Archive for September, 2010

Ex-GM CEO Fritz Henderson to head Sunoco spin-off (AP)

Thursday, September 2nd, 2010 | Finance News

PHILADELPHIA – Sunoco Inc. has tapped former General Motors CEO Fritz Henderson to lead the energy spin-off it is forming early next year.

Henderson, 52, is joining Pittsburgh-based Sunoco as a senior vice president and will help prepare for SunCoke Energy to split from the oil refining and gasoline station giant in the first half of 2011. He will then become chairman and CEO of SunCoke, which is Sunoco's metallurgical coke manufacturing operations.

Coke is a key ingredient used to make steel. The company provides coke for steel manufacturers in the U.S. and Brazil. SunCoke Energy has operations in Virginia, Indiana, Ohio and Illinois. It is building a plant in Middletown, Ohio, that is slated to produce 550,000 tons of coke and 46 megawatts of electricity when fully operational in the second half of 2011. It also operates and has a stake in a 1.7 million tons-per-year coke-making operation in Vitoria, Brazil.

Henderson was appointed head of GM in March 2009, and led the automaker through a government-backed bankruptcy restructuring last year. But he was later replaced by board chairman Ed Whitacre due to concerns over the speed of GM's turnaround.

Despite leaving the GM CEO post, Henderson has since served as a consultant to the automaker.

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Stocks rise on economic hopes ahead of payrolls (Reuters)

Thursday, September 2nd, 2010 | Finance News

NEW YORK (Reuters) – Stocks rose on low volume on Thursday as data showed improvement in housing and the job market a day ahead of the critical monthly payrolls figures.

Investors built on Wednesday's sharp advance as indicators provided the latest reason for optimism the economy could avoid another downturn. But the nascent rally could be derailed if Friday's jobs data disappoints investors.

"Money seems to be flowing out of bonds and into the stock market," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

"Obviously, tomorrow comes the big news with the employment data. But in the near term, it shows how explosive rallies can be when we get decent economic data, because the market is pricing a double-dip recession."

Chipmaker shares rose for a second day running and the PHLX semiconductor index (.SOX) gained 2.1 percent to close above its 14-day moving average for the first time since late July.

Broadcom Corp (BRCM.O), up $1.63 at $32.71, posted a 9.2 percent advance in the last two sessions, its largest such gain since May 2009.

The Dow Jones industrial average (.DJI) added 50.63 points, or 0.49 percent, to 10,320.10. The Standard & Poor's 500 Index (.SPX) rose 9.81 points, or 0.91 percent, to 1,090.10. The Nasdaq Composite Index (.IXIC) gained 23.17 points, or 1.06 percent, to close at 2,200.01.

About 6.6 billion shares traded on the New York Stock Exchange, the Nasdaq and the American Stock Exchange, about average for the past month, but still way below last year's daily average of 9.65 billion. Volume is typically light in the days just ahead of the Labor Day holiday weekend.

The housing and labor markets have long been considered two of the biggest headwinds the economic recovery faces. Friday's payrolls report is expected to show about 100,000 jobs were lost in August.

Data from the National Association of Realtors showed pending home resales rose unexpectedly in July and a separate report showed new claims for unemployment insurance fell for a second straight week.

Shares of Hovnanian Enterprises (HOV.N) rose 5.4 percent to $3.88 on the home sales data and after the sixth-largest U.S. builder reported a narrower quarterly loss late on Wednesday.

"Homebuilders, semis are doing well, the riskier trade is kind of back on," said Detrick.

The biggest open interest on an ETF that tracks the S&P 500 was at September $109 on the call side and September $110 on the put side. Since the SPDR S&P 500 (SPY.P) was at 109.47, the open interest suggests options investors are not expecting a major move after the payrolls report.

The S&P 500's moving average convergence-divergence or MACD generated a 'buy' signal after having been a 'sell' since August 11. The last time the signal turned bullish was July 9, foreshadowing an advance that ended a month later and made July the best month for the index in a year.

"At least in the near term, that's a sign things are improving. That's usually the first step. We need that positive MACD for bigger future gains," Schaeffer's Detrick said.

The Morgan Stanley Retail index (.MVR) rose 2.4 percent and Nordstrom Inc (JWN.N) jumped 8.1 percent to $32.76 as U.S. retailers posted better-than-expected sales in August.

"Today's data is positive, but given the high level of unemployment, it's hard to be too optimistic about the consumer," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

Burger King Holdings Inc (BKC.N) agreed to sell itself to investment firm 3G Capital for about $3.26 billion, pushing the stock up 25.1 percent to $23.59.

In the end to an extended bidding war, Hewlett-Packard Co (HPQ.N) raised its buyout offer for data storage company 3PAR Inc (PAR.N) to $33 a share, topping an earlier bid from Dell Inc (DELL.O). The higher bid prompted Dell to bow out.

Shares of 3PAR rose 2.5 percent to $32.88 while Dell gained 2 percent to $12.36.

HP, a Dow component, rose 1.2 percent to $39.68.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 7 to 3, while on the Nasdaq, about eight stocks rose for every five that fell.

(Reporting by Rodrigo Campos; Additional reporting by Ryan Vlastelica and Angela Moon; Editing by Jan Paschal)

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Burger King agrees to $3.3 billion sale to 3G Capital (Reuters)

Thursday, September 2nd, 2010 | Finance News

LOS ANGELES (Reuters) – Burger King Holdings Inc agreed to sell itself to investment firm 3G Capital for $3.26 billion, giving the No. 2 U.S. fast-food chain breathing room to fix its business and close the gap with leader McDonald's Corp.

At $24 per share, the offer represents a 46 percent premium to Burger King's price before news of the negotiations emerged on Wednesday.

"It was a call out of the blue," Burger King Chairman and Chief Executive John Chidsey told Reuters in an interview when asked about how the talks started. He declined to give additional details.

Chidsey will keep his roles during a transition period and then become co-chairman with 3G Managing Director Alex Behring.

The sale, worth about $4 billion including debt, is expected to close in the last three months of 2010. Burger King has until October 12 to solicit a richer offer from other buyers.

"It looks like a good price for Burger King shareholders. I don't anticipate that someone is going to come in higher," said Telsey Advisory Group analyst Tom Forte.

"The valuation is based on good fundamentals, which Burger King doesn't have and probably won't have for another year," said Stifel Nicolaus restaurant analyst Steve West. On Wednesday, he had issued a research note saying that a $23-per-share price would satisfy shareholders.

Analysts said the deal's valuation -- at almost nine times cash flow over the last year -- is higher than previous restaurant deals and could pave the way for more.

TPG Capital LP, Goldman Sachs Group Inc's Goldman Sachs Capital Partners and Bain Capital Investors collectively own about 31 percent of Burger King and will tender their shares into 3G's offer, due to begin by September 17.

Burger King's private equity investors took the company public just four years ago at an initial share price of $17.

At the market close on Tuesday, shares in Burger King were down more than 31 percent since the end of 2008. McDonald's shares were up nearly 18 percent.

Burger King's stock jumped 25 percent to close at $23.59, on Thursday, adding to Wednesday's 15 percent gain. Shares in bigger rival McDonald's rose 0.6 percent and Wendy's/Arby's Group Inc added 6.8 percent.

CATCHING UP TO MCDONALD'S

3G, a little-known investment firm, was last in the spotlight in 2008, when it waged a proxy battle alongside The Children's Investment Fund against U.S. railroad CSX Corp. That led to Behring joining the railroad's board.

3G's backers include Brazil's Jorge Paulo Lemann, who sits on the board at Anheuser-Busch InBev NV. Forbes magazine estimates his fortune at $11 billion.

"This looks to be something of a new line of business for 3G, which has historically held a concentrated portfolio of high-quality publicly traded businesses, rather than buying companies outright," Bernstein analyst Sara Senatore said.

The deal is the biggest in a string of recent restaurant buyouts. This summer, Carl's Jr parent CKE Restaurants and Brinker International Inc's On the Border Mexican Grill & Cantina were sold to private equity shops.

Wendy's/Arbys in June said an unnamed party had expressed interest in a potential deal involving the fast-food company, while California Pizza Kitchen Inc and Benihana Inc are looking for buyers.

Burger King, which has been hurt by high unemployment rates among its core audience of young men, expects weak demand during its new fiscal year due to the U.S. economy's slow pace of recovery and government austerity programs in Europe.

Analysts said going private would free Burger King to make major changes without the distraction of pleasing Wall Street.

In particular, West said Burger King needs to remodel its restaurants, which he said are older and less appealing than those operating under McDonald's Golden Arches.

Burger King, known as the "Home of the Whopper," also needs to upgrade its technology to allow it to track sales trends in real time, analysts said.

McDonald's has muscled a bigger share of the market by expanding its menu with salads and apple dippers -- which appeal to moms and kids -- and high-profit beverages like lattes, fruit smoothies and frappes.

Telsey's Forte would like to see Burger King's new owners stick with the company's "barbell" strategy of selling low-priced and high-priced food.

Value-priced menu items, like its previously offered $1 double cheeseburgers, boosted sales but squeezed franchisees.

On the flip side, it has introduced a new broiler system that allows the chain to quickly prepare larger, "premium" Steakhouse XT burgers that sell for around $4 and bone-in ribs, which quickly sold out despite their price of about $7 for an eight-piece order. Such items appeal to its young, hungry male clientele, but sales could be constrained by the weak economy.

Burger King is rolling out an expanded breakfast menu this autumn and Chidsey said 3G has strong connections internationally, where the chain has opportunities to expand.

Lazard Ltd, JPMorgan Securities LLC and Barclays Capital acted as advisers to 3G Capital. Morgan Stanley and Goldman, Sachs & Co advised Burger King.

JPMorgan and Barclays are providing financing. About $2.8 billion of the $4 billion purchase price is debt, with the remainder equity, a source familiar with the situation said.

(Additional reporting by Phil Wahba, Paritosh Bansal and Megan Davies in New York, with Guillermo Parra-Bernal in Sao Paulo; Editing by Michele Gershberg, Gerald E. McCormick and Richard Chang)

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