HSBC Fears Laundering Charges to Cross $1.5 B, Seadrill in $2.9 B Deal

Darlington Musarurwa
05 Nov, 2012
New York City

U.S. indexes traded lower ahead of the close presidential election and looming spending cuts that are set to kick in on January 1. Malaysia-based SapuraKencana and Seadrill agreed to integrate tender rig businesses in a $2.9 billion deal. Humana agreed to acquire Metropolitan for $850 million.

[R]9:35 AM New York – U.S. indexes traded lower ahead of close Presidential election and looming spending cuts that are set to kick in on January 1. Malaysia-based SapuraKencana and Seadrill agreed to integrate tender rig businesses in a $2.9 billion deal. Humana agreed to acquire Metropolitan for $850 million.[/R]

G20 finance ministers and central bankers are meeting in Mexico City to discuss world economy and the leaders pressed the U.S. delegates to resolve the fast approaching fiscal cliff.

In the final communiqué scheduled to be released after the talks end on Monday, the leaders are looking for details on the fiscal cliff in the U.S., speedy resolution on the bailout debt negotiations for Spain and Greece in the euro zone and a quick resolution to the deficit financing bonds in Japan.

The U.S. is poised for sharp spending cuts after the election as the nation battles record debt and anemic economic recovery and more than 12 million people are actively looking for a job. The out of control defense spending and the cost of bailout of banks have driven the federal government debt over $16 trillion.

From January 1, after the election, the U.S. is set to cut $600 billion spending and increase taxes unless the divided Congress can reach a deal.

Separately, in China there is growing speculation that the mantle of power may be transferred from the present President Hu Jintao to Vice President Xi Jinping and the announcement is likely to be made on Thursday.

China''s service sector expanded at a weaker pace in October, according to a report released by Markit Economics today. The business activity index eased to 53.5 from 54.3 in September.

The HSBC Business Activity Index recorded 53.5 in October, down from 54.3 in September.

Separately, Australian retail sales rose a seasonally adjusted 0.5% from a month ago to A$21.6 billion in September, following the upwardly revised 0.3% rise in August, the Australian Bureau of Statistics said today.

A separate government report showed that Australia''s trade deficit narrowed to A$1.46 billion in September.

Seadrill and SapuraKencana Integrate Tender Rig Businesses

Malaysia-based SapuraKencana Petroleum Berhad and Seadrill Limited inked a non-binding memorandum of understanding to combine and integrate rig businesses in a $2.9 billion deal.

Boeing Finalizes Kuwaiti Order

Boeing and Kuwait airplane leasing company ALAFCO finalized an order for 20 Boeing 737 MAX 8s valued at $2 billion at current list price.

Humana Agrees to Acquire Metropolitan

Humana Inc. agreed to acquire Metropolitan Health Networks, Inc., a Medical Services Organization in a transaction valued at approximately $850 million plus transaction costs.

Under the terms of the agreement, Metropolitan stockholders will receive $11.25 per share in cash from Humana for each Metropolitan share. Humana will also repay all of Metropolitan''s outstanding debt.

Separately, Humana Inc. acquired Certify Data Systems, a developer of health information exchange technology. Terms of the transaction were not disclosed.

Stifel to Buy KBW

Stifel Financial agreed to acquire KBW for $575 million and create a middle-market investment bank that will target financial service industry.

Earnings Review

Church & Dwight Co., Inc. ((CHD)), the specialty products maker said third quarter net sales increased 3.5% to $725.2 million from the prior year. Net income for the quarter climbed to $93.9 million or 66 cents per diluted share from $79.6 million or 54 cents per share last year.

Genesee & Wyoming Inc. ((GWR)), the railcar switching services provider reported third quarter revenues rose to $222.74 million from $217.21 million in the prior year. Net loss in the quarter was $19.56 million or 47 cents per diluted share compared to earnings of $32.94 million or 77 cents per share last year.

HSBC said it expects the settlement costs with regulators for charges stemming from money laundering allegations are likely to “significantly” exceed $1.5 billion set aside by the global bank.

Humana Inc. ((HUM)), the health insurer reported third quarter consolidated revenues rose 4% to $9.65 billion, from a year-ago quarter. Net income in the quarter fell to $426 million or $2.62 per share compared with $445 million or $2.67 per share last year.

Time Warner Cable Inc. ((TWC)), the cable-television network operator reported third quarter revenues increased 9.2% from the third quarter of 2011 to $5.4 billion. Net income in the quarter soared to $808 million or $2.60 per diluted share from $356 million or $1.08 per share, for the third quarter of 2011.