While Europe initially rallied on the Greek aid package (a 30 billion euro loan package at roughly 5 percent for 3 yrs, plus an additional 15 billion euros from the IMF if needed), most European markets are unchanged as we approach the open of the U.S. Greece will come to market with a 1.2 billion euro offering 0f 6 to 12 month bills tomorrow.
1) Two buyouts in the energy business:
a) Independent energy giant Mirant(MIR) is merging with RRI Energy in an all-stock transaction to create a new company, GenOn Energy. MIR shareholders will get 2.835 shares of RRI for each MIR share. This implies a price of about $11.20 a share based on Friday's closing price, a rather disappointing 4 percent premium. MIR will own 54 percent of the combined company.
We noted last week that independent power producers like MIR, RRI, and AES have had a simply disastrous six months on two issues: 1) low electricity demand, and 2) falling natural gas prices. Many of the independent producers are highly regulated; the price they can charge is often tied to the price of natural gas, so as prices have declined so have their profits.
b) Halliburton buying Boots & Coots, a company that provides pressure control services. WEL shareholders will get about $3 for each share, about $1.73 in cash and $1.27 in HAL stock. It's a premium of about 30 percent to WEL's closing price on Friday.
Not a surprising deal, since these guys have to do these types of bolt-ons just to stay competitive, given the previous deals we have seen between Schlumberger and Smith International, and between Baker Hughes and BJ Services.
2) Alcoa will report after the bell, Street consensus is for a gain of $0.10, though there are whisper numbers several cents higher than that. This is the start of the (expected) big earnings ramput for Alcoa and many of the other big industrials: we are expecting gains of $0.23, $0.75, and $1.08 in the second, third, and fourth quarters respectively.
3) UBS rises 4 percent as the Swiss bank pre-announcing that its pre-tax earnings would be at least $2.4 billion (2.5 billion Swiss francs) in the first quarter. That's a stark contrast to the 1.55 billion Swiss franc loss it incurred in the year-ago quarter. Encouraging signs: its fixed income division likely saw improving results and account withdrawals at its private banking unit were just a third of last quarter's amounts.
Many of the big U.S. financials will be reporting earnings over the next two weeks, beginning with Bank of America and JPMorgan Chase this week.
4) Pizza and Smartphones for sale?
a) Following a 32 percent surge in its stock last week, Palm shares jump 8 percent on a Bloomberg report that the PDA/smartphone maker is seeking a buyer for the company. Analysts speculate that Chinese PC manufacturer Lenovo and Taiwanese smartphone maker HTC Corp could be potential suitors.
The firm, which has failed to be profitable in nearly 3 years, has also lost significant market share as Research in Motion's BlackBerry and Apple's iPhone products have become the dominant players in the smartphone wars.
b) Meanwhile, California Pizza Kitchen rises 4 percent after announcing it was pursuing "strategic alternatives," including a possible sale of the company. Additionally, the casual dining chain raised its Q1 earnings guidance.
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