Frontrunning: February 18

Frontrunning: February 18
  • Carl Icahn wins again: Actavis to Buy Forest Labs for $25 Billion (WSJ)
  • ECB governing council member attacks German court ruling on OMT (FT)
  • China Tackles $1 Trillion Data Gap as Xi Changes Metrics (BBG)
  • FX Traders Facing Extinction as Computers Replace Humans (BBG)
  • BOJ Boost to Loan Programs Signals Room for More Easing (BBG) – actually no it doesn’t as it was “factored in”
  • Four killed in Thai clashes; PM to face charges over rice scheme (Reuters)
  • Goodbye unsterilized SMP: Bundesbank Backs Measure to Boost Funds in Banking System  (WSJ)
  • Iranian Hacking to Test NSA Nominee Michael Rogers (WSJ)
  • Ukraine Clashes Leave Dozens Wounded as Putin Resumes Bailout (BBG)
  • European Stocks Little Changed as ZEW Measure Disappoints (BBG)
  • White House report on economic stimulus rekindles debate five years later (Reuters)
  • François Hollande pledges fixed tax regime for foreign investors (FT)
  • Credit Suisse Bankers Face Delay To Bonuses; hundreds of UK employees could wait until 2021 to receive bonuses (SkyNews)
  • What Lottery Winners and Tom Perkins Have in Common (BBG)
  • India Budget Seeks 7-Year Low Deficit Amid Sops for Votes (BBG)
  • Foreign banks braced for Fed rule changes (Reuters)

Overnight Media Digest


* Iran’s infiltration of a Navy computer network was far more extensive than previously thought, according to officials, and the officer who led the response will likely face questions about it from senators weighing his nomination as the next head of the embattled National Security Agency.

* Actavis Plc is in advanced talks to acquire rival drug maker Forest Laboratories Inc in a deal that could value Forest at up to $25 billion, according to people familiar with the matter.

* Computer-security researchers have discovered on a website documents that could allow hackers easily obtain electronic medical records and payment information from health-care providers.

* British prosecutors filed criminal charges against three former bank traders for alleged fraud, opening a new front in a global investigation into alleged rigging of benchmark interest rates, with more charges in the pipeline.

* Barry Sternlicht, a star real-estate investor and founder of the W hotel chain, is in early talks with banks about selling shares of his investment firm to the public, according to people with knowledge of the matter.

* Alcoa Inc said Monday it would close a large aluminum smelter in Australia, cutting total capacity by 4.8 percent, as stubbornly low raw aluminum prices mean “the 50-year-old smelter has no prospect of becoming financially viable.”

* Bharti Airtel Ltd, India’s biggest telecommunications company, is in advanced talks to acquire closely held Loop Mobile India Pvt Ltd, company executives familiar with the matter said Monday.

* Hon Hai Precision Industry Co, the top global contract manufacturer by revenue, intends to list its cable and connector unit in Taiwan next year as it seeks funds for overseas expansion and new technologies.

* BHP Billiton Ltd said Tuesday its first-half profit rose as it cut spending and squeezed more from assets including its vast Australian iron ore pits to offset a decline in global commodity prices.


London’s financial services centre would lose access to the wider European Union should Britain quit the bloc, the EU’s justice chief said on Monday, warning that such a move would reduce its status to that of an offshore centre.

In a crackdown on currencies traders, financial institutions including Royal Bank of Scotland, Deutsche Bank and UBS are reviewing the rules governing how traders make bets with their own money.

Iran’s largest private bank Mellat is suing the British government for almost $4 billion in damages after the Supreme Court quashed sanctions imposed against it over alleged links to Tehran’s nuclear programme.

Britain’s fraud agency started criminal proceedings against three former bankers at Britain’s Barclays Plc for the alleged manipulation of Libor interest rates.

Euro zone’s largest bank by market value, Santander , was fined 16.9 million euros ($23.2 million) by Spain’s market regulator for mis-selling convertible bonds to customers.


* The Southwest Chief route, a lifeline to rural communities, is in danger if Amtrak cannot persuade three of the states it runs through to help fund track repairs and maintenance.

* After months of hype and hysteria that have driven up its price at a dizzying pace, Bitcoin recently encountered several hurdles that are likely to determine whether it makes it out of its early speculative phase to become a currency that people actually use, is supplanted by a rival or falls apart altogether.

* A group of investors led by an affiliate of Maurice Greenberg and the Swiss investment firm Partners Group announced on Monday that it had acquired MultiPlan.

* With Comcast Corp proposing to buy Time Warner Cable Inc, other companies that own cable networks are watching nervously, and may look to consolidate.

* Tom Steyer, a retired hedge fund manager, plans to spend as much as $100 million this year on a hard-edge campaign to pressure officials and candidates to support climate change measures.

* With their party on offense in its push to capture the Senate, Republicans say they are determined to avoid the mistakes and stumbles that Democrats exploited in 2010 and 2012.



* Toronto depleted its entire winter maintenance reserve fund dealing with the massive ice storm that plunged large parts of the city into darkness just days before Christmas.

* British Columbia’s Finance Minister Mike de Jong will reveal in his budget how his government intends to extract enough revenue from a liquefied natural gas industry to retire the provincial debt – currently C$56 billion ($51 billion) and growing.

Reports in the business section:

* Two Canadian cities are vying to become North America’s primary center for trading the Chinese yuan, an effort that has received federal backing amid a broader desire by Ottawa to strengthen ties with Beijing.

* Irving Oil has become the first Canadian refiner to phase out the older crude-oil rail cars that have been involved in several fiery derailments, including last summer’s deadly accident in Lac-Mégantic, Quebec.


* Canadian Prime Minister Stephen Harper left for Mexico on Monday with a plan that could pave the way for getting rid of his host’s biggest complaint about Canada – the onerous visa on Mexican travelers.


* Canada has spurned a request by the U.S. Environmental Protection Agency to extend the deadline to apply as a participant in public hearings over Kinder Morgan Inc’s Trans Mountain pipeline, ratcheting up cross-border tensions over energy infrastructure.

* A refreshed vision for Tim Hortons begins to take shape this week as the company releases details on its financial results, and how it plans to remain innovative in the highly-competitive Canadian coffee market.



– Non-performing loans and competition from internet finance services resulted in a slowdown in profit growth at Chinese banks in 2013, according to Chinese brokerages.


– China’s Ministry of Land and Resources is researching further land reform plans, which would grant more rights to local-level governments and increase the participation of financial institutions.

– Suning Commerce Group Co Ltd said it has obtained a license to sell insurance to consumers through its Suning Insurance Co Ltd unit.


– Inner Mongolia and Guizhou Province plan to undertake a tax reform in the coal industry, adopting a price-based collection method to replace the current quantity-based method.


– As of Feb. 17, about two-thirds of Shanghai-listed real estate firms have predicted a profit for 2013. Just under half of all the 132 real estate firms had reported by this date.


– Only 36 percent of global consumers trust China-based firms, said a report from public relations firm Edelman. China ranked amongst the least-trusted countries, along with Russia and India. Germany, Sweden and Switzerland topped the list.

– Mobile payment transactions grew over 200 percent in 2013 against a year earlier, according to a report from the People’s Bank of China. Mobile payments hit 9.64 trillion yuan ($1.59 trillion) last year, accounting for about three percent of the total non-cash payments in China.


– Chinese police have detained over five hundred people this month in a series of stings against the country’s sex trade, the Ministry of Public Security said on Monday. Authorities have uncovered 1,300 cases and broken up 73 gangs.


– China’s people must be more active to realise the core values of socialism, rather than just talking about it, an editorial in the paper that acts as the part mouthpiece said.


The Telegraph


Britain’s housing market is not overheating but interest rates will not remain at record lows indefinitely, Bank of England policymaker David Miles said in an interview on Monday.


The boss of Britain’s Co-operative Group said in an interview on Monday he was worried Scottish independence could burden British businesses.

The Guardian


Asking prices for homes in Britain rose at the sharpest rate in more than six years over the past 12 months despite a big rise in new listings coming onto the market recently, property website Rightmove said on Monday.


Britain’s Co-operative Group is carrying out a national survey on the future strategy for the 150-year-old group. “We will be asking people up and down the country what they believe The Co-operative should really stand for,” said the group’s Chief Executive Euan Sutherland.

The Times


Britain’s fraud agency started criminal proceedings against three former bankers at Barclays on Monday for the alleged manipulation of Libor interest rates.


Britain’s Court of Appeal on Monday ruled that a lower court should look again at how pay-TV group BSkyB sells its sports channels to rivals, in the latest twist in a near four-year battle.

Sky News


U.S.-based Anchorage Capital Group has acquired about 80 million pounds of debt from Lloyds Banking Group for a controlling stake in New Century Care (NCC), one of Britain’s biggest care home groups.


Senior staff at Credit Suisse were told last week that they may not be able to receive millions of pounds worth of deferred payouts which were due to mature in 2016 for a further five years under a revised scheme.

Fly On The Wall 7:00 AM Market Snapshot


Domestic economic reports scheduled to be reported include:
Empire State manufacturing survey for February at 8:30–consensus 9.0
Housing Market Index for February at 10:00–consensus 56



Aixtron (AIXG) upgraded to Overweight from Neutral at JPMorgan
athenahealth (ATHN) upgraded to Outperform from Neutral at RW Baird
Big Lots (BIG) upgraded to Buy from Hold at Deutsche Bank
Darden (DRI) upgraded to Outperform from Market Perform at Raymond James
First Cash Financial (FCFS) upgraded to Overweight from Neutral at JPMorgan
Forest Labs (FRX) upgraded to Overweight from Equal Weight at Morgan Stanley
Green Dot (GDOT) upgraded to Equal Weight from Underweight at Morgan Stanley
HEICO (HEI) upgraded to Buy from Hold at KeyBanc
lululemon (LULU) upgraded to Outperform from Perform at Oppenheimer
MacroGenics (MGNX) upgraded to Buy from Neutral at BofA/Merrill
Maxim Integrated (MXIM) upgraded to Buy from Hold at Drexel Hamilton
Newfield Exploration (NFX) upgraded to Outperform from Market Perform at BMO Capital
Randgold Resources (GOLD) upgraded to Neutral from Sell at Citigroup
SVB Financial (SIVB) upgraded to Strong Buy from Outperform at Raymond James
Universal Display (OLED) upgraded to Hold from Sell at Canaccord
Veeco (VECO) upgraded to Hold from Sell at Canaccord
Zions Bancorp (ZION) upgraded to Outperform from Market Perform at Keefe Bruyette


Equifax (EFX) downgraded to Market Perform from Outperform at Raymond James
Galena (GALE) downgraded to Sell from Buy at Cantor
Kansas City Southern (KSU) downgraded to Neutral from Overweight at JPMorgan
Range Resources (RRC) downgraded to Sector Perform from Outperform at RBC Capital
Weight Watchers (WTW) downgraded to Underweight from Equal Weight at Barclays

Initiations (CRCM) initiated with a Hold at Stifel
Charles River Labs (CRL) initiated with a Neutral at Citigroup
Covance (CVD) initiated with a Neutral at Citigroup
Hi-Crush Partners (HCLP) initiated with a Hold at Wunderlich
PAREXEL (PRXL) initiated with a Buy at Citigroup
Quintiles (Q) initiated with a Buy at Citigroup
Rice Energy (RICE) initiated with a Neutral at Citigroup
Rice Energy (RICE) initiated with a Neutral at Goldman
Rice Energy (RICE) initiated with a Sector Perform at RBC Capital
Rice Energy (RICE) initiated with an Outperform at Wells Fargo


Anadarko (APC) to divest Chinese subsidiary for $1.08B
Duke Energy (DUK) initiated process to exit Midwest commercial generation business
Alcoa (AA) to close smelter, rolling mills in Australia, sees $250M-$270M in charges
Google (GOOG) acquired Israeli security start-up SlickLogin
JPMorgan (JPM) reported January net credit losses 2.91% vs. 3.07% last month
Capital One (COF) reported January net charge-off rate 4.04% vs. 4.11% last month
Kaiser Aluminum (KALU) said outlook for first half of 2014 ‘cautious’
Sony (SNE) said PlayStation 4 sales surpass 5.3M units worldwide


Companies that beat consensus earnings expectations last night and today include:
NiSource (NI), Wolverine World Wide (WWW), Norwegian Cruise Line (NCLH), VASCO Data Security (VDSI)

Companies that missed consensus earnings expectations include:
USA Compression (USAC), Atlas Pipeline Partners (APL), Kaiser Aluminum (KALU)

Companies that matched consensus earnings expectations include:
Nova Measuring (NVMI)


Actavis (ACT) expected to buy Forest Labs (FRX) in deal valued at $25B, WSJ reports
Target (TGT) security staff raised concerns ahead of breach, WSJ reports
Hewlett-Packard (HPQ) networking head Bethany Mayer reassigned, Re/code reports
Murdoch’s News Corp (NWSA) wins A$880M Australia tax battle, FT reports
Adrian Perica, M&A chief at Apple (AAPL), met with Tesla (TSLA) CEO last spring, SF Chronicle reports
Credit Suisse (CS) ends bonus plan tied to risky assets, Reuters reports
Barclays (BCS) pressured over investment bank turnaround, FT reports
Las Vegas Sands (LVS) restored websites following hacker attack, Bloomberg reports
Comcast (CMCSA), Time Warner Cable (TWC) deal could spur wave of consolidation, NY Times reports


EPL Oil & Gas (EPL) looks undervalued
American Airlines (AAL) could gain over 20% in next year
CVS Caremark (CVS) shares could reach $85 in a year
EnPro (NPO) could rise another 25%
J.M. Smucker (SJM) looks attractive
Liberty Media’s (LMCA) long-term value will increase (SIRI)
Nestle (NSRGY) could return about 20% (LRLCY)
HSBC (HSBC) could benefit the most from the Fed tightening
Occidental Petroleum (OXY) shares could jump 25%
Comcast (CMCSA), Time Warner Cable (TWC) deal shows strength, expansion ability (NFLX, AMZN)

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