Wall Street News
In its quest for cool, Yahoo nabs Tumblr. Yahoo's (YHOO) board approved the $1.1B acquisition of popular blogging service Tumblr Sunday, the latest step in Marissa Mayer's quest to give the internet heavyweight a much-needed makeover. AllThingsD notes the deal is indicative of Mayer's strategy to increase YHOO's "cool factor" and relevancy with younger audiences. Tumblr, whose founder/CEO David Karp will reportedly stay at YHOO for the foreseeable future, also comes with a treasure trove of user-generated content, something YHOO covets. As for comparisons between Tumblr and YHOO's ill-fated 1999 acquisition of Geocities, Forbes notes Geocities faltered in part because a flood of ads drove users away; Tumblr seems to be avoiding that pitfall.
Actavis in $8.5B deal for Warner Chilcott. Actavis (ACT) confirmed it will buy Warner Chilcott (WCRX) for $8.5B in a stock for stock transaction Monday morning. The deal will see WCRX shareholders receive 0.160 shares of the "new" ACT for each WCRX share they own. The combined company will become the third-largest specialty pharmaceutical player in the U.S.
Sun rises on Japanese economy. The Japanese economy is slowly improving, the government said Monday, pointing to evidence that exports and factory output are beginning to show signs of life. The upgraded economic assessment is the first upbeat report in two months. Additionally, Reuters Tankan survey showed a sixth consecutive month of improving manufacturer sentiment in Japan, as exporters cheered the weak yen. The index printed at 7, the first positive read in more than a year. The country's Economics Minister said the stage is set for a "V-shaped recovery." The rosy outlook was enough to boost the Nikkei 1.47% on the session to a fresh five-and-a-half year high.
Top Stock News
Chesapeake recruits new CEO. Directors at Chesapeake Energy (CHK) have recruited Anadarko (APC) senior VP of international and deep-water operations Robert Douglas Lawler to succeed Aubrey McClendon as CEO, WSJ said. Lawler, a seasoned industry veteran, will join CHK on June 17 and says he "looks forward to generating value for shareholders in the years ahead." Besides plugging a multi-billion dollar gap between the company's spending and cash flow, Lawler's greatest challenge might be dealing with McClendon, whose contractual well investment rights mean he will likely be a part of the picture at CHK even if he isn't at the helm.
GE Capital to return $6.5B to parent. GE Capital will pay $6.5B in dividends to parent company GE in 2013, consistent with previously stated goals on capital allocation. The payments will comprise $2B in earnings dividends and a $4.5B special dividend. Overall, GE plans to return $18B in cash to its shareholders in 2013.
Analysts speculate on Vodafone's next move. The deal may be far from done, but that hasn't stopped analysts from spending (in their heads anyway) the $100B+ cash hoard Vodafone (VOD) would be sitting on in the event Verizon (VZ) buys out VOD's 45% Verizon Wireless stake. "What they should do is a dramatic rethink of the business," a Bernstein analyst tells Bloomberg. One possibility: acquisitions, such as Kabel Deutschland Holding and/or Liberty Global, KBC asset management says. Even if the company returned half of the cash from a potential deal to shareholders, it would still be left with $62M, including what it currently has on its books.
Goldman to sell off remaining ICBC stake. Goldman Sachs (GS) plans to sell the remainder of its stake in Industrial and Commercial Bank of China at between HK$5.47-5.50 per Hong Kong-listed share (~3% below Monday's closing price) for proceeds of around $1.1B. GS has divested its stake over three separate sales (counting the current offering), with the first coming in April of 2012 and the second earlier this year. GS has held a stake in the bank since 2006.
Morgan Stanley sells wealth-management unit. Morgan Stanley (MS) has finally unloaded its Indian wealth-management unit, inking a deal to sell the business to Standard Chartered (SCBFF.PK) for an undisclosed amount. Morgan started the unit amid an economic and stock market boom in India in 2008, but things haven't panned out as hoped.
Hedge funds bet big on Boeing. Among those apparently not worried about the fate of the 787 Dreamliner during the first quarter were hedge funds. All told, hedgies spent $1.6B during Q1 buying shares of Boeing (BA), FactSet says. Among the buyers were Viking Global Investors and Jana Partners who bought 12.3375M and 1.55M shares respectively.
Autodesk buys Tinkercad. Autodesk (ADSK) said Saturday it will acquire Tinkercad, a developer of low-cost, web-based, 3D modeling and simulation tools. In tandem with the deal, Autodesk will revive Tinkercad's modeling service, which the startup recently said it would discontinue to focus on its supercomputer-powered Airstone simulation environment. Tinkercad's offerings will be added to Autodesk's 123D family of hobbyist-focused 3D design products, which now includes iPad apps. Terms were undisclosed.
Top Economic & Other News
Curtailing rising property values proves difficult in China. New home prices in China rose 4.9% from a year ago in April, a faster Y/Y pace than the 3.6% growth witnessed in March. In Beijing and Shanghai, prices rose 10.3% and 8.6% respectively. The data underscore government concerns regarding property inflation and suggest that last month's 13% decline in home sales transaction value was an anomaly tied to developers' rush to supply homes in March ahead of property curbs rather than an indicator that the sector is cooling. On a M/M basis, home prices rose 1% in April. The Chinese Real Estate ETF (TAO) is essentially flat YTD, but up ~43% over 12 months.
Report questions financial stability of independent Scotland. If Scotland were an independent state, its banking sector would have assets totaling 1250% of GDP, a U.K. government report said, throwing the financial risks inherent in a 2014 referendum on Scottish independence into stark relief. By contrast, Cyprus' banks had assets equivalent to 700% of economic output before the country's financial sector was hit by a devastating crisis. Such an "exceptionally large banking sector" would be vulnerable to financial shocks, and taxpayers may be at great risk if the central government didn't have the capacity to deal with the fall out, the U.K. says. Scotland's Finance Secretary called the report "a feeble attempt to undermine confidence" in an independent Scotland.
Gold bears abound as short positions hit record. "I think that any last vestige of an investment thesis for gold has been stripped," a senior VP and fund manager tells Bloomberg. Downbeat rhetoric from the likes of Goldman Sachs and Credit Suisse, combined with news George Soros and BlackRock (among other large investors) pared holdings of gold ETPs (GLD) during the first quarter have brought out the bears in force: CFTC data shows that as of May 14, hedge funds and other speculators held 74,432 short contracts, the most on record.
Relaxed lending standards spark concern. The latest installment of the Senior Loan Officer Opinion Survey, has some observers worried. Citing "increased competition," banks generally reported easing their lending standards on business loans over the last three months as razor thin margins have created a scramble for C&I business. Concurrently, the amount of business loans extended rose 10% Y/Y to $1.55T, leading some to question whether the combination of more lending and lax underwriting standards might prove hazardous to the system. Competition "creates the temptation to do silly things," M&T vice-chairman Mike Pinto told FT.
What risk? Yields fall for Italy, Slovenia. Is risk aversion yesterday's news in the eurozone? A report out of Italy showing industrial orders rose 1.6% in March (handily beating estimates and reversing a 2.5% decline in February) helped push the spread between 10-year German bunds (BUND) and comparable Italian government debt (ITLY) to its narrowest level since January at one point on Monday, as investors pared safe haven bets. Meanwhile, yields on Slovenian 10-year bonds fell slightly early on, defying Fitch's downgrade. Of course, the ratings agency is still "far behind the market's assessment of Slovenia's creditworthiness," one economist said, adding that as long as S&P maintains its A- rating, Slovenian banks can still pledge their government bonds as collateral in ECB liquidity ops.