Rolfe Winkler
Option ARMageddon
Morning links 12-14
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No shortage of news this morning….
Dubai gets bailout from Abu Dhabi (Reuters)
Exxon to buy XTO for $41 billion (Reuters) $41 billion is the enterprise valuation. It’s incomplete to say the Exxon is only paying $31 billion for the stock when it is also assuming $10 billion of debt.
Citi to repay TARP, raise $17 billion (Reuters) The ringfence agreement on Citi’s pile of toxic assets will end and Treasury will also start selling its common shares back to the market. Here are all the details from Citi.
Morgan Stanley hires Greg Fleming (NYT) Fleming was the guy who pressed Merrill to sell itself to BofA. He hashed out the deal, including Merrill’s controversial bonus package, with BofA’s Greg Curl.
VIDEO: “Wall Street doesn’t get it.” Too bad Obama’s reform plan does little to change the status quo. And in any case, Fed policy will continue to support banks for an “extended period.” The Prez meets with Wall Street CEOs this morning.
Watch CBS News Videos Online
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$41B including assumed debt. “Only” $31B in stock.
Geez, bro. Touchy today? I wasn’t disagreeing, merely adding detail for those who might wonder why some outlets were reporting $41B and some $31B.
Although if you’re an XTO owner, from your perspective the amount you are receiving is only $31B, so mentally it can be a matter of perspective.
Nah.
My thought is that if you’re an XTO owner, you’re not just getting $31 billion. You’re also being relieved of a $10 billion debt.
It’s like the guy I knew in Tampa who wanted to “give me” his used Camry. I didn’t have to pay HIM anything, but I would have to take over his car payment.
I know YOU know the difference Andrew….it’s just a pet peeve of mine that financial journalists generally use market cap instead of enterprise value in their deal headlines.
Luckily the folks on the news side here at Reuters are top notch and know to make the distinction.
But you know XTO owners haven’t really been relieved of the debt, seeing as XOM is assuming it and XTO shares are being replaced by XOM shares. So in the end XTO are still supporting some of the XTO debt. A reduced amount, sure, but you can’t really count all $10B.
You’d have really enjoyed a WSJ online article covering BAC’s countrywide acquisition I once read, praising Lewis for cutting the acquisition price by 1/3 from the originally announced price.
It was an all stock transaction that saw BAC’s stock drop by 1/3 in the following months.