Too many M&M's, Snickers, and sticks of chewing gum will give most folks a bellyache. But in the world of Big Candy, that mix makes for a global powerhouse, cooked up when closely held Mars agreed on Apr. 28 to acquire Wm. Wrigley Jr. for $23 billion in cash. The deal comes blessed by Warren Buffett, whose Berkshire Hathaway is kicking in $4.4 billion of the financing. An additional $5.7 billion comes from Goldman Sachs (GS).
Another Pick-Me-Up from the Fed
The Federal Reserve led by Ben Bernanke whacked another quarter-point off the federal funds rate on Apr. 30, reducing it to 2%, and said "economic activity remains weak." No kidding. Earlier that day, the Commerce Dept. said the economy grew at an annual rate of just 0.6% in the first quarter. Worse, it reported the first dip in 17 years in final sales to domestic purchasers, a better measure of actual demand. With consumer confidence cratering, the nation may well be in a recession even though the GDP report was above zero. The Fed isn't letting on whether it will cut rates again. Its statement seemed to indicate roughly balanced risks of economic frailty and inflation.
United's New Flight Plan
When United Airlines (UAUA) disclosed on Apr. 22 that it lost $537 million in the first quarter—far more than expected—the surprise proved costly in more ways than one. It sent the shares of parent UAL tumbling 28% and threw a wrench into a possible merger with Continental (CAL) in a stock swap. When Continental on Apr. 27 announced that it preferred to fly solo for now, United quickly ramped up its Plan B talks with US Airways (LCC)— and could have a deal within weeks, industry sources say.
A Blow to Merck
Analysts thought Merck's (MRK) new cholesterol drug would go down smoothly, but the FDA gagged. The agency on Apr. 28 rejected Cordaptive. The pill, a reengineered version of a natural supplement called niacin, was supposed to lower bad cholesterol (LDL) and raise the good (HDL), without the unpleasant flushing that niacin generally causes. The denial caused Merck shares to swoon by 10%. The company, however, isn't giving up: It plans to launch Cordaptive in Europe and to submit additional data to U.S. regulators.
See "FDA Rejects Merck's Cordaptive"
In February, Deutsche Bank (DB) CEO Josef Ackermann was boasting that the Frankfurt giant had dodged the worst of the subprime crisis. The self-congratulation may have been premature. On Apr. 29, Deutsche reported a $397 million pretax loss for the first quarter, its first in five years, after writing down $4.2 billion in mortgage-backed securities and other credit. A few blocks away, rival Dresdner Bank fared better. The unit of insurer Allianz (AZ) said it would write down a mere $1.4 billion.
Countrywide's Red Ink
The balance sheet at Countrywide (CFC), the nation's No. 1 mortgage lender, continues to look like a World War I battlefield. The bank reported an $893 million loss for the first quarter, and a thumping 36% of its subprime loans are now past due, up from 20% a year earlier. To add to its problems, The Wall Street Journal said on Apr. 30 that a federal probe of the California outfit, which Bank of America (BAC) is in contract to buy, is uncovering evidence that it overlooked inflated income figures for many borrowers. Countrywide declined to comment.
Apple Goes Corporate
In the March quarter, Mac (AAPL) sales blew away forecasts, soaring 51% over the previous year. That's more than three times the rate for the PC industry. Most of the increase came from the consumer market, but now the momentum is spilling into corporations—and not just among traditional fans such as graphic designers. Companies like Cisco (CSCO) and IBM (IBM) are testing whether to let employees choose either a Mac or a PC, and other companies seem likely to follow suit.
How Google Does It
Before Apr. 17, investors had knocked Google's (GOOG) stock down 35% this year, fearful that the faltering economy finally would dent the search giant's advertising business. But Google confounded them with a strong showing, a testament to the power of its innovation engine to skirt downturns. In an interview, CEO Eric Schmidt explains how that engine works—and reveals his intention to step up the pace of acquisitions.
Even if Barack Obama doesn't make it to the White House, he could end up playing the role of Democratic Party power broker for years to come. That's partly because his campaign's wholehearted embrace of Web-based social networking has netted a database with the kind of detailed info on voters that is pure gold to political consultants. One Republican operative estimates that the 800,000 profiles collected through the Mybarackobama.com site could be worth as much as $200 million. (Bloomberg.com)
Virtual Offices Revisited
Regulators are putting the kibosh on Robert Sucarato, the New Jersey resident who claimed to manage two hedge funds with more than $7 billion in assets, yet operated out of a $100-a-month virtual office in lower Manhattan. A federal judge, at the behest of the Commodity Futures Trading Commission, has frozen Sucarato's assets. In a civil complaint unsealed on Apr. 30, the CFTC accuses him of "employing a device, scheme, or artifice to defraud participants" into giving him at least $1.5 million. The Apr. 7 edition of BusinessWeek profiled Sucarato in a story about alleged financial scam artists using virtual offices—sometimes used as mail drops—as a front. Sucarato did not respond to requests for comment.
See "Regulators: "Fund Manager' Was a Fraud"
Why Food Is Scarce
The worldwide food crisis has prompted riots in more than a dozen countries and much hand-wringing by world leaders, but solutions will be hard to come by. That's because this crisis is different: It's global, while others have been regional. And while others lasted months, this one could last years. Over the long haul, freer trade and agro-technology advances may help. Meanwhile, despite a backlash against ethanol, biofuels are not the main culprits in food-price escalation.
Ghosn Under Pressure
Carlos Ghosn isn't finding it easy to run two carmakers. His turnaround of Nissan (NSANY) has lost some horsepower, and sales at Renault have flattened over the past two years. Still, Ghosn tells BusinessWeek he doesn't envision stepping down at either company, nor will the two, which own mutual stakes, fully merge while he's at the wheel. The U.S. auto industry, says Ghosn, is mature and gaining share will be costly. That's why he's stepping on the gas in Brazil, China, India, and Russia.
Ford's New Friend
Billionaire Kirk Kerkorian has completed the Detroit trifecta. After owning chunks of General Motors (GM) (GM) and Chrysler over the past 15 years, he bought a 4.7% stake in Ford and made a tender offer that would drive his holdings up to 5.6%. His adviser, former Chrysler CFO Jerome York, says it's a passive investment. He thinks Ford (F) CEO Alan Mulally has the company on the right track. Rival GM on Apr. 30 reported a $3.25 billion first-quarter loss, due largely to one-time charges at lender GMAC and costs related to bankruptcy at its old parts unit, Delphi (DPHIQ). Two days before, GM said it would slash output of SUVs and full-size pickups.
Cutting the Cable
In his latest bid to shrink Time Warner (TWX) and sharpen its focus on content, CEO Jeffrey Bewkes said on Apr. 30 that it would fully divest its cable unit, a move that has been anticipated for months. Time Warner Cable trades as a separate stock, but the parent holds an 84% stake. Bewkes gave no details on when cable would be cleaved but said the separation would benefit shareholders of both companies. Wall Street shrugged: The parent's stock fell 2.75% on Apr. 30 and the cable unit rose 1.4%.
Say It Ain't So, Hannah!
Walt Disney (DIS) is fending off bad press after Vanity Fair released racy photographs on Apr. 28 of 15-year-old star Miley Cyrus (aka Hannah Montana). The singing actress, whose smash concert tour last year was captured in a hit 3D movie, says she was embarrassed by the Annie Liebowitz photos. Despite some anguished public reaction, the not-very-revealing shots are unlikely to dent the megamillion-dollar Hannah/Miley industry of dolls, records, and DVDs.
There's an exodus at the $244 billion California Public Employees' Retirement System. CEO Fred Buenrostro told The Wall Street Journal on Apr. 28 that he's leaving after four years. CalPERS denied the buzz that he and the board disagreed on future investing strategy. His resignation comes days after chief investment officer Russell Read announced plans to exit to start an environmental investment firm. And in February senior investment officer Christianna Wood left to work at a New York hedge fund.
Big Oil's Big Profits
The party rolls on for oil majors riding sky-high prices. Royal Dutch Shell: (RDS) up 25% over last year, with first-quarter profits of $9.08 billion. BP (BP): up 63%, with $7.62 billion. And the big daddy, ExxonMobil, (XOM) was expected to set another profit record with $12 billion when it reported on May 1. That didn't stop a majority of John D. Rockefeller's shareholding descendants, on Apr. 30, from backing resolutions that would require the company to separate its chairman and CEO positions (currently, both are held by Rex Tillerson), cut greenhouse-gas emissions, and explore putting more oomph into alternative energy.
A New Sovereign Fund
Saudi Arabia may be the top oil exporter, but as a BusinessWeek blog predicted in February, it will be near the bottom of the sovereign wealth fund league. The Financial Times reported on Apr. 29 that the kingdom's fund is about to launch—with a puny $5.3 billion. By way of comparison, Kuwait's sovereign fund wields about $200 billion, while Abu Dhabi's sports $500 billion to $850 billion.
See "Saudis to Be Modest Sovereign Wealth Players"