (7:00 ET).

BoJ loosens monetary policy. The Bank of Japan kept its benchmark interest rate unchanged at 0.1% today, as expected, but opted to further loosen monetary policy by doubling the size of a ¥10T ($111B) program providing low-interest loans to the money market.

Confidence rises, but consumers still nervous. ABC's Consumer Comfort Index rose an out-of-the-ordinary 6 points to -43. Despite the relatively large increase, 90% of Americans still rate the economy negatively, 54% are negative on their personal finances and 71% say it's a bad time to spend money.