Frontrunning: November 12

  • Jefferies to be bought by Ian Cumming's Leucadia in an all-stock deal for $3.59 billion or about $17/share (WSJ)
  • FBI Scrutinized on Petraeus (WSJ)
  • Identity of second woman emerges in Petraeus' downfall (Reuters)
  • SEC staffers used government computers for personal use (Reuters)
  • Japan edges towards fifth recession in 15 years  (FT)
  • Europe Finance Chiefs Seek Greek Pact as Economy Gloom Grows (BBG)
  • Americans Say Europe Lesson Means Act Now as Austerity Will Fail (BBG) - of course it would be great if Europe had ever implemented austerity...
  • Greece battles to avert €5bn default  (FT)
  • You don't bail out the US government for nothing: No Individual Charges In Probe of J.P. Morgan (WSJ)
  • Israel Warns of Painful Response to Fire From Gaza, Syria (BBG)
  • Greece's far-right party goes on the offensive (Reuters)
  • Don’t fear fiscal cliff, says Democrat  (FT)
  • Apple Settles HTC Patent Suits Shifting From Jobs’ War (BBG)
  • Man Set on Fire in Argentina Over Debt (EFE)
  • Iraq cancels $4.2-billion weapons deal with Russia over corruption concerns (Globe and Mail)
  • An Honest Guy on Wall Street (Bloomberg)

Overnight Media Digest


* China's banks are likely to face pressure to adjust their business models as the country looks to rebalance its economy toward more consumption and away from bank-fueled investment, which has enriched lenders.

* Disruptions to Google Inc's search and email services in China over the weekend underscore the uncertainty surrounding Beijing's effort to control the flow of information into the country.

* Hertz Global Holdings Inc has tentatively agreed to shed about a dozen locations at U.S. airports in a concession aimed at winning U.S. regulatory approval for its proposed acquisition of rival Dollar Thrifty Automotive Group Inc according to people familiar with the negotiations.

* Apple Inc and HTC Corp announced a broad ten-year licensing agreement that settles all of the lawsuits between the companies around the world.

* Mark Thompson's debut at the helm of New York Times Co on Monday signals that he has survived, at least for now, the doubts that have dogged him since the Jimmy Savile scandal erupted at the British Broadcasting Corp last month. But big challenges await him at his new job




The BBC was scrambling on Sunday to limit the damage done by a scandal that has seen Director-General George Entwistle quit and Chairman Lord Patten call for a "radical overhaul".


Greece is battling to raise funds to avoid defaulting on a 5 billion euros ($6.35 billion) debt repayment this week.


George Osborne is being urged by leading Tory MPs to raise council tax on mansions and expensive homes.


KKR is launching two investment funds to be distributed to individuals by Charles Schwab, the U.S. brokerage.


Apple has settled its first patent battle over smartphone makers using Google's Android platform.


The EU is to serve formal objections against Ryanair's third proposed takeover of Aer Lingus.


Investors will on Monday register one of the biggest protest votes this year, in a move against Redrow's senior non-executive director.


Xstrata and Glencore are moving to boost shareholder turnout in an upcoming vote on their proposed merger.


The Russian government has for the first time publicly encouraged the U.S. and Iran to begin direct one-to-one negotiations over Tehran's nuclear programme.



* China's top banking regulators and the chairmen of the four largest banks tried to allay concerns on Sunday that the country was allowing its banking system to grow at a reckless pace as a way to sustain short-term economic growth.

* Apple Inc and HTC Corp the Taiwanese smartphone maker, said they had agreed to dismiss a series of lawsuits filed against each other in a feud that started more than two years. The companies said their settlement includes a 10-year license agreement that grants rights to current and future patents held by both parties.

* Finance ministers from euro area countries are scheduled to gather in Brussels on Monday evening to confront a Greek debt that still threatened to torpedo the European monetary union after three years of unbroken crisis.

* The BBC's chairman said Sunday that the broadcasting organization was in a "ghastly mess" as a result of its bungled coverage of a decades-old sexual abuse scandal and in need of a fundamental shake-up.

* Known to fans of politics as the nation's liberal television network, MSNBC is looking to gain ground on the Fox News Channel in President Obama's second term.




* People in southeastern British Columbia are dying from prescription opioid overdoses at the same rate they're dying in drunk-driving accidents.

Across southeastern B.C., an average of 21 people are dying each year from overdoses of prescribed opioids such as morphine, codeine, oxycodone, hydromorphone and fentanyl, the study showed.

Reports in the business section:

* Retailer Leon's Furniture Ltd is acquiring arch-rival the Brick Ltd for about $700 million in a friendly deal that is aimed at strengthening the merchants as they prepare for the next foreign retail invasion.

The agreement, which was announced Sunday evening, will see the country's two largest specialty furniture retailers team up amid a sluggish economy and weakening housing market, which has put strains on sales growth and forced the two big players to look for new ways to gain an edge.


* Investors are looking for a compromise to keep the U.S. economy from sailing over the fiscal cliff. It's just not clear that the politicians in Washington are ready to deliver one.

With $600 billion in tax increases and automatic spending cuts due to take effect in January, investors say they would welcome an agreement that delays most changes until Congress can hammer out a long-term deficit reduction deal in early 2013.


* The next wave of real estate investment trusts south of the border is likely to be made of distressed properties bought by private equity investors so cheaply that they can be rented out and still produce good returns despite the high management costs. This asset class does not exist now among REITs, which, in terms of rental properties, has been restricted to apartment buildings.

* After 20 years at the helm, Rona Inc president and CEO Robert Dutton announced Friday that he is leaving the largest Canadian-based home improvement retailer and distributor.

Dominique Boies, the company's executive vice-president and chief financial officer, will take over as acting CEO while executive search firm Korn/Ferry International searches for a successor to Dutton.




-- China is considering whether to relaunch trading in government bond futures as soon as this year, although regulators have no firm timetable yet, Shanghai Stock Exchange Chairman Gui Minjie said. China banned government bond futures in 1995 after a major trading scandal.

-- Experts believe a new round of urbanisation will bring fresh vitality to China's economy in coming years. China has said more than half of its population lived in urban areas for the first time last year.


-- China Securities Regulatory Commission (CSRC) Chairman Guo Shuqing said regulators have no plan to launch an international board for now. China has been considering whether to launch such a board on the Shanghai Stock Exchange to allow foreign companies to float shares.

-- Total assets of China's trust industry jumped 54.25 percent to 6.3 trillion yuan ($1.01 trillion) by the end of September from a year earlier, according to data issued by an industry association.


-- China's total power consumption is expected to double by 2020 from the current level, said Liu Zhenya, general manager of the State Grid Corporation of China.


-- China's banking sector remains largely healthy and market-oriented reforms will be continued prudently, said Shang Fulin, Chairman of the China Banking Regulatory Commission.



Fly On The Wall 7:00 AM Market Snapshot



Comerica (CMA) upgraded to Neutral from Sell at Citigroup
DTS, Inc. (DTSI) upgraded to Neutral from Underweight at JPMorgan
Disney (DIS) upgraded to Buy from Neutral at Citigroup
Energy Transfer Partners (ETP) upgraded to Buy from Neutral at BofA/Merrill
Highwoods Properties (HIW) upgraded to Buy from Neutral at BofA/Merrill
Intercontinental Hotels (IHG) upgraded to Outperform from Neutral at Exane BNP Paribas
KLA-Tencor (KLAC) upgraded to Outperform from Underperform at RBC Capital
Navistar (NAV) upgraded to Outperform from Neutral at RW Baird
Nelnet (NNI) upgraded to Outperform from Neutral at Credit Suisse
Ormat Technologies (ORA) upgraded to Equal Weight from Underweight at Barclays
Ryman Hospitality (RHP) upgraded to Buy from Neutral at Goldman
SL Green Realty (SLG) upgraded to Buy from Neutral at BofA/Merrill
Telephone and Data (TDS) upgraded to Buy from Neutral at Citigroup
TripAdvisor (TRIP) upgraded to Overweight from Underweight at Morgan Stanley
U.S. Cellular (USM) upgraded to Buy from Neutral at Citigroup


Alexandria Real Estate (ARE) downgraded to Neutral from Buy at BofA/Merrill
Caterpillar (CAT) downgraded to Neutral from Overweight at JPMorgan
Garmin (GRMN) downgraded to Sell from Neutral at Goldman
Inteliquent (IQNT) downgraded to Underweight from Equal Weight at Morgan Stanley
J.C. Penney (JCP) downgraded to Underperform from Neutral at Credit Suisse
Johnson & Johnson (JNJ) downgraded to Hold from Buy at Jefferies
Kilroy Realty (KRC) downgraded to Neutral from Buy at BofA/Merrill
Nektar (NKTR) downgraded to Hold from Buy at Jefferies
Strayer Education (STRA) downgraded to Neutral from Overweight at JPMorgan
Vertex (VRTX) downgraded to Neutral from Outperform at Credit Suisse
Vornado (VNO) downgraded to Neutral from Buy at BofA/Merrill


Dendreon (DNDN) initiated with a Buy at Needham
OvaScience (OVSC) initiated with an Outperform at Leerink


Leucadia (LUK) to acquire Jefferies (JEF) for $3.7B or $17.60 per share, CNBC reports
Titanium Metals (TIE) to be acquired by Precision Castparts (PCP) for $16.50 per share
J.C. Penney (JCP) credit rating lowered to B- from B+ by S&P after weak results
Cliffs Natural (CLF) and United Steelworkers announced 37-month labor agreement
Lockheed Martin (LMT) named Marillyn Hewson as CEO and President
Annaly Capital (NLY) announced proposal to acquire CreXus (CXS)
Johnson & Johnson (JNJ): FDA approved new 800mg PREZISTA
Myrexis' (MYRX) board approved plan of complete liquidation and dissolution
Abraxas Petroleum (AXAS) agreed to sell 25% interest at Nordheim Project in Eagle Ford
Sunbelt International (SUNB) to acquire Aptitude Life


Companies that beat consensus earnings expectations last night and today include:
ImmunoCellular (IMUC), SouFun (SFUN), RRsat Global (RRST)

Companies that missed consensus earnings expectations include:
Beazer Homes (BZH), Sky-mobi (MOBI), 3SBio (SSRX), Consolidated Water (CWCO), Synutra (SYUT), Fushi Copperweld (FSIN), Exide (XIDE), Medivation (MDVN), Titanium Metals (TIE), Omeros (OMER)

Companies that matched consensus earnings expectations include:
Abraxas Petroleum (AXAS)


Cisco Systems (CSCO) unveiled a new strategy for dealing with so-called patent trolls: accuse them of breaking the law, the Wall Street Journal reports
Xstrata’s (XSRAY) effort to close the merger with Glencore (GLNCY) has run into another hurdle that could prove fatal. Shareholders next week will vote on the merger using an untested ballot system devised to sidestep investor opposition to retention payments that Xstrata has proposed, the Wall Street Journal reports
Wal-Mart Stores’s (WMT) U.S. employees will pay between 8% and 36% more in premiums for its medical coverage in 2013, prompting some of the 1.4M workers to say they will forego coverage altogether, Reuters reports
The French and German governments began talks on whether to maintain their shareholder pact at EADS (EADSY) once Daimler (DDAIF) sells its entire stake in the company, according to the French daily Les Echos, Reuters reports
UPS’s (UPS) $6.6B purchase of TNT Express (TNTEY) faces growing investor skepticism as the company struggles to win EU approval, Bloomberg reports
Vodafone Group (VOD), struggling with decreasing wireless revenue in European markets such as Spain and Italy, is courting new sales partners: TV companies and newspaper publishers, Bloomberg reports


Disney (DIS) shares could hit $60 in next 18-24 months
Berkshire Hathaway's (BRK.A) shares are historically cheap
Holiday shopping (AAPL, BBBY, COH, KORS, FDX, UPS, JOSB) may be cheerier than investors expect
Yahoo (YHOO) investors are betting new CEO can turn the company around


Cynosure (CYNO) files to sell 2.6M shares of common stock
Fiesta Restaurant Group (FRGI) files to sell 6.56M shares of common stock for holders
IsoRay (ISR) files to sell 1.7M shares of common stock for holders


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