Frontrunning: February 15

  • G20 struggles over forex, at odds over debts (Reuters)
  • Alwaleed Sells Airbus A380 to Invest in Middle East Firms (BBG)
  • GOP Stalls Vote on Pick for Pentagon (WSJ)
  • ECB officials rebuff currency targeting as G20 meets (Reuters)
  • Not good for the reflation effort: Muto leads as Japan PM close to choosing nominee for Bank of Japan chief (Reuters)
  • M&A Surges as Confidence Spurs Deals in Computers to Consumer (BBG)
  • JPMorgan’s head of equity prop trading Gulati to launch own fund (FT)
  • Tiffany & Co. sues Costco over engagement rings labeled ‘Tiffany' (WaPo)
  • JPMorgan Said to Fire Traders, Realign Pay Amid Slump (BBG)
  • Broker draws Tullett into Libor scandal  (FT)
  • Airbus drops Lithium-Ion batteries for A350 (Reuters)


Overnight Media Digest


* H.J. Heinz Co, a brand in virtually every American kitchen, is selling itself for $23 billion to another household name - Warren Buffett - and Brazilian private equity firm 3G Capital.

* After a year of sometimes-acrimonious negotiations, AMR Corp's American Airlines and US Airways Group Inc have agreed to merge. However, the two carriers face months, perhaps years, of work integrating their massive operations into the world's biggest airline.

* Differing approaches by the U.S. Securities and Exchange Commission and the Justice Department in cases against Standard & Poor's could complicate things for federal prosecutors, who say the company disregarded its own standards when rating certain securities.

* The euro zone economy plunged last quarter at its fastest pace in nearly four years, as recessions along the currency zone's southern border gripped powerhouses Germany and France.

* Nasdaq OMX Group Inc said it plans soon to start processing trades at 0400 ET. The earlier start time is a challenge to rival NYSE Euronext, whose electronic Arca exchange began matching bids and offers for shares at that wee hour in 2005.

* Anheuser Busch InBev SA offered to sell an additional $2.9 billion of assets to Constellation Brands Inc in a dramatic bid by the world's largest brewer to rescue its $20 billion takeover of Mexico's Grupo Modelo .

* SAC Capital Advisors agreed to give clients more time to decide whether to keep their money with the hedge fund giant amid an insider-trading investigation, bowing to concerns expressed by one of its biggest investors, according to people familiar with the matter.

* Tiffany & Co sued Costco Wholesale Corp on Thursday, contending that the warehouse chain sold engagement rings it falsely claimed were made by the luxury jewelry company.

* U.S. Senate Republicans blocked, at least temporarily, the nomination of former Senator Chuck Hagel to be secretary of defense, amid intense partisan fighting in Congress.



JPMorgan's Gulati to launch own fund Fisher exits as BlackRock fixed income chief

Browett returns to UK high street

Overview Warren Buffett's Berkshire Hathaway and Brazilian private equity firm 3G Capital will buy ketchup maker H.J. Heinz Co for $23.2 billion in cash. American Airlines and U.S. Airways said they plan to merge in a $11 billion deal that will form the world's biggest air carrier.

Anheuser-Busch InBev, the world's largest brewer, has revised the terms of its $20.1 billion takeover of Mexican brewer Grupo Modelo in the hopes of satisfying U.S. Department of Justice concerns it would mean higher prices for U.S. beer drinkers.

Barnes & Noble Inc expects its Nook business to post an increased full-year loss in fiscal 2013, as the top U.S. bookstore chain struggles with slower sales of e-readers and e-books. Deepak Gulati, JPMorgan's global head of equity proprietary, is quitting to set up a hedge fund in Switzerland called Argentière Capital, in the second or third quarter this year.

BlackRock, the world's largest money manager, said on Thursday that Peter Fisher was stepping down as head of fixed income at the New York-based firm.

BNP Paribas unveiled a three-year plan to save 2 billion euros ($2.69 billion) in annual costs and ramp up growth in Asia after its fourth-quarter profits were hit by Europe's weak economy. John Browett will return to UK's high street as the new chief executive of Monsoon Accessorize. Browett, who left Dixons for a short stint as head of Apple's global retail stores, abruptly parted ways with the gadget maker after just three months.



* The U.S. airline industry took a decisive step toward greater concentration on Thursday with the announcement that American Airlines, a unit of AMR Corp, and US Airways Group Inc had agreed to merge, forming the nation's biggest airline.

* Warren Buffet's Berkshire Hathaway Inc and Brazilian private equity firm 3G Capital agreed to buy ketchup maker H.J.Heinz Co for $23 billion on Thursday.

* European economies shrank in the fourth quarter at their fastest rate since the depth of the financial crisis in 2009, new data showed on Thursday, with both strong and weak countries falling short of expectations and raising anxieties of a longer, deeper recession.

* Blackstone Group said it would keep most of its $550 million with SAC Capital Advisors for three more months, as the hedge fund's clients faced a regularly scheduled quarterly deadline on Thursday to decide whether to continue investing.

* Budweiser brewer Anheuser-Busch InBev moved on Thursday to rescue its $20.1 billion proposed takeover of Grupo Modelo of Mexico, the maker of Corona beer, by offering concessions aimed at persuading American antitrust authorities to let the deal proceed.

* Activist shareholder Carl Icahn has built up a 12.98 percent stake, or 14 million shares, in Herbalife Ltd, a nutritional supplements company, according to a regulatory filing on Thursday.

* U.S. drugmaker Merck & Co Inc agreed to pay $688 million to settle lawsuits claiming that it had harmed investors by delaying the release of unfavorable study results for its cholesterol drug Vytorin, the company announced on Thursday.

* General Motors Co said its profit in the fourth quarter increased slightly, as continued losses in Europe offset positive results in North America.

* The Moscow Exchange, better known by its original name, Micex, is scheduled to begin trading on Friday on its own trading platform. The listing drew interest from specialized investors in financial services companies and institutional investors in the United States and Europe, a financial industry official said on Thursday.




* Snowbirds driving in blithe violation of Florida law were saved by the Geneva Conventions - not the ones governing the conduct of war, but the 1949 Geneva Convention on Road Traffic.

The licensing brouhaha surrounded an obscure new law - section 322.04, Florida Statutes - which meant that Canadians motoring in Florida, along with all other foreigners, risked arrest unless they were armed with an International Driving Permit. No longer was a Quebec or Ontario drivers' license good enough.

* Long before they can understand what is being said to them, babies can make strategic use of the sound cues that they hear to distinguish between two languages, a new study has revealed.

The finding suggests that children growing up in a multilingual environment are neither confused nor disadvantaged by having to cope with two mother tongues, even when the grammatical structures of the two languages are substantially different from one another.

* A crippled cruise ship that lost power for more than four days in the Gulf of Mexico was pulled into a port in Mobile, Alabama, late on Thursday as passengers cheered the end of a "hellish" voyage marked by overflowing toilets and stinking cabins.

Reports in the business section:

* Nadir Mohamed is stepping down as the chief executive officer of Rogers Communications, leaving the telecommunications and media giant in search of a new leader at a critical time for the industry.

* Mattamy Homes, Canada's largest builder of new homes, is planning a major U.S. expansion, as it bets that house prices have topped out in its main market of Ontario - and have bottomed out south of the border.

"I think Ontario's had a good run in terms of house prices and I think we're at a point in time where we've peaked in pricing," Brian Johnston, the chief operating officer of Mattamy Homes, said during an interview at the company's Oakville, Ontario headquarters. "We've had a good run as an industry and now things are flattening out."


* On Thursday, Oscar Pistorius was charged with the murder of his 29-year-old girlfriend, Reeva Steenkamp, in South Africa. He is accused of shooting her four times in the middle of the night in his home in Pretoria. The news comes as a shock. Murder should always come as a shock, but Oscar Pistorius is supposed to be a hero.

* In a potent reminder of the arbitrary censorial powers of Canadian liquor authorities, a rum cheekily named for pornographic actor Ron Jeremy was pulled from Manitoba store shelves after customers complained it was obscene.

Dubbed Ron de Jeremy, the liquor's label features an image of Ron Jeremy's face above the taglines "the adult liquor" and "long smooth taste."

On Thursday, however, after the decision was publicized, the rum was restocked after liquor authorities determined that it did not, in fact, have any obscene content.


* While Canada's economy should pick up later this year, there are external and domestic threats that, if unchecked, could make a case for more interest rate cuts, according to the International Monetary Fund.

The IMF said in its annual report Thursday that Canada's economy will grow by 1.8 percent in 2013, hobbled by a weak second-half handover from the previous year.

* Fairfax Financial Holdings Ltd says it has returned to profitability in 2012 after the "catastrophe" of losses it endured a year earlier.



Fly On The Wall 7:00 AM Market Snapshot



Heinz (HNZ) upgraded to Neutral from Sell at Goldman
inContact (SAAS) upgraded to Buy from Neutral at Roth Capital
Korn/Ferry (KFY) upgraded to Buy from Neutral at SunTrust
Qlik Technologies (QLIK) upgraded to Outperform from Sector Perform at RBC Capital
XL Group (XL) upgraded to Buy from Neutral at Janney Capital


ARMOUR Residential (ARR) downgraded to Hold from Buy at Deutsche Bank
Angie's List (ANGI) downgraded to Market Perform from Outperform at Barrington
Comerica (CMA) downgraded to Sell from Neutral at Citigroup
DaVita (DVA) downgraded to Neutral from Buy at Goldman
Endeavour (END) downgraded to Hold from Buy at C.K. Cooper
Extra Space Storage (EXR) downgraded to Sell from Neutral at UBS
Generac (GNRC) downgraded to Sell from Neutral at Goldman
Gold Fields (GFI) downgraded to Sector Underperformer from Sector Performer at CIBC
Huntington Bancshares (HBAN) downgraded to Neutral from Buy at Citigroup
LogMeln (LOGM) downgraded to Neutral from Overweight at JPMorgan
LogMeln (LOGM) downgraded to Perform from Outperform at Oppenheimer
Monster Worldwide (MWW) downgraded to Neutral from Buy at SunTrust
NorthWestern (NWE) downgraded to Market Perform from Outperform at Wells Fargo
Randgold Resources (GOLD) downgraded to Sell from Neutral at Citigroup
Sovran Self Storage (SSS) downgraded to Sell from Neutral at UBS
St. Jude Medical (STJ) downgraded to Underperform from Neutral at Cowen
SunTrust (STI) downgraded to Hold from Buy at Jefferies
Transocean (RIG) downgraded to Sell from Hold at Deutsche Bank
UGI Corporation (UGI) downgraded to Neutral from Buy at UBS


CTC Media (CTCM) initiated with an Underweight at Barclays
Emerson (EMR) initiated with an Outperform at RBC Capital
Garmin (GRMN) initiated with an Outperform at William Blair
Lehigh Gas (LGP) initiated with a Perform at Oppenheimer
Neptune Technologies (NEPT) initiated with an Outperform at JMP Securities
Parker-Hannifin (PH) initiated with a Sector Perform at RBC Capital
Triumph Group (TGI) initiated with an Outperform at Wells Fargo
Yandex (YNDX) initiated with an Overweight at Barclays


Procter & Gamble (PG) lowered FY13 EPS guidance
Revised guidance following Venezuelan currency devaluation
Expects to incur one-time charges of $200M to $275M after-tax, or 7c to 9c per share
McGraw-Hill (MHP) cut to Baa2 from A3 by Moody's, outlook negative
Tiffany (TIF) filed suit against Costco (COST) for trademark infringement
UPS (UPS) reauthorized $10B share repurchase program
CBS (CBS) plans for $1B accelerated share repurchase
B&G Foods (BGS) sees FY13 adjusted EBITDA $178M to $182M
Industrias Bachoco S.A.B. de C.V. (IBA) announced a possible outbreak of avian influenza H7N3 detected in five breeder farms in Guanajuato state
Boston Scientific (BSX) invested in BAROnova clinical trial, terms not disclosed


Companies that beat consensus earnings expectations last night and today include:
Key Energy (KEG), Goldcorp (GG), Pilgrim's Pride (PPC), eHealth (EHTH), comScore (SCOR), Brocade (BRCD)

Companies that missed consensus earnings expectations include:
NGL Energy Partners (NGL), Health Management (HMA), Kronos Worldwide (KRO), Agilent (A), B&G Foods (BGS), CBS (CBS)

Companies that matched consensus earnings expectations include:
Envestnet (ENV), VCA Antech (WOOF)


A flurry of acquisitions (AAMRQ, LCC, HNZ, BRK.A, BUD, STZ, CAH) announced yesterday suggests that major deal-making is back after a nearly six-year absence. The $40B-worth of deals struck Thursday brings the total value of M&A transactions announced since January to nearly $160B, the fastest start to a year since 2005, according to Dealogic, the Wall Street Journal reports
Lawmakers reintroduced legislation that could force Internet retailers (AMZN, EBAY) to collect sales taxes, the latest effort by states and the federal government to end what they call a handicap on brick-and-mortar businesses, the Wall Street Journal reports
Hedge fund manager William Ackman, who called Herbalife (HLF) a pyramid scheme, said the biggest risk in shorting the company was whether regulators would take time to focus on the matter. "Could we get the SEC, the FTC and the regulators around the world interested?," he asked, Reuters reports
Two midtown Manhattan skyscrapers owned by international real estate firm Hines are for sale, sources say, as sales of New York office buildings show signs of heating up, Reuters reports
European Central Bank council member Jens Weidmann said an appreciating euro alone won’t trigger a cut in interest rates and the exchange rate’s gains are justified by the economic outlook, Bloomberg reports
Wells Fargo & Co. (WFC), expanding its securities unit to challenge its Wall Street competitors, is broadening U.K. commercial property lending as European banks are forced to retreat, Bloomberg reports


Cliffs Natural (CLF) 9M share Spot Secondary priced at $29.00
Kosmos (KOS) Energy 30M share Secondary priced at $11.00
Pioneer Natural (PXD) Resources 9M share Secondary priced at $128
Sequans (SQNS) files to sell American Depository Shares
Xoom (XOOM) 6.3M share IPO priced at $16.00


Carl Icahn reports 12.98% stake in Herbalife (HLF), intends to have discussions with management regarding strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction.