Oil prices posted a bearish 'Three black crows' pattern over the last three days... Oil prices posted a bearish 'Three black crows' pattern...The pattern is a significant reversal formation after an uptrend. The pattern is considered highly reliable, but the risk is that oil is oversold in the short-term. The reversal is also confirmed by a break of trendline support that guided the move higher since mid-March at the 135.30 level. Also, the Tenkan line is crossing the Kijun line to the downside, generating a sell signal on he Ichimoku charts. The 135/138 area should contain any rebounds in oil and rallies should be sold from here on.--BD (www.forex.com)
PHILADELPHIA/NEW YORK (Reuters) - InBev NV, armed with financing and promises to protect Anheuser-Busch Cos Inc's heritage, pursued its $52 billion target as a chess game with the final checkmate victory foreseen from the first move.
"The speed and efficiency with which InBev (its attack on A-B got a deal done just $5 (per share) ) above its initial bid price is impressive," Credit Suisse beverage analyst Carlos Laboy wrote in a research note on Monday.
InBev moved gently from the start, meeting with Anheuser Chief Executive August Busch IV in June 2 in Tampa to discuss a possible combination. It followed with an unsolicited offer on June 11 that included several concessions to soothe any pain for Anheuser-Busch.
Among the concessions in the initial $65 per share bid, InBev offered Anheuser seats on the combined company's board; promised to keep Anheuser's St. Louis, Missouri, home as the North American headquarters; and have the merged company's name reflect the heritage of the more than 150-year-old U.S. brewer.
InBev also said it would keep Anheuser's U.S. breweries open. The Belgian-based company kept all of those promises in the final agreement to buy Anheuser for $70 per share, creating the world's largest brewer which would be named Anheuser-Busch InBev.
"It was pretty much the standard example of how to acquire a company in an agreed deal when they weren't up for sale. The AB board did well, but the InBev tactics were spot-on in that they didn't have to face a messy, long drawn-out battle," said one source close to the deal.
"On the financing side in these difficult markets, they did well to pull together a high-class bank group," the source said.
FINANCING, POLITICS, LAWSUITS
Immediately after news of the possible deal leaked in the press, InBev's Chief Executive Carlos Brito met with U.S. politicians to ease any concerns about an international company buying the American icon and brewer of Budweiser beer.
"The InBev team played a good game in Washington. The first thing Brito did after it was leaked was to get over there and see the relevant senators," the source said. "Even though (Democratic presidential candidate Barack) Obama came out and spoke against it, that was contained."
InBev, though, reiterating through the month-long battle that it wanted to negotiate a friendly deal, showed that it would also push hard and set the stage to try to replace Anheuser's board. InBev proposed a slate of nominees that included Adolphus Busch IV, an uncle of Anheuser-Busch's current chief executive.
BUD'S WEAK SPOTS
Although some analysts credit InBev with running a smart campaign, others said that Anheuser had few defenses and was ripe for takeover given the slow growth of the U.S. beer market, the founding family's small stake and the brewer's weak performance.
"BUD made big missteps, but it made them two years ago when they declassified the board. Once BUD did that, they were always a sitting duck," said Andy Baker, a special situations analyst with Jefferies & Co Inc. "InBev won because all the pieces lined up."
Anheuser-Busch let their poison pill expire in 2004, and they declassified their board in 2006, according to FactSet MergerMetrics.
The firm gave Anheuser-Busch a "bullet proof" rating of 1.25, far weaker than the mean bullet proof rating for the Standard & Poors 500 of 3.7.
InBev and Anheuser traded lawsuits over the efforts by the Belgian brewer to challenge Anheuser's board. Anheuser also called the InBev takeover attempt an "illegal plan and scheme" to acquire Anheuser "at a bargain price."
The Anheuser lawsuit said InBev failed to disclose information about its Cuban business, an assertion that was mocked by analysts as a weak tactic to cast a negative light over InBev.
"If A-B had played its hand quite differently, we are certain that Brito would have run up as high as $75. Brito wanted the deal that badly," said Tom Pirko, president of California-based Bevmark, an industry consulting firm.
"A-B made a large mistake by alienating everyone with its legal machismo -- all pointless. It had no realistic defenses," Pirko said.
Anheuser also faltered by unveiling an alternative plan to deliver more than $1 billion in annual savings, adding that it would cut jobs, raise prices and boost share buybacks. Its stock failed to respond.
IT'S ALL ABOUT MONEY
Of course, money talks. InBev lured Anheuser to the bargaining table last week by raising its offer to $70 per share from $65 per share, a 27 percent premium over Anheuser's record-high stock price in October 2002.
August Busch IV had told a meeting of beer distributors that the brewer his family has controlled for more than a century would not be sold "on my watch." He'd now be on the board of the combined company.
"Some family firms have a tendency to be protective and August Busch once talked about how he was still trying to win his dad's respect," said Eleanor Bloxham, chief executive of Corporate Governance Alliance.
"Once you've gone public, the dynamic has changed and your obligation is to shareholders. It's best to be prepared for that," Bloxham said.
In the end, Anheuser accepted a friendly deal with a company it already knew and respected due to existing distribution agreements. It became a smart business move to allow InBev, which can expand Anheuser's brand in more international markets, to take over, analysts said.
"I credit the board of BUD for recognizing the situation and doing what was best for their shareholders. They did the right thing and said 'We'll swallow our pride. Swallow our home town pride,'" Baker said.
(Additional reporting by Eleanor Wason in London, editing by Gerald E. McCormick)
In a reversal of its previous hostility to the idea, Anheuser-Busch is in active talks to sell itself to the Belgian brewer InBev in a friendly deal, people briefed on the matter said Thursday night.
Exact terms of the potential deal could not be learned, but one person said that InBev had indicated that it would be willing to pay more than the $65 a share it had originally offered. People briefed on the deal cautioned that the talks might still break down.
In striking an agreement, Anheuser risks a political backlash from the growing number of hometown politicians and customers who had supported the company in its efforts to remain independent.
Helping to drive the deal talks was the indication that some of Anheuser’s largest shareholders, including Warren E. Buffett, were leaning toward backing a deal with InBev.
If a deal is reached, it would end more than a month of hostilities between the two beer giants and create the world’s largest brewer. It would combine Anheuser, the maker of Budweiser and a fixture in American culture, with InBev, the producer of Stella Artois, Beck’s and Bass, creating a new behemoth with distribution channels around the world.
Since InBev unveiled its original $46.3 billion, $65-a-share offer in June, however, the two sides have waged a very public and very bitter brawl. Both companies have sought to press their case in court: InBev has sought to oust the American company’s board, while Anheuser accused the Belgian brewer of lying about its financing commitments and criticized it for having operations in Cuba.
The fight is set against a backdrop of rising prices for beer ingredients like grain and a rapidly consolidating beer industry. Giants like InBev and SABMiller, the world’s two largest brewers — which were themselves the products of mergers struck this decade — have raced to outstrip each other in market share. Though SABMiller, based in London, currently holds the No. 1 position, an Anheuser deal would propel InBev to the top spot.
While the United States remains the world’s largest beer market, domestic brewers have struggled in recent years as their customers drift toward wine and spirits, as well as craft beers and imports. That has tempted the international brewers, as has the weak American dollar. SABMiller and Molson Coors will combine their operations in the United States, forming a formidable rival to Anheuser.
InBev has been mindful of the political pitfalls that could befall a hostile bidder for an American icon like Anheuser. The company said that it would keep St. Louis as its North American headquarters and would try to keep the Anheuser name somewhere in the combined brewers’ new title. Yet on Monday, InBev said that it would begin to canvass Anheuser’s shareholders, seeking their support in ousting the company’s directors. It named an alternate board, including a dissident member of the controlling Busch family.
August A. Busch IV, Anheuser’s chief executive and a scion of the company’s longtime owners, has consistently said that InBev’s offer is too low. But he has felt pressure to enhance his company’s long-stagnant stock. To counter InBev’s claims that it could bolster Anheuser’s bottom line, Mr. Busch and his management team have said that they will cut the company’s work force by as much as 15 percent.
Anheuser has also sought to stymie InBev’s efforts to dislodge its board with its own lawsuit, filed on Tuesday. The company accused its suitor of lying about the firmness of its lending commitments, drawn from a group of eight international banks including JPMorgan Chase. It also argued that because of InBev’s current brewery operations in Cuba, the combined company would run afoul of American trading prohibitions against the island nation.
NEW YORK (CNNMoney.com) -- Teenagers are finding jobs much harder to come by this summer, as employers trim payrolls amid a slumping economy.
According to an analysis of U.S. Bureau of Labor Statistics data by global outplacement consultant Challenger, Gray & Christmas, teen employment grew by only 683,000 jobs in June, 38.7% below the 1.1 million new positions that teens were able to fill in June of last year.
"This tells you how sparse and thin the job market is right now," said Challenger, Gray & Christmas Chief Executive John Challenger. "Companies are cutting back to their core and cutting out their extras."
June is typically the peak month for teen hiring, yet this June marks the first since 2004 in which companies added fewer than one million new jobs for 16- to 19-year olds.
"Companies tend to hire teens to build their pipelines for the future and give kids a chance to get into the workplace," said Challenger. "But those jobs are the first ones that companies cut back when they need to pare down."
A rebound in July is unlikely, Challenger said, because July employment has fallen an average of 43% from June levels over the past 10 years.
If the average holds, total summer hiring in May, June, and July would be about 1.2 million, which would be the smallest gain in teen summer employment since 1958.
Teen employment also fell in the most recent recessions of 2001 and 1991, but the drop was not nearly as pronounced, noted Challenger.
"This is pretty drastic," Challenger said. "You don't see drops like this too often unless the economy is in a recession."
The struggling U.S. economy has put a stranglehold on companies looking to hire new employees. In just the first half of 2008, the economy lost 438,000 jobs.
"This is about the sluggishness in the economy, rather than a long term change that's part of companies discounting teens," said Challenger. "Our economy, from a labor standpoint, has taken a nosedive in the last 3 months."
Fannie Mae and Freddie Mac were created by Congress to help more Americans buy homes. Now their shaky condition threatens the entire housing market.
By Katie Benner, writer
Last Updated: July 11, 2008: 3:13 PM EDT
NEW YORK (Fortune) -- They own or guarantee $5 trillion worth of mortgages - nearly half of all the country's outstanding home loan debt-and they're crashing. Big time.
Fannie Mae and Freddie Mac are struggling with an investor loss of confidence so great that, while they're unlikely to go under, they could conceivably see their ability to function impaired. That would wreak yet more havoc on an already wrecked housing market- making loans tougher to come by and possibly pushing hundreds of billions of dollars in cost onto U.S. taxpayers.
How could the companies end up in such awful straits? Given the way they were created and run, a better question might be: how could they not?
The two companies are so-called government-sponsored enterprises, created by Congress in 1938 (Fannie) and 1970 (Freddie) to help more Americans buy houses.
Their mandate is to maintain a market for mortgages - buying loans from banks, repackaging them as bonds, and selling those securities to investors with a guarantee that they will be paid. This makes lending more tempting for banks because Fannie and Freddie take on risks like missed payments, defaults and swings in interest rates.
But the companies are also publicly traded, with the usual mandate of trying to maximize profits for shareholders.
That effort, of course, involves risk, but as quasi-government programs, they've long carried an implicit guarantee that the feds wouldn't let them fail.
Their hybrid nature created both the opportunity and the temptation for the enterprises to take on more risk and to make themselves ever larger, more important and thus more profitable players in the mortgage market.
Very special treatment
The market and ratings agencies have treated Fannie and Freddie as bulletproof, even though the actual business of dealing with interest sensitive loans is very risky. This is in large part because of the very special perks granted to the mortgage giants, but to no one else.
Each may borrow up to $2.25 billion direct from the Treasury. They are exempt from state and local income taxes and from Securities and Exchange Commission registration requirements and fees. And they can use the Federal Reserve as their bank.
One result of all this special treatment was AAA credit ratings. That means Fannie and Freddie could borrow at super-low rates, a benefit they used to purchase - and hold -high-yielding mortgage loans. The spread between the two provided an irresistible earnings stream and the companies just kept getting bigger.
The mortgages they hold on their books alone total about $1.4 trillion, said Mike Stathis, managing Principal of Apex Venture Advisors, a research and advisory firm.
In the meantime, the companies were allowed to operate in this manner, piling on risk after risk, with virtually no capital cushion (Wall Street speak for the rainy-day piggybank financial companies keep should one of their investments blow up.) As the company's loan portfolio loses value and the mortgage market continues to crumble, it's easy to see why this was a fatal misstep.
Some saw the crisis coming before this week. For example, Alan Greenspan famously warned in 2004 that Fannie and Freddie's rapid growth needed to be curbed because their expansion threatened the financial markets.
Still, the cocktail of high credit ratings, domination of the mortgage securities market, and preferential government treatment led to the sort of shenanigans that go hand in hand with excessive privilege.
Fannie overstated its earnings by $10.6 billion from 1998 through 2004, and its chief executive Franklin Raines lost his job. Freddie Mac had understated its profit by nearly $5 billion from 2000 through 2002. Both companies missed earnings filings while their overhauled their books.
"If Fannie and Freddie had been created in the private sector, they wouldn't look like this," says Christopher Whalen, head of research firm Institutional Risk Analytics. "They have a public sector mission to expand housing and run what is essentially an insurance company. But they also have a conduit to securitize and sell loans, which is what broker-dealers like Lehman do; and they have an interest arbitrage piece (making money on the spread between interest rates) that looks like a hedge fund."
Robert Rodriguez, the founder of First Pacific Advisors, hasn't bought Fannie for Freddie bonds for over two years. "With the recent issuance of their financials, we were still uncomfortable with their leverage," Rodriguez says. "We believed there was considerable balance sheet risk in both of these companies.
Now the dwindling pool of mortgages, higher foreclosure risk, and a shaky interest rate environment have the companies on the ropes; and investors are beginning to lose faith in Fannie and Freddie.
Both firms told Fortune that they have enough capital to weather the storm and continue to support the nation's housing market.
And yet, Fannie has fallen 32% this week and 65% since the beginning of the year. Freddie plunged 47% so far this week and is down 75% since January.
Investors have lost faith that the companies can operate in their current incarnation without running into major problems.
If investors abandon these companies, what do we learn from this odd Frankenstein of a business model?
"Nobody every believed that Fannie and Freddie were truly private and they never should have been," says Whalen. "Now we will all have to pay for a company that has gone astray."
