Yahoo! Inc.'s (NASDAQ: YHOO) stock price has held up surprisingly well. Trading at $26.07 midday, its shares are only modestly below their closing price of $26.81 on May 1, the session before they rallied on talk that Yahoo! and Microsoft Corp. (NASDAQ: MSFT). were close to a deal. The price is even more surprising given the reports that Yahoo! plans to outsource its search advertising to Google Inc. (NASDAQ: GOOG) may be premature. If that deal is on the backburner, there's little else to support Yahoo!'s stock unless investors are counting on it renewing talks with Microsoft.
Yahoo! has come under fire from shareholders after Microsoft withdrew its offer over the weekend. In the fallout, Yahoo! execs have postured to suggest they were open a deal for even less than the $37 a share, or $53.2 billion, counteroffer they reportedly made to Microsoft's $33 a share, or $47.5 billion, offer.
But If Yahoo! really has indicated to Microsoft that it would accept $34 a share offer, which comes to $48.9 billion, a deal could still come together quickly. Not that it would be simple. Yahoo! has had plenty of time to come to terms. Meanwhile, with Yahoo! shares poised on the precipice, Microsoft arguably has more leverage than it has during the entire saga, which means it can better dictate terms. Microsoft can let Yahoo! sweat it out until the Internet company's annual meeting in July, when shareholders are likely to be in a lather.
So The Wall Street Journalreports today -- according to its favorite "people familiar with the situation" sentence -- that wireless provider Sprint Nextel Corp. (NYSE: S) is considering spinning off or selling its Nextel unit. This is when I hear the screeching sound of a needle scraping a record. Say what? Should we play that again?
I guess I shouldn't really be that surprised since the $35 billion acquisition of Nextel Communications Inc. in 2005 has always seemed, to say it mildly, challenging. This would be, as the Journal puts it, "a dramatic acknowledgment" that the merger has actually been a failure.
Well, only Monday we heard that Deutsche Telekom AG (NYSE: DT) may be interested in Sprint. Could it be that either Deutsche Telekom demanded such an action, or that Sprint management decided such an action could entice DT to indeed go forward with an offer (despite the probable problems such a merger could face, as Jonathan Berr outlined in his post Monday)? Without Nextel, Sprint would rid itself of much debt. It is also considered to have better handsets and fewer dropped calls, making it a more attractive target.
The differences in corporate culture made the now three-year-old merger difficult and Sprint has lost subscribers while its competitors added them. Of course, the stock price has suffered as well, down over 60% since the merger. No wonder then that Sprint is looking to undo the merger. The Journal lists several options, including selling Nextel to a consortium of investors related to Nextel's founder Morgan O'Brien. Other possibilities of course include private equity firms, or a spin off of Nextel.
A report inthe Financial Times says that Merrill Lynch & Co. Inc. (NYSE: MER) is holding talks with TPG about forming closer ties. This may include the possibility of the private equity firm investing in Merrill Lynch if the investment bank needs more capital. John Thain met with key executives from TPG according to the report.
The companies have apparently been in discussions since last fall. One affiliate had offered to put in as much as $3 billion into Merrill Lynch. Merrill Lynch raised some $12+ billion in funds elsewhere for different terms.
What is interesting here is that the article notes that TPG doesn't want to appear too close to Merrill Lynch, because of the appearance of being too close to a competitor.
The company has also raised additional funds this month by selling fixed income and preferred securities.
John Thain's suspenders and belt might be a little tighter since he went on record saying Merrill Lynch will not need any more capital.
Following this Yahoo! Inc. (NASDAQ: YHOO) affair is like playing a very high-stakes game of Three Card Monte: Take your eyes off the lucky lady and, pfffft, you're cooked.
As paidContent reported yesterday and the Wall Street Journal confirmed this morning, Time Warner Inc. (NYSE: TWX) is talking with the Internet company about shipping AOL and a trunk full of cash to Yahoo! in exchange for a minority stake in the combined company and a chance to close the door on one of the dumbest mergers in recent memory. AOL would get a lifeline. Beyond escaping Microsoft Corp.'s (NASDAQ: MSFT) $42 billion headlock, in AOL Yahoo! would get what remains a premier player in internet advertising and a company that retains large online audiences for financial, entertainment and other content.
The hardest thing to figure here is what's happening on the other side of the deal, where Microsoft is reportedly lining up News Corp. (NYSE: NWS) for a joint bid for Yahoo!. Under that scenario, Yahoo! would be folded in with Microsoft's MSN portal and News Corp.'s MySpace unit in one mighty online ad-selling, application-bundling, social networking-ing company. That Microsoft CEO Steve Ballmer is thinking of climbing into business with News Corp.'s Rupert Murdoch (pictured) suggests just how worried the software giant is about losing Yahoo!. But Ballmer should think twice. Murdoch has a famously keen instinct for when to buy, sell or hold a business. His interest in unloading MySpace underscores that, with the rise of FaceBook and other social networks, the Web property's best days might be behind it.
Shares of Citrix Systems Inc. (NASDAQ: CTXS) are up more than 7% today on rumors that the virtualization software vendor could be a takeover target. Citrix has been considered more of a buyer than an acquisition candidate, having last year closed a $500 million acquisition of XenSource Inc.
But now IBM Corp. (NYSE: IBM) and Cisco Systems Inc. (NASDAQ: CSCO) are sniffing around the company, according to the rumor du jour. Avian Securities analyst Jeff Gaggin says in a research note today that Citrix has developed a virtualization management offering that has become a "real threat" to rival VMWare Inc.
Following Citrix's XenSource deal, speculation arose that Microsoft Corp. (NASDAQ: MSFT) might take an interest in the newly enlarged company, mainly because of the long-standing marketing partnership between the two companies. But Gaggin argues that Microsoft prefers keeping its relationship with Citrix at the partnership level, being distracted with its attempt to takeover Yahoo! Inc. (NASDAQ: YHOO) and the development of its own internal virtualization offering.
General Motors (NYSE: GM) is recently up 54 cents to $21.15 on unconfirmed chatter Kirk Kerkorian's Tracinda has taken a position in GM.
GM call option volume of 17,266 contracts compares to put volume of 11,950 contracts. GM April 22.5 straddle is priced at $2.53, May is at $4.51. GM May option implied volatility of 73 is above its 26-week average of 53 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Though tech M&A has been fairly quiet of late because of macro-economic conditions, the rumor mill is churning strong, with Google Inc. (NASDAQ: GOOG) in the middle of two rumored deals.
Shares of online travel site Expedia Inc. (NASDAQ: EXPE) were up more than 2% Wednesday on top of Tuesday's 10% gain on rumors of a potential buyout by Google. Meanwhile, TechCrunch is reviving a rumor from last year that eBay Inc. (NASDAQ: EBAY) is in talks to either sell Skype to Google or the two sides would form a partnership involving the Internet phone service provider.
When we last wrote about a possible Google buy of Skype in November, we didn't think anything was imminent. After all, eBay would have been selling at a low point, having just announced the unit was underperforming. At that time, Skype's quarterly revenues were $98 million. In its last earnings report, Skype's revenues were reported at $115 million, a 76% increase versus the prior year and a 17% increase quarter-over-quarter. So it's not like Skype is a total disaster.
As if Cleveland needed any more trouble, the two leading banks in the city are rumored to be considering a merger or even an outright sale. According to The Wall Street Journal, KeyCorp. (NYSE: KEY) may acquire National City Corp. (NYSE: NCC). Buyout firm Kohlberg Kravis Roberts & Co. could provide the capital for the buyout.
National City has had a difficult few months. The bank has a lot of exposure to the subprime mortgage market, and the company's stock has dropped from the mid $30s to about $10 in the last year. Although National City has a $1 billion stake in Visa (NYSE: V), it has laid off over 3,000 workers recently, and is likely to reduce staff even further. An acquisition by neighbor KeyCorp. would no doubt guarantee many more firings -- or "redundancies," as they say in Britain.
So far, these rumors are good news for KeyCorp, which is up nearly 5% to $24.66. For National City, it's a different story, with the stock down nearly 2% to $9.78. I guess the market thinks KeyCorp. will pick up some decent assets at fire sale prices. Let's hope that this isn't another mistake by the lake.
This morning we have several pieces that are key for buyout and private equity investors alike. Deals are continuing as you will see below, but they are not as traditional in public to public deals, and private equity deals will be looking different than 2007 (duh!). Here is a digest of some of the deals:
Nationwide Financial Services, Inc. (NYSE: NFS) has received a buyout offer from its parent company, which already controls the company via a Class B share ownership. This will end up being a mutual insurance company again rather than a stock insurance company. At least that is the case if it agrees to be bought.
The Blackstone Group, L.P. (NYSE: BX) posted earnings this morning that were under estimates and actually were a net loss after charges. You'll want to see the comments from Steve Schwarzman, because this will show you the tone for 2008 in private equity land. At least they have a good dividend now.....
The rumors or speculation surrounding Sprint Nextel Corp. (NYSE: S) are continuing, yet it is having almost no net impact on the stock. Speculators have been noting Carlos Slim of Mexico may want to bundle this one or that even Deutsche Telecom (NYSE: DT) may want to bundle it up either in a buyout or in a strategic investment of sorts.
If you think the mortgage and financial meltdown will kill all rumor in the financial sector, think again. Bear Stearns (NYSE: BSC) shares are trading up today and even the stock options are active on the Friday Rumor Mill that the troubled brokerage firm could be for sale or have an expanded stake from China's CITIC.
Today is also options expiration date, so we looked further out the expiration calendar beyond February. Options are active in March from the $85 to $105 strike prices on call options. April is actually quiet. Specifically these March $85 call options. The July $75 and $100 strike prices each saw over 1,000 contracts trade.
What is interesting is that there is another report here that noted that Bear Stearns and CITIC may modify their terms. This may or may not be the case. Most sovereign funds so far are having to stick to original terms. It wasn't that long ago that they were criticized for taking large stakes in critical US companies. These funds may just have to take their deals as is if they want to keep buying up properties.
Bear Stearns has been the perpetual merger rumor target in the rumor mill for literally over 10-years now that I am aware of personally. When I was a bond broker in the early and mid-1990's, that was a typical "FRIDAY RUMOR" and then since switching to the equity side of the equation after the mid-1990's this "FRIDAY RUMOR" persisted one and off numerous times each and every years since then. Even Warren Buffett has been noted as a rumored buyer before. It appears that even the CDO and mortgage meltdown doesn't kill some rumors.
Who knows for sure.... Some time you might expect the merger to actually happen.
Bear Stearns stock is up today while many competing investment banks are not so lucky. Shares were up over 5% in afternoon trading to over $83.00 on nearly double average volume. It appears that a recent pullback is being attributed to David Faber reporting on CNBC that these rumors are not likely true.
Google (NASDAQ:GOOG) always had a problem trying to keep Yahoo! (NASDAQ:YHOO) out of the hands of Microsoft (NASDAQ:MSFT). The No.1 and No.2 search engine firms would have had 80% of the US market if Google took over the function for both companies. As The Wall Street Journalwrites, the deal was dead from the start because of "concerns about the intense regulatory scrutiny it could attract, given Google's and Yahoo's significant shares of the Web-search and online-advertising markets,"
There are ongoing rumors that News Corp (NYSE:NWS) and Time Warner (NYSE:TWX) may have an interest with linking up with Yahoo!. If the portal really wants to stay independent, either deal could make sense. Yahoo! could extend its search function over the NWS MySpace property, which is now one of the five most visited sites in the world, or over AOL, which is also in the top five. This could, in effect, move Yahoo!'s search engine share from the 20% range to closer to 30%. That would still be well short of Google which is around the 55% level.
If Yahoo! Inc. (NASDAQ: YHOO) is serious about remaining independent, it must of course present a compelling argument to shareholders why staying single is preferable to Microsoft Corp.'s (NASDAQ: MSFT) $44.6 billion buyout offer. Unfortunately for Yahoo!, the possibility of merging with AOL LLC hasn't elicited the desired level of excitement.
Adam Lehman, a former senior vice president of business affairs and development at AOL and once one of the company's top dealmakers, says that the move to float the AOL rumor showed "there aren't any compelling alternatives being bandied about in Yahoo!'s boardroom," adding that such a deal doesn't match up with Microsoft's offer.
"I don't think there's a clear and compelling vision for how the combination of the assets would drive better results for either," says Lehman, who from 1999 to 2002 led AOL's strategic and dealmaking team supporting the company's international expansion. "They also would need to overcome all the inherent complexities of any large-scale merger just to get the combination functioning."
According to (subscription required) the Wall Street Journal, a wave of consolidation in the oil industry could be in the cards given high crude prices that show few signs of letting up.
The Journal reports that, "Private-equity firms, for instance, see the promise of profitable investments. State-owned oil companies from booming China and India are more willing to make big outlays for the assets they crave. Oil companies from producing countries are flush with cash and looking to expand. The big international companies are adjusting their portfolios to focus on their most profitable assets and to buy the advanced technology they need to keep an edge amid growing competition. And small and midsize oil concerns are more likely to pair up to survive."
The interest of private equity is a strong indication that the sector is undervalued. Generally, private equity firms aren't interested in speculating on future commodity prices, so they must think the stocks are undervalued based on current fundamentals.
For most investors, betting on individual oil and gas companies is too risky. If you agree with the notion that a wave of consolidation in the industry is likely to drive prices up, you may want to look at the S&P Oil & Gas Exploration & Production SPDR (AMEX: XOP). With an expense ratio of just 0.35%, it's an inexpensive way to profit from a bull market there.
According to Trends magazine, Anheuser-Busch (NYSE:BUD) and InBev are in merger talks.
According toReuters "InBev, whose key brands are Stella Artois, Beck's, Brahma and Leffe, and Budweiser and Bud Light maker Anheuser-Busch have been the subject of consistent merger speculation over the past year."
Richard Windsor, an analyst with Nomura International, must have time on his hands. In a memo to clients he passes along the opinion that Motorola (NYSE: MOT) may exit the handset business "and concentrate on becoming and enterprise and government company," according to a report at MarketWatch.
The buyer of the handset business could be a Chinese electronics firm.
The trouble with the speculation is that a firm in China would have the same trouble that Motorola does. With its share of the world handset market down from about 22% two years ago to 12% now, it does not have a single flagship model, like its old Razr, to get the company back on track. Larger rival Nokia (NYSE:NOK) has 40% of the worldwide market. Samsung and Sony-Ericsson are also taking share.
To put a fine point on it -- Motorola does not have anything to sell.
Douglas A. McIntyre is an editor at 247wallst.com.
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Yahoo! Inc.'s (NASDAQ: YHOO) stock price has held up surprisingly well. Trading at $26.07 midday, its shares are only modestly below their closing price of $26.81 on May 1, the session before they rallied on talk that Yahoo! and Microsoft Corp. (NASDAQ: MSFT). were close to a deal. The price is even more surprising given the reports that Yahoo! plans to outsource its search advertising to Google Inc. (NASDAQ: GOOG) may be premature. If that deal is on the backburner, there's little else to support Yahoo!'s stock unless investors are counting on it renewing talks with Microsoft.
So The Wall Street Journal 
