Merger Monday: $28 Billion Deals; Wells Fargo Drops 6%

Nichole Harper
17 Oct, 2011
New York City

Market indexes in New York opened lower and declined more than 1% after three deals of $28 billion were announced. Wells Fargo fell as much as 6% after quarterly revenues declined. Citigroup quarterly revenues were flat. Home improvement retailer Lowe

[R]11:10 AM New York – Market indexes in New York trading opened lower and declined more than 1% after three deals of $28 billion were announced. Wells Fargo declined as much as 6% after quarterly revenues declined and operating margins narrowed. Citigroup quarterly revenues were flat. Home improvement retailer Lowe’s plans to cut 1,950 jobs and close 20 stores.[/R]

Stocks in early trading turned lower after three deals of $28 billion of deals were announced in the last 24 hours. The merger wave in energy sector accelerated consolidation in the pipe network operators and in unconventional oil exploration.

The S&P 500 index and the Nasdaq declined more than 1% and the yield of 10-year U.S. Treasury bonds fell to 2.18% and on 30-year bonds declined to 3.16%.

Yields in Europe were on the rise on the growing anxiety that European plan to recapitalize banks will fall short of market expectations.

Three Deals of $28 Billion

Kinder Morgan, Inc agreed to acquire El Paso Pipeline Partners, LP in a deal that valued the company for $20.7 billion and including debt at $37 billion.

The deal is expected to close by the second quarter next year. The combined company is going to be one of the largest transporters of crude oil, natural gas and CO2.

AmeriGas Partners, L.P. agreed to acquire the propane operations of Energy Transfer Partners, L.P. ((ETP)) for $2.9 billion. The transaction is expected to close in late 2011 or beginning of 2012.

Brigham Exploration Company ((BEXP)) soared 20% or $6.04 to $36.40 after the oil exploration and production company agreed to merger with Norway based Statoil ASA. Brigham will receive $36.50 a share in cash or $4.4 billion and the offer expected to commence by end of this month.

With the purchase the company will extend its shale gas fields to Montana and North Dakota based fields and will deepen its involvement in unconventional oil exploration.

BGC Partners, Inc. ((BGCP)) decreased 3.1% after the financial intermediary completed its previously announced acquisition of all of the outstanding shares of Newmark & Company Real Estate, Inc.

European Markets Volatility

European indexes turned volatile after comments from German finance minister added more uncertainty and German Chancellor’s Spokesman lowered expectations ahead of the October 23 summit.

Finance Minister Walter Schaeuble played down market expectations and said in Dusseldorf, “We won’t have a definitive solution this weekend.”

Market indexes have rallied in the last two weeks in anticipation of a resolution to banking recapitalization plan and target to lower Greek sovereign debt.

Chancellor Angela Merkel’s spokesman Steffen Seibert also commented at a news conference that “the dreams” of this resolution at the weekend meeting “will mean everything will be solved and over by Monday cannot be fulfilled.”

Stock Movers

Citigroup Inc. ((C)) gained 0.9% or 28 cents to $28.68 after the financial service provider reported third quarter revenues edged up to $20.8 billion from $20.7 billion in the same quarter last year. Net earnings in the quarter surged 74% to $3.8 billion or $1.23 per diluted share compared to $2.2 billion or $0.72 per share a year ago.

Halliburton Company ((HAL)) slumped 7.1% or $2.66 to $34.77 after the oilfield service provider reported third quarter revenues soared to $6.55 billion from $4.66 billion in the same quarter last year. Net income in the quarter decreased to $683 million or 74 cents per diluted share compared to $739 million or 80 cents per share a year ago.

Lowe’s Companies, Inc ((LOW)) increased 1.6% to $21.13 after the home improvement retailer said it plans to shutter 20 stores in 15 states and cut 1,950 jobs. The company also lowered its plan to open new stores in 2012 to 10 to 15 from the previous plan of 30 stores a year.

Two months ago the retailer lowered its annual sales outlook and blamed weak economy and volatile weather.

Sun Life Financial Inc. ((SLF)) slipped 7.6% or $2.01 to $24.15 after the Canada based insurance and investment expects to report loss of $621 million for the third quarter.

Wells Fargo & Company ((WFC)) declined 6.1% or $1.63 to $25.04 after the diversified financial service company reported third quarter revenues decreased 6% to $19.63 billion from $20.87 billion in the same quarter last year. Net earnings in the quarter soared 21% to $4.1 billion or 72 cents per diluted share compared to $3.3 billion or 60 cents per share a year ago.