Friday, December 28, 2007

Paperstand (HBC, BBI, LEAP)

The WSJ’s “Heard on the Street” column out saying that in the credit crisis, banks have been taking extraordinary steps to shore up their finances, selling stakes to foreign investors and snapping up loans from central banks. Now comes the yard sale. In a sign that they see tough times ahead, US and European banks are considering sales of everything from branches to entire units. Possible sellers include Citigroup (C), which may unload or shut several midsize units, and HSBC (HBC), which could exit all or parts of its $13bn auto-finance business. Talk of the potential moves comes days after Merrill Lynch (MER) announced that it would sell most of its commercial-lending business to General Electric (GE) for $1.3bn. Morgan Stanley (MS) pocketed more than $250m last month by selling a slice of its MSCI investment-analysis unit in a public offering. "I think we are going to see a real wave of these coming through in the 1H08," says Huw van Steenis, of Morgan Stanley.

Barron’s Online discusses Blockbuster (BBI), saying that so far, the revitalization has proved challenging for the new chmn and CEO, Jim Keyes. Shares tumbled in Nov after a candid investor-day presentation failed to quell fears about the co's future. Blockbuster deserves a fresh look, though, as the co refocuses on its 7,800 retail stores and deemphasizes a once-promising strategy of morphing into a purveyor of movies by mail, like Netflix. Despite a growing number of viewing options, traditional DVDs remain a major mkt. Global video sales are still estd to be $24.8bn in ‘07 -- 49% of Hollywood studios' rev, according to SNL Kagan. Of that total, the rental business will represent $7.8bn this year, based on SNL Kagan ests. "To just assume that studios are going to throw that [business] away b/c they think it's cool to beam a movie into your house is pretty stupid," says Wedbush Morgan analyst Michael Pachter.

“Inside Scoop” section reports that two insiders at Leap Wireless (LEAP) have jumped at the chance to snap up shares in the wireless provider buying $258m in stock this month. Chmn Mark Rachesky purchased 3.8m shares for $163.2m. He now owns 15.2m shares for a 22.3% stake in Leap. Harbert Mgmt purchased 2.4m shares for $94.8m. The investment firm now owns 10.2m shares, a 15% stake in Leap. "I look at [the purchasing] as a positive," says Lon Juricic, of StreetInsider.com. "Since the recent downward action of the stock after MetroPCS withdrew its merger proposal with [Leap], larger holders have been stepping up and buying on weakness. While there may not be a merger, the insiders definitely see value there, and they definitely see bright prospects for the co over the longer period."

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