Are E*Trade and TDAmeritrade pursuing a deal, or aren’t they? The buzz of an acquisition started early on Wednesday with a front page article in the Wall Street Journal saying the two online brokerages were “holding merger discussions.”

But Wall Street analysts, including Bank of America and UBS, threw cold water on a transaction, as did–for what it’s worth–the New York Times. In addition, the market doesn’t appear to be overwhelmingly excited about the prospects of the deal, with both stocks moving up only a couple percentage points. 

TDAmeritrade has been very candid about its discussions with other brokers, with its CEO speaking as recently as early June about the subject. 

According to the Journal on Wednesday:

“E*Trade and TD Ameritrade have been in serious discussions for weeks but aren’t yet close to a deal, according to people familiar with the matter. They have discussed an alliance several times in previous years but have never managed to make it to the altar. This time, however, they may feel more pressure to reach a deal. Two hedge funds with big stakes in TD Ameritrade have publicly urged the two companies to talk. ”
    
Mathias Helleu, managing director of E*Trade’s international operations, told Reuters in Singapore: “We do believe that consolidation provides tremendous opportunity: If there is an alignment in strategy and product we do see value.” A TD Ameritrade spokeswoman said the company has talked and continues to talk to industry peers, and would take advantage of a deal if and when it made sense. Toronto Dominion, which owns a large stake in the company, declined to comment. 
     
That is hardly the “declined to comment on rumors and speculation” companies are fond of issueing in such situations. But as the morning wore on, the buzz of the deal began to wear off.  
                                                                                          

As for the Times’ take, granted they’re taking a shot at an arch rival, the paper argues “no deal” for the two brokerages.

The Times: “It is not clear what the basis for the story is: the companies have said publicly they would explore a deal, and people close to both companies told DealBook that no deal is imminent. The same issues that have stymied a deal in the past remain, notably who would run the company, these people said. For a transaction to work, TD Ameritrade may have to buy E-Trade, which would be unpalatable for the smaller firm.”

This isn’t to say that a deal can’t or won’t get done. With private equity firms on the sidelines, it’s a perfect time for companies to pursue a strategic fit, with a sponsor getting in the way of the process.

No doubt Warren Buffett can see value in a distressed company like Countrywide Financial Corp. But then again, it’s hard to see Countrywide Chairman and CEO Angelo Mozilo working for the “Oracle.”

First, what would the tabloids call this duo, BuffAngelo or Warzilo, perhaps? And are cavemen any good at hawking mortgage products? And how would Mozilo handle his new compensation package, as administered by Mr. Buffett?

Mozilo, the butcher’s son who has made several hundred million dollars from exercising stock options, wouldn’t get any such generosity from Mr. Buffett. He’s not into such executive incentives, at least not at the level overseen by Mozilo’s, uh, Countrywide’s board. Mozilo might get the employee discount at a certain Omaha, Nebraska jewelry store, though.

And even though Mozilo looks fit as a fiddle, he’s closing in on 70. Would Buffett want the headache of finding a successor while paying the price (Severance=more moolah for Mozilo) of sending Mozilo into retirement?

But maybe there’s another card to play here.

Buffett, sitting on a billions-dollar-high mound ‘O cash in Omaha, could be the liquidity Countrywide needs to ride out the mortgage maelstrom.  BuffAngelo could work something out,  giving Countrywide time to unwind its subprime exposure while getting back on track making loans to borrowers who put money down.

Countrywide, however, isn’t the only mortgage move for Buffett, though. What’s more Buffett-like than a bet on a company that writes mortgage insurance? There’s plenty of distress in that market. MGIC Investment Corp. and Radian Group Inc. come to mind.

Mid-market private equity firms are beginning to feel some investment banking love. 

Granted, the entire private equity industry is in tough shape right now, with little to celebrate since the credit crunch set in. But according to some in the industry, mid-size is where it’s at in terms of trying to make a buck amid the market turmoil.

Blue Chip investment banks have showered mega-funds with attention in the last two years, since mega-funds (Blackstone, KKR, TPG and the like) were doing the biggest deals, and paying the fattest fees. 
 
Now it appears that mid-sized players are the ones getting more attention from the banks. Why? Because the world won’t likely see a mega-buyout in the $25 billion to $75 billion range for quite a while. Sure, mega-funds are changing their focus and will pursue smaller deals in the $1 billion range, but mid-market funds make a living doing leveraged buyouts that size.  While large funds will work to build a mid-market deal pipeline, mid-size funds already have the pipelines in place.

“I’m getting a lot of love,” said the manager of a mid-sized buyout fund, who did not want to be identified. The big banks he used to struggle to get attention from are now calling him, he said. That trend is reflected in several conversations Reuters has had with LBO executives and bankers.
 
Mid-sized deals will be the first to break through the current debt clog and LBO freeze and that’s why banks are reaching out to these shops. Quadrangle founder Steven Rattner talks about this in a DealZone post earlier this month. The mid-market LBO category is the same group, numbering in the hundreds, that is often referred to disparagingly on Wall Street as JAMMF (just another mid-market fund). 
     
Mega-funds made a point in the last 18 months to remind the market how differentiated they were, and how the big returns were in the big deals. David Bonderman of TPG Capital, has taken particular pleasure in poking fun at the mid-market group, and extolling the mega-fund model.
    
Now, maybe the mid-market crew will have the last laugh. 
     
     
   

A bidding war over Nordic exchange OMX has much more riding on it than the future of the Stockholm-based company– it could go as far as determining the fate of Nasdaq’s chief executive Bob Greifeld.

When Greifeld, who presided over two failed efforts to buy the London Stock Exchange,  said in May that Nasdaq had agreed to buy OMX, it looked like the top U.S. electronic stock exchange would finally find a willing partner overseas, as rival NYSE had with Euronext.

But then Borse Dubai — a state-owned holding company that didn’t exist last month — trumped Nasdaq’s bid with its own offer for OMX. 

If Nasdaq fails this time around, shareholders could get impatient with the exchange’s sagging share price. They may push for the company to sell itself, or at least to shake things up in the executive suite, analysts said.

“If this doesn’t go through, I can’t imagine the level of frustration there,” said Celent consultant David Easthope. “When people are frustrated stocks suffer. And when stocks suffer, changes are made.”

MediaFile is introducing a new daily column that aims to start each morning with a handful of developing stories that caught our eye. It could be anything from the day’s biggest deals to financing for a new Silicon Valley firm that aims to destroy business models overnight. We do this in-house already and figured it would be just as helpful to you as it is to us. Let us know how we can make it better.

Can he pull it off? That’s the question everyone’s asking real-estate magnate Sam Zell (pictured left), whose $8.2 billion leveraged buyout of newspaper publisher Tribune Co. could be endangered by the tightening credit market.

Shareholders gathering at Tribune’s annual meeting in Chicago on Tuesday are expected to approve the deal. But with the subprime mortgage meltdown putting the skids on debt-financed transactions and a stock that’s traded well below the deal’s $34 per share price, plenty are betting the deal won’t get done — at least not on the current terms. Zell’s committed, for now. Tribune shares traded at $24.46 last Tuesday, its lowest level in nine years.

One source told Reuters last week there were no known talks between Zell and Tribune over the terms of the deal … yet.
New York Times
Wall Street Journal (subscription required)

Keep an eye on:

• Sony’s “Superbad” drop-kicked “Rush Hour 3″ to take the No. 1 spot at the U.S. box office this weekend, proving you can be a somebody even if you’re a nobody in Hollywood. I haven’t laughed as hard since “Old School.” (Reuters)
• Google discloses stake in Chinese social networking site Tianya.cn. (Reuters)
• Skype’s back! Reboots on PCs running Skype across the globe after receiving a routine software patch takes down network. (Skype blog)
• Building-B, a tech firm keen on building a set top box that combines on-demand HDTV and Internet video, lands $17.5 million. (paidcontent.org) (B&C) (press release)
• Aniboom, a Web site with more than 2500 animators who create and share their clips, is launching a channel on YouTube with an eye to discovering the next “South Park”. (Reuters)

    It was a week for Chicken Little, Glock weapons and a warning about watching too much Borat.
    
    “It’s premature to say that this upset in the market is changing the course of the economy in any fundamental way.” — William Poole, president of the Federal Reserve Bank of St. Louis. “No one has called up and said the sky is falling.” (August 15 in Bloomberg TV interview)
    
    “Are they the institution that is too big to fail and the one that the Fed says ‘We must defend?’” — James McGlynn, a Southlake, Texas-based portfolio manager with Summit Investment Partners, on Countrywide Financial Corp.’s troubles. (August 16)
    
    “Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward … the Federal Open Market Committee judges that the downside risks to growth have increased appreciably.” — U.S. Federal Reserve statement announcing a cut in its discount rate. (August 17)
    
    “The schedule for the call was in direct conflict with a long-scheduled dinner meeting. President Poole was concerned that failure to appear at the dinner meeting might have been noted, which could have led to speculation about the possibility that the FOMC was holding an unscheduled meeting.” — St. Louis Fed explaining why Poole didn’t make the meeting that decided on the rate cut. (August 17)
    
    “It’s too early to say that we have seen the worst of it.” — Naomi Fink, currency strategist with BNP Paribas in New York. (August 19)

    “It would not be surprising, should the market continue to correct, that come December people will be surprised by the paucity of their bonuses next year. And a goodly number may find themselves looking for work elsewhere.” — Harlan Platt,  business professor at Northeastern University. (August 13)
    
    “This is not a rescue.” — Goldman Sachs Chief Financial Officer David Viniar after Goldman and some other investors injected $3 billion into a struggling Goldman-run hedge fund. (August 13)
    
   “This is a sort of preemptive rescue.” — Eric Kuby, chief investment officer for North Star Investment Management Corp. in commenting on the Goldman move. (August 13)
    
   “If they are unsuccessful in the appeals process, it’s hard to envision how they would continue to function. If they lose this case on appeal then it may be a merger that’s needed for them to survive.” — Cono Fusco, retired national managing partner of strategic relationships at Grant Thornton, speaking about a $521.7 million damages award against the sixth-largest accounting firm BDO Seidman. (August 15)
    
    “When you’re in a pit, the first thing to do is to stop digging.” — James Ellman, a portfolio manager at Seacliff Capital, on Countrywide Financial’s tightening of lending standards. (August 16) 
     
    “I can only advise these people to watch Disney cartoons instead of movies like Borat.” — Mukhtar Dzhakhishev, the president of Kazakh state uranium company Kazatomprom, commenting on a challenge by Greenpeace and other environmental groups to its plans to buy 10 percent of Toshiba’s Westinghouse nuclear power unit. (August 13)
    
    “This is an overpriced deal, at the top of the cycle, and we are not supportive.” — TPG-Axon, which owns about 3.5 percent of Akzo Nobel, in comments on Akzo’s plan to buy Britain’s ICI. (August 13)
    
    “High grade securities are trading like junk bonds as panicked investors dump names like General Electric at Tyco-like prices.” — Sentinel Management Group statement to clients. (August 13, the cash management company filed for bankruptcy on August 17)
    
    “For companies that we worked on and were overbid, we’re starting to look at those as being very attractive investments where, frankly, I think we may be able to buy the debt … and get a higher return than the underlying equity … We’re looking hard at that and that is pretty appealing to us.” — Blackstone President and COO Hamilton James (August 13).
    
    “It’s the same people who were robbing the bank 20 years ago, but instead of using a Saturday Night Special, they are using a Glock weapon.” — Cam Funkhouser, vice president in charge of market regulation for the Financial Industry Regulatory Authority on a spate of insider trading cases. (August 15)
    
   “Some of the best opportunities happen when you have a situation like this in the market. At times like this, we tend to find better valued assets - more bargains - and that means it is people like us who are actually going to come into the market more.” — Abu Dhabi-government investment agency Mubadala Development Co’s. Chief Operating Officer Waleed al-Muhairi. (August 16)
    
   

The credit markets are a mess, private equity firms are stuck, stocks are getting hammered (except for today’s” Thanks Fed, Friday“), and hedge funds are falling apart.

Enter, “Merle Hazard” who lightens up the mood with a Country-Western song he penned titled “H-E-D-G-E” (with a tip of the hat to Tammy Wynette’s “D-I-V-O-R-C-E”). Hazard is “an extraordinary country singer whom you won’t remember, but you’ve heard him before,” according to the AAO Weblog, a blog published by Jack Ciesielski about accounting issues and news topics related to investment and finance.
    
Indeed, hedge funds in particular are feeling the credit crunch, as they’ve spent gobs of money investing in subprime mortgage securities and high yield debt. Bear Stearns, Goldman Sachs, Sowood, are among those feeling the hedge fund heat, thanks to the subprime meltdown and ensuing credit crunch. It’s left poor Mr. Hazard with the blues, and some inspiration (may we suggest he invest in upgrading his recording studio instead of his alternative asset portfolio).
  
The New York Times’ Dealbook suggests Hazard follow up with a song titled “I May Be Accredited, But I’m Still Up the Creek.”
    
C’mon, it’s Friday. Lighten up pardner.

(Photo. Merle Haggard. Reuters file)

The oldest U.S. securities exchange is now officially on the market. But what’s new here isn’t that the Philadelphia Stock Exchange is for sale — which CEO Sandy Frucher has been discussing for months — but that it hired Greenhill & Co., and not former advisor Keefe, Bruyette & Woods, to handle the process.

KBW advised PHLX’s board on a 2005 transaction that would have put about 90 percent of the exchange’s common stock in the hands of UBS, Citi, Credit Suisse, Morgan Stanley, Merrill Lynch and Citadel.

But that deal resulted in a 2006 class-action suit against PHLX and the Wall St. firms that the exchange only settled this June.

Filed by a former seatholder, the suit alleged that PHLX’s board “deprived” shareholders of their vote and the opportunity to sell their shares.

Terms of the settlement were kept confidential — but however it was resolved, PHLX seems to want some fresh advice before taking its next steps. 

It might seem unlikely that a meeting between Exxon Mobil CEO Rex Tillerson and Wall Street analysts could dredge up comparisons to classic Japanese cinema, but the aftermath of a luncheon that took place on Wednesday in New York brings to mind Akira Kurosawa’s 1950 masterpiece “Rashomon.”

The movie presents four radically different retellings of the same crime, as the main characters offer their version of the incident.

That’s pretty much what happened with analyst interpretations of Tillerson’s comments at the luncheon about the company’s future acquisition plans.

Bank of America analyst Daniel Barcelo told his clients not to expect M&A activity, writing in a research note, “We don’t sense urgency on the company’s part given the commodity price environment … The company also feels political and regulatory for any material transaction would preclude acquisitions.”

But Credit Suisse analyst Mark Flannery left with a completely different view. Exxon Mobil “is ready to do a deal, a big deal, when the time is right,” he writes. “We believe (Exxon’s) preferred target would be Chevron, and we think that a deal is a possibility before the end of the decade.”

And Bear Stearns’ Nicole Decker had her own view on Tillerson’s acquisition strategy.

She paraphrased Tillerson as saying the company is looking for value in its acquisitions and that a corporate acquisition would need to be significant in size.

“However, by ’significant,’ we do not see an acquisition of a company the size of a Chevron or Shell,” Decker wrote in her report. She said the company could gain more value by acquiring smaller companies or an independent oil and gas company.

So who to believe?

Tillerson’s exact comments are unknown (press were not invited to the event) and Exxon declined to comment.

According to Roger Ebert, “the message of ‘Rashomon’ is that we should suspect even what we think we have seen.”

Perhaps Wall Street should take note.

(Photo of Toshiro Mifune and Machiko Kyo in “Rashomon” courtesy of the Criterion Collection)

Investment banks looking to offload leveraged buyout debt are likely to find leveraged buyout firms themselves at their doorsteps coming to the rescue.
    
Apollo Management, Blackstone Group, TPG Capital are among the LBO shops seeking to buy up LBO debt on the cheap, on the assumption that the return from a company’s high-yield debt stands a better chance of outperforming than the equity of an LBO candidate.  The returns on these investments won’t outshine the 30 percent plus returns top tier buyout funds have hauled in during the LBO boom. But in this credit squeeze, what’s an LBO shop to do?
    
Think about it. The same private equity firms that helped fuel the debt/borrowing boom of the last two years may now poised to profit from its bust. At least, that’s what they’re hoping.
  
The Wall Street Journal points this out in a Tuesday article headlined:  “LBO shops drove debt boom; Now, they profit from its fall.”
    
Businessweek takes it a step further on Thursday, saying that Kohlberg Kravis Roberts & Co. is raising $1 billion to scoop up some of the $300 or so billion in junk bonds and high-yield loans that investment banks are trying to get rid of. 
    
In a way, it’s appropriate that KKR is a willing buyer of this debt. Businessweek points out that KKR is responsible for roughly one-quarter of the $300 billion in outstanding buyout financing in pending deals.

The banks used to be able to depend on CDOs and CLOs to buyout LBO debt, but the credit squeeze has taken them out of the game.
    
So some private equity firms are bravely stepping in, hoping their model really will allow limited partners who have invested billions with them make money in good times, and in bad.

Here’s what Blackstone president and COO Hamilton James had to say about this trend on Monday’s conference call:

“We’re also starting to look directly at some of these distressed debt securities — some of the debt securities which are trading at distressed levels but they are not distressed from a credit perspective. For companies that we worked on and were overbid, we’re starting to look at those as being very attractive investments where, frankly, I think we may be able to buy the debt in these companies and get a higher return than the underlying equity and we’re looking hard at that and that is pretty appealing to us.”

(Photo. Reuters file)