Top Stories: Business and Finance
The following are the day's top business stories:
1. Sara Lee Said to Get Bid From Apollo Exceeding Current $12 Billion Value 2. Goldman Sachs Bond Sale Signals Inflation Concerns Waning: Credit Markets 3. Euro Reaches Two-Month High on Growth Signs, Confidence in Debt Resolution 4. Swaps Climb to 2008 High as RBI `Desperate' to Raise Rates: India Credit 5. Fed Signal on Credit Seen Raising Treasury Yields 60 Basis Points in 2011 6. Woolworths Ltd. Cuts Profit Forecast as Confidence Wanes; Shares Decline 7. Bank Valuations Stuck at 2009 Lows Showing No Recovery From Credit Crisis 8. Ivory Coast Halts Cocoa, Coffee Exports for One Month to Pressure Gbagbo 9. Brisbane Roads Circling Globe Twice Needed for Nation's Costliest Disaster 10.Silver May Drop 11% by April as Banks `Confront' Inflation: Chart of Day 11.Super-Cycle Leaves No Economy Behind as Davos Shifts to Growth From Crisis 12.Metals Traders Worth $3 Million Amid Shortages as Wall Street Pay Shrinks
1. Sara Lee Said to Get Bid From Apollo Exceeding Current $12 Billion Value
Sara Lee Corp. received a takeover bid from Apollo Global Management LLC, Bain Capital LLC and TPG Capital that is higher than the food company´s current share price of $18.70, said three people with knowledge of the matter. The offer gets close to the $20 a share that Sara Lee´s board is seeking, said one of the people, who declined to be identified because the process is private. JBS SA, the Brazilian meat processor, is considering a revised bid backed by Blackstone Group LP, the people said. Downers Grove, Illinois- based Sara Lee has a market value of about $12 billion. Sara Lee´s board plans to meet Jan. 27 to review any bids as well as consider spinning off its coffee business, one person said. A purchase would give Apollo a company with products such as Jimmy Dean breakfast foods and Ball Park hotdogs, as well as coffee. The profit margins and growth prospects of Sara Lee´s coffee division may have attracted Apollo, John Baumgartner, an analyst at Telsey Advisory Group in New York, said this month. "You have good, stable brands and abundant cash flow," Baumgartner said. "It would scream pretty favorably from a private-equity perspective."
2. Goldman Sachs Bond Sale Signals Inflation Concerns Waning: Credit Markets
Goldman Sachs Group Inc.´s offering of 30-year bonds, its first in more than three years, signals waning concern among investors that inflation is accelerating. The fifth-biggest U.S. bank by assets received $9 billion in orders for its $2.5 billion of debentures sold on Jan. 21, according to Mizuho Securities USA. The 6.25 percent senior bonds yield 170 basis points more than similar-maturity Treasuries, at the low end of a 5-basis-point range marketed by the New York-based firm, data compiled by Bloomberg show. Economists are lowering forecasts for consumer price rises next year, with the median estimate declining to 1.9 percent this month from 2 percent in December, according to a Bloomberg survey of 55 economists. The record $13 billion auction of 10- year Treasury Inflation-Protected Securities on Jan. 20 attracted lower-than-average demand and the difference between yields on 10-year notes and TIPS narrowed the most since May. "People aren´t too worried about inflation," said Anthony Valeri, market strategist with LPL Financial Corp. in San Diego, which oversees $293 billion. "Goldman was noticing there´s some demand here and they could get that deal done."
3. Euro Reaches Two-Month High on Growth Signs, Confidence in Debt Resolution
The euro touched a two-month high against the dollar on signs growth in the region is accelerating and speculation policy makers will craft a long-term approach to handle the sovereign-debt crisis. The 17-nation currency also traded near a two-month high versus the yen as European Central Bank President Jean-Claude Trichet told the Wall Street Journal that policy makers will "closely" monitor energy and commodity prices pressures. The yen weakened against 15 of its 16 major counterparts before reports this week that may show European industrial orders increased for a second month and U.S. consumer confidence rose, sapping demand for Japan´s currency as a refuge. "Eurozone rates are higher versus the U.S. and the countries that were a cause for concern have rallied strongly," said Tony Allen, global head of currency trading at Australia & New Zealand Banking Group Ltd. in Sydney. "We´re in a bull move for euro." The euro traded at $1.3611 as of 8:19 a.m. in Tokyo from $1.3621 in New York on Jan. 21, after advancing 1.7 percent last week. It earlier touched $1.3647, the highest since Nov. 22. The common currency bought 112.45 yen from 112.48 yen last week and reached as high as 112.71 yen, the most since Nov. 23. The dollar fetched 82.64 yen from 82.57.
4. Swaps Climb to 2008 High as RBI `Desperate' to Raise Rates: India Credit
The cost of locking in five-year interest rates in India has climbed to the highest level since 2008 as investors brace for the central bank to resume Asia´s most-aggressive tightening of monetary policy. The fixed rate to receive floating payments for five years in a swap contract surged 118 basis points in the past year, the most in Asia, to a 27-month high of 8.09 percent on Jan. 20, data compiled by Bloomberg show. The Reserve Bank of India will boost its repurchase rate tomorrow by 25 basis points to 6.5 percent, according to 21 of 22 economists in a Bloomberg News survey. Central bank Governor Duvvuri Subbarao said at a ceremony in Mumbai on Jan. 17 he is "desperate" to cool inflation that accelerated the most in 10 months in December to 8.43 percent. Deutsche Bank AG forecast this month that rates on India´s 2016 swaps, already twice as high as the 4.15 percent for the similar gauge in China, will advance further as investors use the contracts to guard against higher debt costs. "A 50-basis-point rate increase is probably what´s needed to bring inflation under control and the swap market is telling you just that," K. Ramanathan, chief investment officer at ING Investment Management Pvt. in Mumbai, said in a Jan. 20 interview. "Monetary policy so far seems to have stayed a bit too pro-growth than was necessary."
5. Fed Signal on Credit Seen Raising Treasury Yields 60 Basis Points in 2011
Federal Reserve Chairman Ben S. Bernanke and his colleagues may shift from focusing on the gap between actual and optimal employment to an emphasis on the economy´s speed limit in the months ahead. "By the middle of the year, the economic momentum will be building, and all the hawks are going to be crazy about tightening," said Laurence Meyer, a former Fed governor who´s now vice chairman at St. Louis-based Macroeconomic Advisers, referring to officials who concentrate on fighting inflation. Policy makers, who meet this week to plot monetary strategy, will begin to increase the benchmark federal funds rate in January 2012, he predicted. The yield on the two-year Treasury note will rise to 1.25 percent by the end of this year from 0.609 percent on Jan. 21 as it becomes clear that a Fed move is coming, said David Greenlaw, chief financial economist at Morgan Stanley in New York. The Fed increasingly will confront a key question as the year wears on: Does a continued high level of unemployment justify holding short-term interest rates near zero even as growth picks up?
6. Woolworths Ltd. Cuts Profit Forecast as Confidence Wanes; Shares Decline
Woolworths Ltd., Australia´s biggest retailer, cut its full-year profit forecast, citing lower consumer confidence and "uncertainty" over inflation and interest rates. Profit after tax will grow between five and eight percent for the full year, compared with an increase of between 8 and 11 percent as previously forecast, the company said in a statement to the Australian stock exchange. "The market is expected to remain competitive with a less confident consumer who is spending less whilst having a greater propensity to save," the Sydney-based company said. "This combined with the uncertainty around the level of inflation going forward, the risks of future interest rate rises, and a continuing strong dollar provides a platform for a potentially subdued trading environment." Sales rose 4 percent to A$28.3 billion ($28 billion) in the six months ended Jan. 2 from A$27.2 billion a year earlier, Sydney-based Woolworths said in a stock exchange filing today. The result matched the growth estimate of analysts at Nomura Holdings Inc.
7. Bank Valuations Stuck at 2009 Lows Showing No Recovery From Credit Crisis
Valuations for U.S. financial stocks have fallen so far, it´s like the rebound from the worst crisis since the 1930s never happened. Banks, insurers and asset managers in the Standard & Poor´s 500 Index trade at 12.3 times estimated earnings, close to the lowest level since the bull market began in March 2009, according to data compiled by Bloomberg. The group is the second-cheapest among 10 industries in the gauge even as analysts say profits will rise 18 percent this year, exceeding the S&P 500, data compiled by Bloomberg show. While the biggest equity rally in more than five decades has lifted the S&P 500 above its level when Lehman Brothers Holdings Inc. collapsed in September 2008, the failure of price- earnings ratios to widen is a sign to Pioneer Investments and Gamco Investors Inc. that gains in banks may end when government stimulus ends. Bulls such as OppenheimerFunds Inc. say forecasts for a three-year economic expansion mean the stocks will prove bargains as earnings and dividends increase. "It may be awhile before investors feel comfortable paying above-average multiples for financial companies," said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. "What everyone is waiting for is a sign that the companies are really back, that they´re really on their feet again and can survive without continued government support and subsidy."
8. Ivory Coast Halts Cocoa, Coffee Exports for One Month to Pressure Gbagbo
Cocoa exporters in Ivory Coast, the world´s biggest producer of the beans, have been ordered to suspend all cocoa and coffee shipments for a month, according to the government of president-elect Alassane Ouattara. The halt in exports runs from tomorrow to Feb. 23, according to an e-mailed statement from the office of Prime Minister Guillaume Soro and signed by Ouattara´s Justice Minister Jeannot Ahoussou. Cocoa rose to an 11-month high in New York on Jan. 21 on speculation that steps to remove the incumbent president will disrupt exports. "Last week we had a meeting with the main cocoa exporters in Ivory Coast and they have agreed to suspend exports for a month," said Malick Tohé, an adviser to Ouattara´s government, in a phone interview from Abidjan today. All exporters have agreed to halt shipments, he said. The export ban is meant to cut off the rival government of incumbent President Laurent Gbagbo from export revenues of the beans, Tohe said. Ouattara´s government "`does not have control over exports revenues right now," he said. "They go straight to the National Coffee and Cocoa Management Committee, which is in the hands of Gbagbo," he said.
9. Brisbane Roads Circling Globe Twice Needed for Nation's Costliest Disaster
To build an average house, you need 6,200 bricks, 2,950 roof tiles, 785 floor tiles and 15 cans of paint -- multiply that 28,000 times and you get a picture of the task to rebuild Brisbane after Australia´s worst flood. It gets worse: the state of Queensland will need to rebuild 90,000 kilometers (56,000 miles) of roads, enough to circle the globe twice, thousands of kilometers of rail line, almost 100 schools, an unknown number of bridges, several regional airports, power lines, sewers and water treatment -- the list goes on. Australian companies, including its largest building- materials seller Boral Ltd., the No. 1 furniture and electrical retailer Harvey Norman Holdings Ltd., paint maker DuluxGroup Ltd. and plumbing supplier Reece Australia Ltd., will benefit from the reconstruction estimated to cost A$20 billion ($20 billion). The floods are the most expensive natural disaster in the nation´s history and have claimed at least 20 lives. "The state´s a disaster zone," said Greg Hoffman, general manager at the Queensland Local Government Association, which estimates up to 90,000 kilometers of road and "tens of thousands of drains" will need to be replaced or repaired across Queensland. "Roads have been torn away, airport terminals have been uprooted and you can´t believe your eyes when you see the wasteland left behind," he said in a telephone interview.
10.Silver May Drop 11% by April as Banks `Confront' Inflation: Chart of Day
The price of silver, the second-best performing commodity in 2010, may tumble 11 percent in the next three months as investor demand wanes, said Michael Pento, the senior economist at Euro Pacific Capital Inc. The CHART OF THE DAY shows that last year´s 84 percent jump in silver prices mirrored surging demand for exchange-traded funds backed by the metal as investors sought protection from financial turmoil and a weakening dollar. Holdings in global ETFs have dropped 2 percent this year, Bloomberg data show. Demand will continue to decline and send the price of the metal to $24.50 an ounce within three months, Pento said. "Investors are now selling silver because central banks around the world like China and India are confronting their inflation," said Pento, who forecast the 2008 slump in commodities and 2010´s rally in gold. "Silver was an inflation hedge and a play on growth in emerging markets in 2010. There´s no longer a need to purchase precious metals because the growth rate is expected to slow. That´s why we´re seeing outflows in the ETFs." Holdings in the iShares Silver Trust, the biggest exchange- traded fund backed by silver, are down 3.6 percent in January, heading for the first monthly decline since June. Holdings may drop another 3 percent in the next two quarters, Pento said.
11.Super-Cycle Leaves No Economy Behind as Davos Shifts to Growth From Crisis
For only the third time since the Industrial Revolution, the world may be entering a long-term growth cycle that will lift all economies simultaneously, driving bond yields and commodity prices higher. The depth and scope of the expansion will be a focus for discussion at this week´s annual meeting of the World Economic Forum in Davos, Switzerland. Evidence of a broadening global recovery will enable U.S. Treasury Secretary Timothy F. Geithner, investor George Soros and 2,500 political, business and academic leaders to shift their emphasis away from crisis- fighting. With the economic and investment outlooks "much better" than in recent years, "people are talking about how to get back to business as normal and what comes next," said Jitesh Gadhia, a delegate to the conference and the London-based senior managing director at Blackstone Group LP, which runs the world´s largest buyout fund. Goldman Sachs Group Inc., PricewaterhouseCoopers LLP and London´s Standard Chartered Bank are among the financial companies sending executives to the meeting. Their economists predict a growth spurt in coming decades led by emerging nations that will be strong enough to boost developed countries.
12.Metals Traders Worth $3 Million Amid Shortages as Wall Street Pay Shrinks
After a year when U.S. President Barack Obama signed a law curbing risk-taking on Wall Street and pay at banks fell, metals traders are reaping bonus bonanzas. The traders probably earned as much as 20 percent more last year than in 2009, with the most-profitable getting $2 million to $3 million, said Peter Henry, head of front-office search at Commodity Search Partners Ltd. The figure, confirmed by three other recruiters who declined to be identified because they aren´t authorized to speak publicly, compares with no change to a drop of 10 percent in pay across commodities personnel. "Metals traders are an exception when there´s pressure on banks to cut remuneration," New York-based Henry said. They "are making more money than other parts of the banks and the bonuses reflect that to some extent," he said. Metals traders are setting up for another banner year, with Barclays Capital predicting shortages and higher prices in copper, nickel and tin. Average pay across JPMorgan Chase & Co.´s investment bank and Goldman Sachs Group Inc. fell last year and Morgan Stanley cut its investment bank´s compensation pool, filings showed last week. The Dodd-Frank Act signed in July seeks to stop compensation that spurs too much risk-taking.
-0- Jan/24/2011 00:35 GMT