Daily Agenda: Frantic Pace of M&A Announcements Continues

Analysts see no sign of a slowdown in merger activity; Glencore announces a more aggressive debt-reduction plan; Argentina’s central bank chief resigns.


Even as markets brace for a Federal Reserve interest-rate hike and bond-yield spreads widen for lesser credits, the current pace of mergers fueled in part by historically low rates shows no signs of letting up. In a note to clients yesterday, New Albion chief market strategist Brian Reynolds wrote, “stocks are so inexpensive relative to credit that after almost every major takeout we point out that there will be more of them as CEOs give up on the public stock market.” According to Reynolds, the decision on Monday by Waterbury, Vermont-based coffee company Keurig Green Mountain to be acquired was interesting because the company had been a target of short sellers for years and now its board and executives will no longer need to worry about investors driving the stock down. “This takeout is like an early Christmas present for shareholders and like a lump of coal for short sellers,” noted Reynolds, who added, “It reiterates the point that even companies with issues can be taken out in a credit boom.” Meanwhile, a merger involving more stable balance sheets, the proposed union of two chemical giants, Wilmington, Delaware’s DuPont and Midland, Michigan’s Dow Chemical Co., which would combine nearly $130 billion in market capitalization, has been generally deemed doable by analysts within antitrust guidelines. As the year comes to an end, it appears that M&A bankers will continue to work at a frantic pace.

Glencore shares rise on asset sale plan. On Thursday Glencore CEO Ivan Glasenberg announced a more aggressive debt-reduction plan than an earlier announced mix of asset sales and capex reductions, causing the troubled Baar, Switzerland-based mining giant’s shares to climb by roughly 10 percent in trading in London. In a call with investors, Glencore management indicated that the agricultural division was a focus for divestiture plans.

SNB leaves rates unchanged. The Swiss National Bank left benchmark interest rates unchanged at historic lows today while releasing a statement that the bank’s policymakers were prepared to take action if franc over-valuation persists. The move was in line with consensus forecasts by economists.

Argentina’s central bank chief steps down. Earlier today it was announced that Alejandro Vanoli, the head of Argentina’s central bank, Banco Central de la República Argentina, had resigned in advance of the inauguration of the country’s president-elect, Mauricio Macri. In an accompanying statement, Vanoli defended his tenure and denied rumors that the bank liquidated foreign currency reserves without disclosing it.

OPEC lowers estimates for competitors. In a report issued Thursday, the Organization of the Petroleum Exporting Countries lowered its estimates for non-OPEC producers in 2016 to a global total of 57.14 million barrels per day. The cut comes as OPEC analysts anticipate further cutbacks in North American production.

BOE makes no change. The Bank of England refrained from changing benchmark lending rates today and kept its ongoing asset purchase facility at a pace of roughly $560 billion. The vote, for the fifth consecutive month, was only one shy of unanimous.

Jobless claims spike. Initial unemployment claims data released on Thursday by the Department of Labor rose to a multi-month high after 282 thousand Americans applied for benefits in the week ending on December 5th. The number of newly unemployed exceeded consensus economist forecasts significantly.