Wall Street Breakfast: Higher And Higher

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IPO record for Saudi Aramco?

Saudi Arabia has set Aramco’s (ARMCO) preliminary valuation at $1.6T to $1.71T, below the $2T level previously targeted by Crown Prince Mohammed bin Salman. The state-owned oil giant is seeking to raise between $24B and $25.6B by selling a 1.5% stake, putting it close to the world’s largest IPO – Alibaba’s (NYSE:BABA) $25B deal in 2014. While the company pulled plans to market the deal in the U.S., MSCI will follow in the path of S&P Dow Jones and FTSE Russell, which told clients last week that they could fast-track Aramco’s inclusion into their indexes as soon as December.
Go deeper: ‘How Aramco IPO Will Change Oil Dynamics’ by CME Group.

U.S. to extend reprieve for Huawei

As the earlier reprieve expires, the Trump administration will issue another 90-day extension today of a license allowing U.S. companies to continue doing business with Huawei, sources told Reuters. The Chinese firm was added to an economic blacklist back in May on national security grounds. Out of $70B that Huawei spent buying components in 2018, some $11B went to U.S. firms including Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC) and Micron Technology (NASDAQ:MU).

HP snubs Xerox offer, still open to deal

Saying the unsolicited proposal was too low, HP’s (NYSE:HPQ) board of directors has unanimously rejected Xerox’s (NYSE:XRX) takeover bid at $22/share. “We note the decline of Xerox’s revenue from $10.2B to $9.2B (on a trailing 12-month basis) since June 2018,” the board wrote in a letter, adding that it remains “ready to engage over a potential combination.” Activist investor Carl Icahn, who owns a 10.6% stake in Xerox, recently bought HP stock worth $1.2B, believing the combination of both companies would bring synergies.
Go deeper: HP’s transformation is underway, writes Mark Ashton.

FedEx slams NYT tax story

FedEx (NYSE:FDX) is punching back after The New York Times (NYSE:NYT) published a front page story on Sunday – entitled How FedEx Cut Its Tax Bill to $0 – and challenged the publisher to a debate in Washington. “Pertinent to this outrageous distortion of the truth is the fact that unlike FedEx, The New York Times paid zero federal income tax in 2017 on earnings of $111M, and only $30M in 2018 – 18% of their pretax book income,” wrote CEO Fred Smith. “Also in 2018 the New York Times cut their capital investments nearly in half to $57M, which equates to a rounding error when compared to the $6B of capital that FedEx invested in the U.S. economy during that same year.”
Go deeper: Individual Trader discusses when FedEx’s “bearish trend” will end.

Ford workers approve new labor deal

The United Auto Workers union has secured a new four-year labor deal with Ford (NYSE:F), which largely mirrors one struck at General Motors (NYSE:GM) last month. It requires Ford to invest more than $6B in its U.S. manufacturing operations, create or retain 8,500 U.S. jobs, and permits the automaker to shutter an engine plant in Michigan. Negotiations now shift to Fiat Chrysler (NYSE:FCAU), the last of the Detroit automakers. UAW’s discussions are expected to be a bit more contentious due to its planned merger with PSA group and amid a federal probe into union corruption that started with the Italian-American carmaker.

WeWork set to lay off thousands

WeWork (WE) is planning to slash its workforce by at least a third after breakneck growth racked up heavy losses and led it to the brink of collapse, NYT reports. At least 4,000 job cuts may be announced this week and will take place across the company’s sprawling global operation, which employed 12,500 people at the end of June. Last week, WeWork reported that it lost $1.25B in the third quarter, up more than 150% from the same period a year ago.

New power shutoffs for weary Californians

PG&E (NYSE:PCG) is warning of more potential power shutoffs as it monitors a “potentially strong offshore wind event” this coming Wednesday that could prompt the need to cut power to about 180K customers in northern California. PG&E said its service area typically experiences dry vegetation that is ripe for igniting or spreading a wildfire, but this year’s conditions are worse than usual. Southern California Edison (NYSE:EIX) is also warning that windy conditions could force shutoffs for 32K customers in mountain and coastal areas.

Euronext, SIX battle for Spain’s bourse

Dealmaking in the exchange sector is gathering pace as Switzerland’s SIX Group announced a €2.8B bid for Spanish stock exchange BME, minutes after Euronext (OTCPK:EUXTF) confirmed its own interest. Euronext already owns the main exchanges in Paris, Amsterdam, Brussels, Lisbon, Dublin and Oslo. Earlier this year, Euronext defeated Nasdaq in a five-month takeover battle for the Oslo exchange, while Hong Kong Exchanges abandoned its £29.6B bid for the London Stock Exchange after failing to win over investors.

SoftBank combining Yahoo Japan, Line Corp

Via a fairly complex transaction, SoftBank (OTCPK:SFTBY) intends to combine its Yahoo Japan internet business – now known as Z Holdings (OTCPK:YAHOY) – with Line Corp. (NYSE:LN), creating a $30B tech giant that will compete with the likes of Rakuten. The firms aim to leverage each other’s large user bases to expand their online businesses like shopping, payment services and advertising-supported content. “Big data is key for the future of both companies,” said Koji Hirai, the head of M&A advisory firm Kachitas Corp. “The merger will enable them to create a massive repository of client data.”

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