Archive for July, 2009

KKR portfolio companies’ IPOs likely on horizon (Reuters)

Friday, July 31st, 2009 | Finance News

NEW YORK/LONDON (Reuters) –
Private equity firm Kohlberg Kravis Roberts & Co is preparing for an initial public offering for discount retailer Dollar General, a source said, and others are speculated to follow as it looks to take advantage of a recent rise in equity markets.

KKR itself is looking to become publicly-listed and successful IPOs of its portfolio companies could be a boost to its ambitions. It has announced plans to combine with its Euronext-listed fund KKR Private Equity Investors and has potential plans for a U.S. listing.

Private equity firms buy companies in order to eventually exit the investments, either by IPO or selling to a rival.

But they have, for some time, been held back from exiting investments through an IPO amid the market turmoil; while finding potential buyers with the cash available to make acquisitions has been hard.

As markets have risen this year, firms have been cautiously looking for ways to exit investments. Bankers and lawyers have reported a rise in the number of portfolio companies in their IPO pipelines and a increased level of talks with private-equity firms.

One KKR backed firm, Avago Technologies Ltd, is already well into the IPO process. A Singapore developer of semiconductor devices, the firm's shares were priced this week at $13 to $15, according to a filing with the SEC.

KKR is also preparing an IPO of discount retailer Dollar General, a source with knowledge of the situation told Reuters. KKR wrote up the value of the retailer in May.

A Dollar General IPO would be underwritten by Goldman Sachs, Citigroup and KKR itself, the Wall Street Journal reported earlier this week.

The Financial Times reported online on Friday that KKR is preparing up to six companies for IPOs in the next year including toy retailer Toys R Us, hospital group HCA, credit card processor First Data and the Danish telecoms group TDC, citing a person familiar with KKR's plans.

KKR declined to comment on the FT's story or for this article.

KKR, which also recently wrote up the value of its investment in HCA, struck a deal in June to sell IPO stocks through Fidelity Investments, suggesting it might be gearing up to take public some of the companies in its portfolio.

The most likely sectors cited by bankers to file for IPO are those that haven't been hit so hard by the economic downturn. Healthcare, education and potentially energy are cited, as well as select companies such as discount retail firms that are weathering the crunch in consumer spending.

Rivals have also started making the most of the improved climate to find exit routes. Blackstone sold its investment in Stiefel Laboratories Inc earlier this year to GlaxoSmithKline for 1.4 times the cost of the investment, or 40 percent above what it paid two years ago.

Another investment that will likely be highly profitable for Blackstone on exit is its $220.1 million investment into Kosmos Energy, which it marked at $602 million at the end of 2008. Kosmos Energy is currently selling its Ghanaian oil interests in a hotly followed auction.

(Reporting by Megan Davies in New York and Adrian Croft in London, Editing by Dean Yates)

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S&P eyes 1,000 but could be ripe for retreat (Reuters)

Friday, July 31st, 2009 | Finance News

NEW YORK (Reuters) –
Wall Street may have momentum on its side next week as the S&P 500 tries to puncture the 1,000 level, but the rally's staying power will depend on whether U.S. data and corporate earnings provide more signs of economic stabilization.

In a busy week of data, the most crucial report will be a look at the number of jobs lost in July as measured by the Labor Department's non-farm payrolls report.

While unemployment is expected to remain high even as the economy begins to recover, analysts are anticipating the data will show the economy shed fewer jobs than the month before.

Among companies expected to release results are Dow components Procter & Gamble (PG.N), Kraft (KFT.N) and Cisco

(CSCO.O).

The broad Standard & Poor's 500 index (.SPX) recorded its best five-month streak since 1938 on Friday with July's gains as more corporate earnings beat expectations and data suggested the worst of the economic slump was over.

More companies will release their quarterly scorecards, though the bulk of the earnings season is out of the way with 67 percent of S&P companies having reported. The better-than-expected results have driven the most recent leg of the rally.

But with a 46 percent gain from March's 12-year low, the S&P 500 could be ripe for a pullback, especially if the week's data is less encouraging.

"I still sense from the portfolio managers and traders we deal with that even though we have nice upside momentum, they have their fingers on the trigger and aren't going to stick around if some bad data comes out," said Brian Daley, sales trader at Conifer Securities in New York.

BUY SIGNAL

Investors will be watching the S&P to see if it can breach 1,000, a key technical and psychological mark. The market will face resistance getting to that point, but piercing 1,000 could also be perceived as a buy signal, causing the market to rally even higher.

The market tested the level earlier in the week, coming within about 4 points but was unable to get any further.

"The price movements have been dramatic and impressive," said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.

"The volume has not been as impressive. I think that we're going to have to see better data in the weeks ahead to actually support it."

So far, 74 percent of S&P companies that have reported have beaten Wall Street's expectations, according to data from Thomson Reuters. Analysts point out that the expectations were a low hurdle to jump, questioning the strength of results that have come on the back of cost cutting and layoffs.

But results have surpassed expectations and heartened investors looking for further proof that the worst of the recession has abated. Since Alcoa kicked off earnings season on July 8, the S&P has surged 12 percent in the second leg of a rally that began in March but stalled through May and June.

"The Street expected some slightly better-than-expected earnings, but this has been extreme so far," said Scott Wren, senior equity strategist at Wells Fargo Advisors in St. Louis.

The latest run-up saw the S&P 500 close out July with a gain of 7.4 percent. The Dow finished the month up 8.6 percent, its best gain for July since 1989.

SIGNS OF CONSUMER SPENDING

P&G, the maker of Gillette razors and Tide laundry detergent, will be of particular interest to investors looking for signs of life in consumer spending. P&G has already seen some of its brands lose market share as recession-weary shoppers trade down to cheaper brands.

In the same vein, a report on personal income for June will be watched for what it says about the savings rate. Personal income is forecast to fall by 1 percent, according to Reuters data, compared to a gain of 1.4 percent in May.

The May report also saw the savings rate jump to its highest level since records began in 1959. Consumer spending accounts for about two-thirds of the U.S. economy and will need to regain strength for any economic recovery to be sustainable.

The economy is expected to eliminate 320,000 non-farm payroll jobs in July, a hefty loss but still an improvement over last month's drop of 467,000. The unemployment rate is expected to rise to 9.6 percent. The data will be released on Friday.

"Clearly the economic news has been getting less bad," said Wren.

"I would argue the market has been expecting that since these March lows, and we keep getting confirmation that the economy is bottoming out."

Reports on private sector employment and weekly initial jobless claims to be released on Wednesday and Thursday, respectively, will be watched for any signs about what they might project about Friday's jobs reported.

Other data for the week include manufacturing and non-manufacturing ISM for July, factory orders for June and pending home sales for June.

(Additional reporting by Rachel Chang; Editing by Kenneth Barry)

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FCC seeks details on Google app rejection for iPhone (Reuters)

Friday, July 31st, 2009 | Finance News

SAN FRANCISCO (Reuters) –
The Federal Communications Commission is seeking additional information about Apple Inc's decision to reject Google Inc's voice application for the iPhone.

The Google application is seen by some as a competitive threat to the voice services that come with the iPhone, which is carried exclusively in the United States by AT&T Inc.

The FCC sent letters of inquiry to Apple, Google and AT&T on Friday after Apple failed to approve the Google Voice app and removed a similar application from the App Store. Copies of the letters were posted on the FCC's Web site.

The commission said it was making the request in light of upcoming proceedings regarding wireless open access and handset exclusivity.

Last month, several U.S. senators urged regulators to review exclusive handset arrangements between wireless carriers and cell phone makers and how they affect competition and choice in the marketplace.

President Barack Obama's choice to head the FCC has said he plans to review handset exclusivity arrangements.

An Apple spokesman declined to comment on the FCC move. Google and AT&T could not immediately be reached for comment.

Google said on Tuesday that Apple rejected its Google Voice app, a program that allows users to store transcripts of voicemail messages in their email inbox and find specific information within a phone message.

It can also be used to make low-priced international calls, and offers a single phone number that can route incoming calls to home, office and cell phones.

In addition, GV Mobile -- a third-party Google Voice iPhone app -- was removed from the App Store.

In its letter to Apple, the FCC asked for the reason behind the rejection and the decision to remove the third-party application. It also asked whether Apple acted alone or in consultation with AT&T, and what role AT&T plays in the approval process for iPhone apps. (Reporting by Gabriel Madway; editing by Carol Bishopric)

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