Monday, December 14, 2009

Citi, Dubai, and Other News

Equity futures are higher on some bullish headlines:
  • Dubai received $10 billion from Abu Dhabi, which will pay part of the debt held by Dubai World and its property unit Nakheel. $4.1 billion of the bailout will be used to repay Nakheel's bonds that mature today. The rest of the money will be used to finance Dubai World's needs up until the end of April 2010. So, if you were confused about whether Dubai World was going to get a bailout, (and why wouldn't you be? What part of "investors understand nothing!" did you not understand?) this should help clear things up. At least until the end of April.
  • Citigroup has finally negotiated its partial exit from the TARP. However, the government is requiring that the bank raise $20.5 billion in equity to replace the $20 billion in TARP funds its wishes to repay. Additionally, the US Treasury will sell up to $5 billion of the common stock it holds in a secondary offering at the same time. The rest of the government's 34% stake will be sold "in an orderly fashion," or in a frenzied panic, whatever the case may be. Here's hoping Citi's efforts to escape the claws of the government is worth all the dilution shareholders will suffer.
  • Speaking of dilution, Exxon Mobil will spend $31 billion in stock to acquire XTO Energy in a bid to boost its presence in the natural-gas industry. The bid represented a 25% premium to Friday's closing price. The market still loves a good M&A deal, particularly on Monday morning. You know, because all of those huge M&A deals are always such value creating opportunities. Like all of those big bank mergers from the past ten years, not to mention AOL-Time Warner. That one worked out really well...for the investment bankers.

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