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Betting on a takeover Investors are driving up shares of Research In Motion Ltd. today, rushing in to buy on speculation of a takeover of the BlackBerry maker.
Well, don't count on it, not at this point, anyway.
Today's rush follows reports that a few potential buyers have studied the possibility of bidding for the down-on-its-luck company whose stock has plunged this year.
The Wall Street Journal reports that Microsoft Corp. and Nokia studied a joint bid, while Reuters reports that Amazon.com also thought about it.
But the key phrase here is "have studied." They haven't done it, and observers suggest they won't any time soon.
"We continue to view near-term M&A for RIM as very unlikely given the company's dismal performance and uncertain outlook," said analyst Kris Thompson of National Bank Financial.
"We'd be selling into rallies led by M&A speculation," he added in a research note. "We continue to expect the stock will trade into the single digits as the company's fundamentals worsen. We expect the vultures to circle and to wait for a lower entry point; if M&A bids surface."
Mr. Thompson isn't alone.
"There is only one clear beneficiary of the current takeover noise: The excessively de-rated RIM shares, said analysts at Exane BNP Paribas, according to Bloomberg.
The company, according to analysts quoted today by Forbes, is worth at least $8.5-billion (U.S.).
Whether or not you agree with Mr. Thompson as to how low this stock will go, there are some things to keep in mind.
He's right that it could well sink lower, given that the company is losing market share and its outlook, notably the delay in new BlackBerry devices with an upgraded system, brings tears to the eyes of its shareholders.
As for who might want RIM, UBS Securities Canada analyst Phillip Huang has noted that any sale would be complicated, and likely would warrant more restructuring that anyone might want.
"We struggle to identify a logical buyer with compelling rationale, though recognize any number of large-cap tech firms could contemplate such a move given RIMM's entrenched enterprise base, patents in messaging, push email, and enterprise security, and net cash position of $1.5-billion," he said in an earlier research note, referring to the company by its U.S. stock symbol.
Also, don't yet count out the co-CEOs of RIM, who have said they're going to do everything in their power to turn the thing around. No matter the results, they're going to try, and I believe in their passion.
"Management is unwilling to do a deal in the immediate future," said Nomura analyst Stuart Jeffrey, also reported by Bloomberg.
- RIM shares jump on takeover prospects
- RIM turns down Amazon merger advancements
- Read the Forbes article
- Crooks steal RIM PlayBooks (But can they fence them?)
Banks take hefty ECB loans Hundreds of banks rushed in today to borrow €489-billion in three-year loans from the European Central Bank, far more than expected in a move that buoyed investors at first, though the optimism soon fizzled.
The ECB's plan is meant to ease concerns with cheap, long-term money.
"We think the number is high but not so high it should cause fears of banks piling up unreasonably high risks ... and overall we expect this tender to be supportive for risk appetite," said currency strategist Elsa Lignos of RBC in London.
"We think it is still within a range where the market will take it as supporting risk (rather than raising fears that banks are piling in too heavily into the periphery carry trade)," she added in a research note.
While the funding had calmed some nerves initially, like other measures it still doesn't get to the heart of the crisis in the 17-member euro zone, where some countries are already in recession and others are expected to follow suit. Numbers released just today, for example, show Italy's economy contracted in the third quarter. And the financing needs of several euro governments next year are huge.
"The euro zone still faces recession; banks are still de-leveraging rather than lending; public sector finances are still very strained, and the mechanism for re-cycling surplus savings from the north and east of the euro zone to the big current account deficit nations in the south and west, is still broken," warned Kit Juckes, the foreign exchange strategy chief at Société Générale.
"This morning's move does however, provide a sugar rush which helps the banks get some much-needed three-year funding and leaves more money floating around the financial markets looking for a home."
Bond markets were wary.
"The interest rate is a low 1 per cent, all kinds of collateral offered would be accepted, and you can borrow as much as you want," said senior economist Jennifer Lee of BMO Nesbitt Burns.
"So the good news is, the ECB's efforts to increase liquidity are working. The bad news is, high demand for the loans creates worries that banks are urgently in need of funds to boost liquidity. But at least they have somewhere to turn to. Bond markets this morning are focussing on the worrying aspect of the ECB loans, and Italian 10-year yields are up 20 basis points to 6.73 per cent, Spanish yields are up 16 basis points to 5.15 per cent, and bunds are down 1 basis point to 1.94 per cent."
Kearl expansion approved Canada's Imperial Oil Ltd. today approved an $8.9-billion expansion of its Kearl oil sands mining project, saying the operation will be producing 345,000 barrels of oil per day by the end of the decade, The Globe and Mail's Shawn McCarthy reports.
Imperial, the Canadian subsidiary of Exxon Mobil Corp. , is now completing the first $10.9-billion phase of the Kearl project, which will produce 110,000 barrels per day when it starts-up in late 2012.
The Imperial announcement is just one of several major expansion underway in the Alberta oil sands, despite concerns that pipeline capacity out of the province faces tough regulatory challenges.
Of oil and bananas Whether it's trying to build an oil pipeline or just defend the oil sands, you can generally count on Canada's energy industry to be the flashpoint for some fireworks. Now, there's a war, of sorts, that has been playing out over the past several days, involving oil and bananas.
The latest controversy relates to a decision by Chiquita Brands International Inc. - yes, that Chiquita - to tell its suppliers to find alternatives to the oil sands. Chiquita says it hasn't banned fuel that originates in the oil sands, and it isn't boycotting Canadian fuel.
"We have asked our suppliers, where possible, to find alternatives that have a lower carbon footprint," spokesman Ed Loyd told me. "If those alternatives are not available in the marketplace, then there is not a prohibition from using fuels derived from oil sands. Our focus is only lowering our environmental impact and avoiding carbon intensive fuel supplies whenever possible."
The goal, he said, is to use cleaner energy, and the company has encouraged its suppliers to find alternative energy sources.
"Canada is an important market for Chiquita and one that we are very proud of," Mr. Loyd added.
There's a campaign being waged by Ethicaloil.org to boycott Chiquita, in turn, and politicians are buying in.
"I gather that Chiquita Bananas has no problem with Iranian oil, but is boycotting Canadian oil," Immigration minister Jason Kenney said in a tweet a few days ago. "No more Chiquita bananas for me."
The MP for Calgary Southeast isn't alone.
"Send Chiquita CEO @FdoAguirreCEO note tell him his stand is wrong and how. Canada respects the environment and human rights," said Edmonton MP Rona Ambrose, the Minister of Public Works and Government Services and Minister for Status of Women.
Chiquita stresses its environmental and social record but it. Its mission, it says, is to improve global nutrition.
"We hold ourselves to high standards of corporate citizenship, corporate governance and corporate compliance," it said in its 2010 annual report.
"We are actively engaged in the communities where we operate, and have established sustainability initiatives designed to minimize our environmental footprint. In 2010, we once again achieved important certifications by the Rainforest Alliance, Social Accountability 8000 and GlobalGAP for strong environmental, labor and food safety practices, respectively."
But it, too, has known controversy. This is from the same annual report:
"As previously disclosed, in March 2007, the company entered into a plea agreement with the U.S. Department of Justice ("DOJ") relating to payments made by the company's former Colombian subsidiary to a Colombian paramilitary group designated under U.S. law as a foreign terrorist organization.
"The company had previously voluntarily disclosed these payments to the DOJ as having been made by its Colombian subsidiary to protect its employees from risks to their safety if the payments were not made. Under the terms of the plea agreement, the company pled guilty to one count of Engaging in Transactions with a Specially-Designated Global Terrorist Group without having first obtained a license from the U.S. Department of Treasury's Office of Foreign Assets Control.
"The company agreed to pay a fine of $25-million, payable in five equal annual installments with interest. In September 2007, the U.S. District Court for the District of Columbia approved the plea agreement. The DOJ had earlier announced that it would not pursue charges against any current or former company executives.
"Pursuant to customary provisions in the plea agreement, the court placed the company on corporate probation for five years, during which time the company and its subsidiaries must not violate the law and must implement and/or maintain certain business processes and compliance programs; violation of these requirements could result in setting aside the principal terms of the plea agreement, including the amount of the fine imposed."
TMX buys stake in Bermuda exchange Bermuda seems like a lovely location for a January or February board meeting. Perhaps Tom Kloet should pack a swimsuit.
Mr. Kloet is joining the board of Bermuda Stock Exchange, which is now minority held by Canada's TMX Group Inc. , of which Mr. Kloet is chief executive officer.
TMX, which operates the Toronto Stock Exchange and has been left at the altar of failed takeover attempts, announced today that it has acquired a 16-per-cent stake in BSX, The Globe and Mail's Tara Perkins reports.
"This investment represents TMX Group's commitment to looking beyond Canada for opportunities," Mr. Kloet said in a statement.
Bleak outlook in Japan Having slowly rebounded from its mid-March devastation, Japan is now being hit by the euro debt crisis and general economic weakening.
The Bank of Japan held steady as its policy meeting ended today, but its governor painted a more troubling outlook for the economy, warning of how the debt crisis could affect other countries.
Fresh numbers today also showed how trade is hurting, with the country's trade deficit widening to ¥538-billion in November, and exports softened.
"Imports also declined but at a slower pace than exports, providing some cushion but not enough to prevent a further widening in the deficit," said Derek Holt and Karen Cordes Woods of Scotia Capital. "Weakness in Europe and China is to blame for much of the export weakness but exports to the U.S. also fell for a second consecutive month."
U.S. bust worse than believed Just when you thought the U.S. housing bust couldn't get any worse, you find out it did.
The National Association of Realtors today revised its numbers for existing home sales from 2007 to 2010, lowering them by 14 per cent from already dismal data. That shows the collapse was even deeper than originally reported.
On a year-by-year basis, sales were revised down by 11 per cent in 2007, 16 per cent in each of 2008 and 2009, and 15 per cent in 2010. The new numbers mark 2008 as the worst year, with sales of just 4.1 million.
At the same time, it reported that sales in November climbed 4 per cent, more than observers had expected.
"Revisions to previous figures correct for distortions owing to factors such as multiple listings, with figures from 2007-2010 being revised down by an average of 14 per cent, magnifying the slump in sales," said Andrew Grantham of CIBC World Markets. "Unfortunately, the rebound this year is similarly unspectacular following revisions, hence the weaker than consensus 4.42 million print for November."
Retail sales rise Canadian shoppers were out buying new cars in October, and paying more at the gas pump, too, leading to a rise in overall retail sales of 1 per cent.
Sales were up for the third month in a row, Statistics Canada said today. But by volume, sales climbed 0.6 per cent. Note that gas station sales increased 1.8 per cent, largely because of higher prices.
Still, sales rose in seven of the 11 sectors measures, representing about three-quarters of overall sales, the agency said. Take out autos, and sales still rose by 0.7 per cent.
Compared to October of last year, gas stations have registered the biggest gain, of 15.2 per cent. Autos and related parts have also done well, with new car sales up 6.2 per cent and parts, accessories and tires up 8.7 per cent.
Other big winners over the 12-month period include jewelry, luggage and leather goods shops, up 15.2 per cent, clothing stores, up 5.2 per cent, general merchandise outlets, up 4.7 per cent, and, oh, yes, beer, wine and liquor shops, up 3.8 per cent.
Business ticker
- B of A to pay record settlement in mortgage discrimination case
- Top EU court upholds carbon airline law
- Iamgold to expand Rosebel gold mine in Suriname
- Credit Suisse buys HSBC's private bank in Japan
In Economy Lab The future is not what it used to be. Nor is the present. This is the theme of The Great Stagnation by Tyler Cowen of George Mason University, Martin Wolf of The Financial Times writes.
In International Business The netbook is dying and it wasn't killed by the iPad, The Financial Times reports.
In Globe Careers There's no formula that will magically deliver a raise with a day or two of preparation. But there is one for getting more money over time, writes Peter Bregman of Forbes.com.
From today's Report on Business