Wall Street Breakfast: Must-Know News

• Duke Energy, Progress Energy to merge. Update, 7:05 ET: Duke Energy (DUK) announced just minutes ago that it will merge with Progress Energy (PGN) in a stock-for-stock transaction that will create the largest power company in the country. Progress Energy shareholders will receive the equivalent of $46.48/share, or $13.7B in total equity value. Duke will also assume approximately $12.2B in Progress Energy net debt. The deal is a 7% premium to Progress Energy's Jan. 5. close. Like other diversified utilities, Duke has been looking for acquisitions to help boost its cash flow at a time when power prices are expected to remain low. The magnitude of this deal is likely to draw regulatory scrutiny. Premarket: DUK -1.1%, PGN +2.6% to $45.90 (7:10 ET).
• DuPont buys Danisco. DuPont (DD) agreed to buy Denmark's Danisco (DNSCY.PK), the world’s largest food-ingredients maker, for $5.8B, or 665 kroner ($115) per share. DuPont will also assume $500M of debt. The deal marks a 25.5% premium to Danisco's Friday close, and is DuPont's biggest acquisition in more than a decade as the company tries to diversify. DuPont expects the deal to reduce expected 2011 EPS of $3.30-3.60 by 30 to 45 cents per share, and to add to earnings beginning in 2012.
• P-E firms circle Sara Lee. Apollo Global Management is leading a group of private-equity firms interested in acquiring Sara Lee (SLE), said sources, and has made an initial takeover approach. The consortium is also said to include TPG Capital and Bain Capital. The size of the bid couldn't be determined. Meanwhile, Brazilian meat producer JBS is considering a higher takeover offer for Sara Lee after initial sale talks broke down last month.
• Alaskan pipeline closure hurts BP, boosts oil prices. A leak in the Trans Alaska Pipeline forced operators on the North Slope to cut production by 95%, a major blow for BP (BP) which is the largest oil producer in Alaska. The North Slope currently accounts for 9% of U.S. output, and BP contributes two-thirds of that figure. Other producers include ConocoPhillips (COP) and Exxon Mobil (XOM). Unless the leak is fixed quickly, the shutdown could trigger a jump in oil prices; crude futures +0.8% to $88.74. Premarket: BP -2.45%, XOM -1% (7:00 ET).
• Sanofi, Genzyme inch closer to deal. Sanofi-Aventis (SNY) and Genzyme (GENZ) appear to be moving closer to a deal after months of stalemate, as Sanofi said yesterday it's in discussions over a way to value Campath, a key Genzyme drug for multiple sclerosis. The two sides are considering a contingent value right, in which Genzyme shareholders would receive an additional payment if Campath meets certain targets and proves to be as successful as Genzyme believes it will be. However, Sanofi cautioned that "there remain significant differences on the terms and conditions of the potential CVR and the value of our offer, and there is no guarantee that the parties will come to an agreement."
• J&J mulls new Smith & Nephew bid. British medical equipment firm Smith & Nephew (SNN) reportedly rejected a £7B ($11B) takeover approach by Johnson & Johnson (JNJ) late last year, with J&J now considering whether to make a higher bid. Smith & Nephew has long been seen as a potential acquisition target for U.S. rivals, and Stryker (SYK) and Zimmer (ZMH) may also be interested in placing bids. Premarket: SNN +10.6% (7:00 ET).
• iGate to buy Patni stake. iGate (IGTE) has reportedly reached a deal to take a majority stake in India's Patni Computer Services (PTI) for $862M, less than the $983M deal sources had previously said was being discussed. The deal, one of the largest in India's tech sector, will give iGate a 63% stake in Patni and marks a 9.4% premium over Patni's closing price in India. Following the deal, iGate will reportedly make an open offer for another 20% of Patni's shares. Premarket: PTI +3.2% (7:00 ET).
• FDIC weighs mortgage disclosure rules. The FDIC is reportedly considering whether to impose new rules that would require increased disclosures from major banks seeking to package and sell mortgage securities to investors. In particular, banks that own both servicers and second-lien loans would need to disclose to mortgage investors the details of what would happen to the second-lien loan if the first mortgage comes into distress. The country's top four mortgage servicers and securitizers are Bank of America (BAC), Citigroup (C), Wells Fargo (WFC) and JPMorgan (JPM).
• China's shrinking trade surplus. China's trade surplus came in 40% smaller than expected in December, as export growth showed softness. The surplus for the month was $13.08B, down from $22.9B in November and vs. economists' expectations of $21.7B. Exports were up 17.9% Y/Y vs. a 34.9% rise in November, while imports climbed 25.6% vs. 37.7% previously. Analysts said the data suggests China's export sector is experiencing a 'structural' cooling.
• Goldman prop traders jump ship. Two of Goldman Sachs' (GS) proprietary traders are poised to leave the firm to set up their own fund in London, sources said. The traders, Daniele Benatoff and Ariel Roskis, have reportedly struck a deal with Brummer & Partners of Sweden, one of the largest hedge funds in Europe. Their departure is indicative of a broader trend in the industry, as traders from Goldman and its rivals look for new opportunities in the wake of the Dodd-Frank bill.
• Matahari to keep hypermarket business. Indonesian retailer Matahari has decided to hold off on the $1B sale of its hypermarket business. Matahari had held two rounds of bidding, and had seen interest from Wal-Mart (WMT) and South Korea's Lotte Shopping, but sources said the bid prices came in too low. Instead, Matahari will seek a global partner to expand its business, which still leaves some room for the spurned bidders to get involved.

Today's Markets

• In Asia, Japan closed. Hong Kong -0.7% to 23527. China -1.6% to 2792. India -2.4% to 19224.
• In Europe, at midday, London -0.5%. Paris -1.6%. Frankfurt -0.8%.
• Futures at 7:00: Dow -0.3%. S&P -0.5%. Nasdaq -0.3%. Crude +0.6% to $88.58. Gold flat at $1368.40.

Monday's Economic Calendar

• 10:00 Employment Trends Index
• Notable earnings after Monday's close: AA, APOL

The SA Currents team contributed to this post.

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