Wall Street Breakfast - Aug 21, 2017
A Pick Up In Energy Deals
Sempra Energy has gatecrashed Warren Buffett's deal to buy Oncor, reaching an agreement worth $9.45B, including taking on more than $9B in debt, with the owner of the Texas utility. Elliott Management, the biggest creditor to bankrupt parent Energy Future Holdings, had opposed the "undervalued" sale to Berkshire Hathaway (BRK.A, BRK.B), but will support the transaction with Sempra (NYSE:SRE), as it provides "substantially greater recoveries to all creditors." See more energy deals below.
Economy
The first round of NAFTA talks has wrapped up in Washington, with Canada, Mexico and the United States committing to an "accelerated and comprehensive negotiation process that will upgrade our agreement." U.S. Trade Representative Robert Lighthizer made clear that strengthening rules of origin for autos - the biggest source of U.S. trade deficits - was one of his top priorities, along with cross-border data flows and e-commerce.
Carl Icahn has resigned from his role as an adviser to President Trump after facing criticism that policy recommendations he offered could help his own investments. Those include CVR Energy (NYSE:CVI), Herbalife (NYSE:HLF) and AIG, which all have faced regulatory issues. Meanwhile, U.S. equities closed off their session lows on Friday after chief strategist Steve Bannon left the administration.
The upcoming U.S.-South Korea military exercises are "reckless behavior driving the situation into the uncontrollable phase of a nuclear war," warned North Korea, ahead of the 10-day event, which will include around 17,500 U.S. service members. Pyongyang followed last year's drills by launching missiles and carrying out its fifth nuclear test.
A war of words is bubbling over trade. Beijing has responded to Friday's announcement of a U.S. investigation into China's alleged theft of U.S. intellectual property, expressing "strong dissatisfaction" with the "unilateral, protectionist action." The Commerce Ministry will also adopt "all appropriate measures to resolutely defend China's interests."
Stocks
The pace of deals in the energy sector is accelerating after a long downturn. AP Moller-Maersk (OTCPK:AMKAF) has agreed to sell its oil and gas division to Total (NYSE:TOT) for $7.45B, seeking to focus on its core transport and logistics units. "The combination offers an exceptional overlap of upstream businesses globally," Total said in a statement. TOT -1.2% premarket.
A consortium led by Rosneft has announced the completion of a $12.9B deal to acquire Essar Oil, strengthening ties between the world's largest oil producer and the fastest growing fuel consumer. Rosneft (OTCPK:RNFTF) will get a 49.13% stake in Essar, while the Trafigura-UCP consortium via Kesani Enterprises will get another 49.13% holding. The remaining 1.74% stake will be held by retail shareholders.
Along with millions of Americans, utilities and grid operators today will be closely watching the first total solar eclipse spanning the entire continental U.S. since 1918. Glued to their monitoring systems... As many as 12,000 megawatts of solar power will vanish along the path of the moon’s shadow, while natural gas generators and hydroelectric plants help fill in the gaps.
Bitcoin cash, an alternative version of bitcoin launched by a minority of developers on Aug. 1, surged Saturday, helped by strong demand from South Korea and digital currency "miners." The offshoot climbed 44% to $996.92, the highest it has ever traded in its less than three weeks of history, and a jump of almost 374% from its low of $210.38 on its first day of trading.
Goldman Sachs has gotten the green light to trade stocks in Saudi Arabia, adding another Western investment bank and equities trader to the region. Goldman (NYSE:GS) had been operating in the country since 2009 as an agent and underwriter, but will now be able to manage funds and portfolios, perform principal trades and a host of other activities in the kingdom.
Looking to improve stakeholder returns, Infosys (NASDAQ:INFY) has approved its first buyback - a 130B rupees ($2B) share repurchase program - as its cash and investments swelled to about $6.1B at the end of June. It follows the resignation of CEO Vishal Sikka amid heightened tensions between the board and founders led by ex-Chairman N.R. Narayana Murthy.
China's Great Wall Motor has asked for a meeting with Fiat Chrysler (NYSE:FCAU) with the aim of making an offer for all or part of the auto group, sources told Reuters. Automotive News reported earlier that Great Wall (OTCPK:GWLLY) had contacted FCA to express an interest specifically in its Jeep brand, which along with Ram, is among its most coveted assets.
While the tension on Uber's board remains high, sources say that a majority of directors is coalescing around General Electric (NYSE:GE) Chairman Jeff Immelt to become the next CEO. There are at least two other candidates who're still in the running, according to Recode, with UBER's board set to hold a vote on who will assume the top job within the next two weeks.
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