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Corporate Cash Driving M&A Action

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

S&P futures were slightly higher Monday, as stocks attempt to extend their gains for the month (Dow up 8 percent) and the quarter (Dow up 11 percent) — although the major indices slipped after the open. Stocks are sitting at 4-month highs as the Dow is still on pace for its best September since 1939 and its best quarter in a year. How good a month has it been? The Dow has only been down on 4 days in September — the fewest number of days in any month since April 2007.

Merger Monday Mania

More corporate cash being used to fuel deals this morning (all three big deals involve cash, with 2 of the 3 being all-cash). Another observation by traders: the deals are not coming at cheap prices — two of the three target companies (Alberto Culver & Massmart Holdings) were already trading at historic high levels last week.

1) Alberto Culver jumps 18 percent after agreeing to be acquired by consumer goods giant Unilever for $3.7 billion in cash. Shareholders of the haircare product maker will get $37.50 per share, an 18 percent premium to Friday’s close.

2) AirTran shares soar 55 percent after Southwest Airlines it was purchasing the low-cost airline for $1.4 billion in cash and stock. AirTran shareholders get $7.69 per share, a hefty 69 percent premium to Friday’s close. The deal will broaden Southwest’s route map on the East Coast and in Atlanta, and it’s expected to close in the first half o 2011.

Other airlines AMR and US Airways are also up 4 percent on the consolidation news.

3) Wal-Mart has offered $4.25 billion in cash for South African consumer goods/food retailer Massmart Holdings. If the sides do agree to a deal, Wal-Mart would further expand its international operations by getting its foot into the fast-growing South African market.

Elsewhere:

a) Sprint rises 2 percent on comments from UBS that the phone carrier could see subscriber gains this quarter – reversing a recent trend of a declining subscriber base. The analyst now expects a gain of 200,000 subscribers in the 2nd half, including a 50,000 gain in the third quarter (previous expectations was for another loss)

b) Zale reported a narrower-than-expected loss as margins jumped on lower discounting. However, weak sales continued to be an issue for the jeweler as same-store sales fell 2.1 percent in the quarter. Also offsetting that was a 5 percent decline in general expenses, which included store closures.

c) Poultry firms Tyson Foods , Pilgrim’s Pride , and Sanderson Farms may see some weakness as China threatened a large tariff on chicken imports from the U.S., blaming unfair low prices. China is the biggest importer of U.S. chicken. The new tariffs will be in effect for 5 years.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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