Unstructured Finance

The Onion on JPMorgan-Bear Stearns

We at Reuters have tried our best to cover the collapse of Bear Stearns in a clear, informative and, yes, even entertaining fashion. But apparently we and our competitors in the financial press are falling short. From The Onion:

JPMorgan Chase Acquires Bear Stearns In Tedious-To-Read News Article

NEW YORK-As a volatile market reacts to news of the Bear Stearns fire-sale deal with a surge in stock prices but reduced bond yield, officers from JPMorgan Chase announced Monday that they were close to finalizing plans to purchase the securities giant in an incredibly complex series of financial maneuvers and obscure legal jargon that can only be described in the most mind-numbingly dense and unreadable way.

Click here to read the full story, which contains some profanity.

No more ‘beans in the teens’? U.S. farmers plan more soy, less corn

intended-plantings-graphic.jpg

American farmers are chilling on planting corn, or at least Monday’s USDA data points to a backlash against the overplanting of corn in 2007. So does this mean the ethanol promise is beginning to fade?

Soybean futures dropped their exchange-set maximum at the Chicago Board of Trade on Monday after the Department of Agriculture released its widely anticipated report on prospective plantings by U.S. farmers.

Corn and soybeans are planted in the same areas of the Midwest and Upper Midwest and farmers systematically rotate between the two crops. Corn is planted first but requires more fertilizer and energy intensive field work. Now soybeans appear to be the flavor of the year.

Check Out Line: Big gains for Big Lots and Wal-Mart

sell.jpgLow price retailers appear to be in. The top performing stock in the first quarter among components of the Dow Jones Industrial Average, through Friday, was Wal-Mart, with a 9.66 percent gain — one of only five stocks up in the index.

And in a much wider group, Big Lots is the big winner in the S&P 500 with a 40.25 percent gain in through Friday. The shares of the company, which specializes in  the sale of excess inventory, posted a 33 percent increase in March alone.

As the U.S. economy struggles, lower-priced retailers like Wal-Mart and Big Lots have benefited from consumers trading down.

Absolut Hangover

Swedish Minister for Financial Markets Odell and Pernod Ricard Chairman and CEO Ricard announce sale of Absolut vodka in StockholmPernod Ricard chief Patrick Ricard could probably use a drink. Having won a hard-fought auction to buy the maker of Sweden’s Absolut vodka in a 5.63 billion euro ($8.87 billion) deal, its shares fell on concerns over the price. The world’s second-largest wine and spirits company outbid the favorite, Jim Beam bourbon maker Fortune Brands. Half of all Absolut is sold in the United States. Fortune said it would begin buying back shares and planned to continue a U.S. distribution arrangement for Absolut.

British insurer Friends Provident has rejected a 3.5 billion pound ($7 billion) cash takeover proposal from U.S. private equity firm JC Flowers, saying it “significantly undervalues” the firm. Friends said it received the offer last Thursday and Flowers had indicated the price would be reduced if Friends Provident went ahead with its 2007 final dividend. Friends said the proposal “does not represent a basis for discussion”.

Barry Diller has come out of the courtroom victorious against fellow billionaire media mogul John Malone. Diller, the chief of IAC/InterActiveCorp, can now start to spin off four of its largest units. Malone’s Liberty Media had been trying to oust Diller, the chairman and chief executive, and six other IAC board members. Now the two must return to the table and either work through the contentious spin-off or agree to swap IAC assets for Liberty’s stake in the company.

USDA’s March 31 planting report: Monday’s annual CBOT fireworks

As I drive across northern Illinois and Iowa, the heart of the U.S. Corn Belt,  during the last week of March it’s hard to believe the planting season is just a few weeks away. Rivers are swollen, fields are flooded and there’s a dusting of snow. Undoubtedly, planting will be the focus of U.S. grain traders in the coming weeks with Monday’s USDA planting intentions report to kick off the season. The grain trade has been waiting for this report for months.

Gathered from USDA farmer surveys and other information like crop insurance applications, the annual seedings estimates are the first “hard” numbers on coming acreage the government provides and will give the trade the first official peek at what U.S. farmers intend to plant this spring.  

The buzz around commodity trading desks ahead of the report was that farmers will decrease their corn seedings by about 6.2 million acres from the massive 93.6 million planted in 2007 – the largest amount of  land planted to corn since World War II.  

Is Clear Channel a guinea pig?

guinea-pig.jpgDan Primack, our soon-to-be coworker at PE Hub, floats a theory about the banks who are being sued by Clear Channel and its private equity buyers.

Of the six banks who initially pledged to provide $22 billion in financing for the Clear Channel deal, Citigroup, Deutsche Bank and RBS are also on the hook for the far larger private equity buyout of Canadian telecom BCE.

“Let’s move on to what may actually be happening with some of the banks: They are using Clear Channel as a test case for BCE, which is on tap to be acquired for a whopping Cdn$52 billion,” Primack writes. “So why not walk away from Clear Channel now and, if the penalties aren’t too severe, walk away from BCE next? Sound far-fetched? Not according to sources on the buyside of Clear Channel, who think that’s exactly what’s happening.”

Fancy furnishings can wait

ethan.jpgConsumers with a taste for luxury are not only scaling down their purchases at Saks Fifth Avenue and Nordstrom, but are also cutting back on furnishings and decor.

Morgan Keegan cut profit estimates for Ethan Allen Interiors  this week, saying it could be the next victim as a spending pullback takes hold at upscale furnishings companies.

“Home related spending is weak and we are now seeing signs that the typically resilient high-end consumer is pulling back on discretionary spending on furnishings,” analyst Laura Champine said in a research note.

Retail rout as Penney warns

sweep.jpgJC Penney surprised the retail sector on Friday with its warning that first-quarter earnings could be as much as 38 percent below its initial forecasts, and it said it expects the difficult environment to persist throughout 2008.

The warning came the same day that the Reuters/University of Michigan Surveys of Consumers showed that U.S. consumers’ confidence weakened to the lowest in 16 years in March, pointing to recession. 

The news battered retail shares as investors’ hope faded that business would improve in the second half of the year. Here is a collection of comments on Penney’s warning:   

Check Out Line: Is it getting worse out there?

recession.jpgCheck out the warning from J.C. Penney.
 
The retailer slashed its first-quarter earnings forecast and said Easter sales were well below expectations.
 
That may be a pretty good snapshot of where the American economy is right now. J.C. Penney says half of American families are its customers and those families are under pressure from higher energy costs, a deteriorating job market, the housing downturn and the credit crunch.
 
Not much news there. But according to J.C. Penny’s forecast, things are much worse than the company thought.
 
The warning comes the same week Williams-Sonoma Chief Executive Howard Lester said the economic environment was probably the worst he’s seen in the 30 years he has been in the business.
 
Oh, and Lester added this cheery note:
 
“We believe there are circumstances under which it could get progressively worse, particularly if we find ourselves in a protracted recession.”
 
Also in the basket:
 
Cash-rich retailers stand to gain in credit crunch
 
Li & Fung’s 3-Year Plan: Sourcing Giant Aiming For $20 Billion in Sales (WWD)
 
Office Depot Holder Group files proxy statement 
 

(Photo: Reuters)

Bear market indicator

bear-eats.jpgIf Jimmy Cayne’s investments are anything to go by, Bear Stearns is unlikely to get a higher bid. Bear’s chairman sold his entire stake in the company for $61 million according to a filing on Thursday afternoon. That’s a lot of bridge tournament entry fees, but nowhere near the $1 billion that the 5.66 million shares would have been worth last year, when Bear’s stock peaked at over $170. JPMorgan agreed earlier this week to increase its original bid for Bear Stearns. Some investors, hoping JPMorgan Chase would increase its bid again or that Bear would find another buyer, pushed the bank’s stock up to $11.23, about 20 percent above the current value of JPMorgan’s offer. Cayne would have as clear a view as anyone if a higher bid were likely, so his actions speak volumes.

Italian power generator Enel looks set to sell $21 billion in assets to Germany’s E.ON after all sides involved agreed the valuation, marking the final chapter in the world’s biggest utility takeover. The assets up for sale from Enel’s Spanish unit Endesa were valued at 11.5 billion euros ($18.15 billion), Endesa said, while the value of Enel assets up for sale was 2.025 billion euros, Enel said separately on Thursday. E.ON said its supervisory board would meet on Friday to decide whether to go ahead with the purchase — jumping the gun on a 10-day deadline outlined in the statements.

Global mergers and acquisitions slumped by almost a third in the first quarter to $661 billion, according to preliminary data from Thomson Financial, as banks reined in borrowing and economic uncertainty weighed on CEO confidence. Buyout firms led the decline with a 77 percent drop-off as their buying power evaporated, halting six straight years of growth. Investment bank Goldman Sachs rose by one spot to top the Thomson table of worldwide M&A advisers, followed by Lehman Brothers and Citigroup. Morgan Stanley, which had led the rankings in the same period last year, dropped to #6.

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