AT&T Is Buying Oklahoma-Based Carrier

AT&T, the wireless carrier, agreed on Friday to acquire the rural wireless provider Dobson Communications Corporation for $2.8 billion in cash.

The offer of $13 a share adds about 1.7 million customers to AT&T’s nearly 62 million at a time when some analysts have questioned how much larger carriers can grow in a wireless market that is saturated.

The offer represents a 17 percent premium over Dobson’s $11.11 closing price on Friday. Including debt, the deal is worth about $5.1 billion.

Dobson, based in Oklahoma City, does business under the Cellular One brand in rural and suburban markets in 17 states and has provided roaming services to AT&T since 1990.

The chief executive of AT&T, Randall L. Stephenson, who took over for Ed Whitacre Jr. this month, has said AT&T will be a wireless-centered company going forward. The announcement of the deal came at the close of Mr. Stephenson’s first board meeting as chief executive.

Patrick Comack, an analyst for Zachary Investment Research, said he was surprised by an acquisition announcement so soon after Mr. Stephenson’s move to the top job. AT&T is still completing its integration of the BellSouth Corporation and the old AT&T long-distance business.
Source : http://www.nytimes.com

Backers of the Buyout Boom Seem to Be Backing Out

BUYOUT TROUBLES On several fronts, things are looking down for the buyout business. The investors who have fueled the boom in recent years have begun to show resistance on some private equity deals as interest rates have risen and banks have insisted on tougher lending terms. Shares of the buyout shop Blackstone Group, which went public last week, sank below their opening price on Tuesday and stayed there all week. Congress, meanwhile, is considering bills that would increase taxes on income earned by private equity managers.

Seven deals were reported on Monday, the day of the week that typically has the most merger announcements, down from 43 on the prior Monday and 84 on Monday, June 4, according to Thomson Financial.

The rest of the week had similar news. The discount chain Dollar General withdrew part of a debt offering it had planned to help finance its $6.9 billion buyout by Kohlberg Kravis Roberts. ServiceMaster may have to pay higher interest rates on loans it is seeking to finance its buyout by Clayton, Dubilier & Rice. And U.S. Foodservice, the American division of the big Dutch food outfit Royal Ahold, postponed a bond offering.

There are several big debt offerings in the works to finance some of the largest buyouts in history, including those of the First Data Corporation, Chrysler and the Texas utility TXU. A pullback by bond investors could spell more trouble for the buyout industry.

DOW JONES ACCORD Negotiators on Tuesday reached a tentative accord aimed at protecting the editorial integrity of The Wall Street Journal, opening the way to final negotiations for the News Corporation of Rupert Murdoch to acquire Dow Jones & Company, which owns the newspaper.

A person close to the talks provided a copy of the agreement to The New York Times on Friday. Under its terms, an independent, five-member committee would be formed that could block the hiring and firing of top editors, go to court to enforce the agreement, and conduct internal investigations and publish the results on the newspaper’s editorial page.

The Bancroft family, which holds a controlling interest in Dow Jones, has stated that it wants an independent editorial board — with most of the initial members chosen by the family — to oversee The Journal’s news operations and prevent Mr. Murdoch from exerting his influence on the newspaper. The proposed agreement, according to people who have been briefed on the talks, calls for initial committee members to be chosen jointly by Dow Jones and the News Corporation. Those members would then vote on replacements when vacancies occur. The family has so far not reacted publicly to the tentative deal, which was negotiated by a committee of the Dow Jones board.

It is still unknown whether the Bancrofts will try for a sale price higher than the $5 billion Mr. Murdoch has offered. Reuters quoted Mr. Murdoch as saying a final agreement would be reached “in the next two, three weeks’ time or not at all.” And he mused to Time magazine about the possibility of discontinuing the paper version of The Journal and publishing solely online.

QUESTIONABLE IMPORTS Pet food, toothpaste, toy trains, tires and now, seafood. Worries over the failure of Chinese imports to meet American health and safety standards were heightened Thursday when the Food and Drug Administration effectively blocked the sale of five types of farm-raised seafood from China because of instances of contamination from unapproved animal drugs and additives.

China is the biggest producer of farm-raised fish and the biggest supplier of seafood to the United States. Included in the F.D.A.’s “import alert” were shrimp; catfish; eel; basa, which resembles catfish; and dace, which is somewhat like carp.

The listed seafood can be sold in the United States only if importers provide independent documentation that it does not contain the contaminants, which are mostly antibacterial and antifungal agents used to prevent disease in fish.

Earlier in the week, federal officials ordered a small New Jersey retailer to recall 450,000 radial tires after it was discovered that a Chinese manufacturer had stopped including a safety feature that prevented the treads from separating.

Some in Congress called for a federal food-safety agreement with China to protect American consumers.

SLOW CONNECTIONS As Apple prepared to put the iPhone on the market, the chief executives of both Apple and AT&T defended their decision to use AT&T’s Edge wireless data network for the product’s Internet connections. Edge is widely accessible, but comparatively slow. Product reviews of the iPhone, which so far have been mostly positive, have noted its slow network connections.

Apple’s chief, Steven P. Jobs, and Randall L. Stephenson, the chief of AT&T, said that the iPhone works well on local Wi-Fi hotspots and that Edge was chosen for cellular connections because it was more widely available, especially in rural areas, than AT&T’s faster HSDPA network.

Now that the highly anticipated introduction of the iPhone is past, the question is whether demand for the $500 and $600 gadget will meet expectations.

PRICE PACTS GET AN O.K. The Supreme Court struck down a 96-year-old antitrust rule forbidding manufacturers and distributors to agree on minimum retail prices. The 5-to-4 decision will give manufacturers considerably more power to determine prices and restrict the flexibility of retailers to discount merchandise.

The old rule held that resale price maintenance agreements violated the Sherman Antitrust Act. The court on Thursday instructed judges to apply a case-by-case approach to assessing the impact on competition of such agreements. Opponents of the old rule said that in many cases it actually stifled competition.
Source : http://www.nytimes.com

UAW Workers Ratify Delphi Labor Agreement - Union

Workers represented by the United Auto Workers union at Delphi Corp. (DPHIQ) ratified a new labor agreement with the auto supplier, clearing a hurdle in the company's effort to exit Chapter 11.

The union said Friday that members approved the measure by a 68% to 32% vote. About 17,000 Delphi workers at 18 sites were eligible to vote on the deal.

Delphi is the former parts-making division of General Motors Corp. (GM) and has been in Chapter 11 since October 2005. The labor deal, in addition to aiding Delphi's efforts to come out of bankruptcy protection, is also significant for GM, which relies on Delphi for many parts and systems used in its cars.

Delphi now needs to finalize a capital investment plan that would shape its emergence from Chapter 11. Delphi also needs to finalize agreements with other unions that represent about 3,000 workers.

Before reaching a tentative agreement last week, the company and its unions had clashed over new labor terms. The UAW said in its statement Friday that 65.3% of production workers approved the deal while 79% of the skilled trades workers voted in favor.

The agreement calls for Delphi to offer wages of $14.50 to $16.23 an hour for all current workers. New hires would make $14 an hour. The agreement also calls for four UAW-represented plants to remain open. The rest will be sold, closed or taken over by GM.

Workers who began their employment with GM or who were hired before the lower- tier wage for new hires went into effect earned about $27 an hour.

About 4,000 of the 17,000 remaining Delphi UAW workers were making the higher wage. Delphi offered buyouts, early retirements and "flow backs" to jobs at GM last year.

Under the new agreement, Delphi will offer lump-sum payments, relocation allowances, buyouts and early-retirement packages to soften the blow for workers.

In addition, GM agreed to take control of some Delphi plants and open the door for certain Delphi employees to "flow back" to the auto maker.

GM also will incur expenses related to supplementing the paychecks for current Delphi workers in order to bridge the gap between what the auto supplier was willing to fork out and what the UAW was willing to accept. GM has said its financial exposure to Delphi will be $7 billion.

The UAW and Delphi still must negotiate so-called competitive operating agreements at the plant level, according to the contract. Those agreements cover issues such as work rules, job classifications and outsourcing, but not wages and benefits.

GM shares, which hit their highest level in more than two years on Thursday, were down 0.4% at $38.01 in recent trading. The stock has benefited from optimism about the Delphi deal and hopes about the prospects for GM's upcoming contract talks with the UAW.
Source : http://money.cnn.com/

Stocks Flat After Fed Holds Steady

Stock indexes finished Thursday's session almost unchanged after the Federal Reserve, finishing a two-day meeting, decided to hold interest rates steady.

An eagerly awaited statement from the Federal Reserve Open Market Committee made few changes. The Fed statement said economic growth was "moderate" during the first half of the year and expects the economy to "expand at a moderate pace over coming quarters."

Core inflation "improved modestly in recent months," the Fed statement said. But, "a sustained moderation in inflation pressures has yet to be convincingly demonstrated."

Markets also digested new economic data and a batch of earnings news, several from retailers.

In the first quarter, the U.S. gross domestic product grew at 0.7%, according to final figures released Thursday. That's revised up from 0.6%. Price data was also revised higher, with personal comsumption expenditures, a measure of the price of consumer goods and services, raised to 2.4% from 2.2% previously.

U.S. initial jobless claims fell 13,000 to 313,000 for the week ended June 23. The claims data were a little lower than expected, Action Economics says.

Despite some volatility after the statement was released, stock indexes ended the session almost exactly where they had started. The Dow Jones industrial average edged down 5.45 points, or 0.04%, to 13,422.28. The broader S&P 500 index was off 0.63 points, or 0.04%, to 1,505.71.

The tech-heavy Nasdaq Composite index was up 3.02 points, or 0.12%, to 2,608.37.

Stocks on the New York Stock Exchange were positive by a 19 to 14 ratio. On the Nasdaq exchange the ratio was 15 to 14.

In energy markets Thursday, oil moved back above $70 on worries about supplies, and then retreated. August WTI crude oil futures finished 60 cents higher at $69.57.

Among stocks in the news on Thursday, General Motors (GM) announced it would sell its Allison Transmission business for about $5.6 billion to the Carlyle Group and Onex. GM stock finished higher.

General Mills (GIS) fell after reporting earnings of 62 cents per share, vs. 61 cents a year ago on a 6.2% rise in sales. The firm sees fiscal 2008 earnings of $3.39 to $3.43 per share, a 7 to 8% increase over 2007.

Monsanto Co. (MON) reported earnings of $1.03 per share in its third quarter, vs. 60 cents a year ago. Sales rose 23% for the company, which expects increased use of its corn seeds globally. The stock was up on Thursday.

KB Home (KBH) moved lower after it reported a $1.93 per share loss in the second quarter, vs. earnings of $2.45 per share a year ago. Revenue for the homebuilder dropped 36%. The firms says there is an oversupply of housing inventory, with aggressive competition and weak demand.

Bed Bath & Beyond (BBBY) fell after reporting earnings of 38 cents in the first quarter, vs. 35 cents a year ago. Same-store sales rose 1.6%, and total sales were up 11%. The overall retail environment, especially for home merchandise, is challenging, the firm said.

Family Dollar Stores (FDO) was also lower after it reported earnings of 40 cents per share in the third quarter, vs. 37 cents a year ago. Same-store sales were up 1.5%, and total sales rose 5.4%.

Rite Aid Corp. (RAD) was up after it reported earnings of 4 cents per share in the first quarter, vs. 1 cents a year ago on a 2.3% rise in same-store sales and a 2.8% rise in total sales.

Novellus Systems (NVLS) said it expects weaking demand in the semiconductor equipment industry. It expects its second quarter results will be at the low end of guidance it previously offered. Semiconductor equipment stocks were down more than 1% on Thursday.

European stock markets moved higher on Thursday. In London, the FTSE 100 index was up 0.67% to 6,571.30. Germany's DAX index was 1.54% higher at 7,921.36. In Paris, the CAC 40 index was up 1.09% at 6,006.31.

Asian markets were also up outside mainland China. In Japan, the Nikkei index was up 0.46% to 17,932.27. In Hong Kong, the Hang Seng index moved up 1.07% to 21,938.22. In China, the volatile Shanghai Composite index plunged 4.03% to 3,914.2.
Source : http://www.businessweek.com

GM Sells Allison Transmission for $5.6B

Shares of General Motors Corp. hit a two-year high Thursday after the automaker said it had agreed to sell its Allison Transmission commercial and military business to an investment conglomerate and a private equity firm.

The deal adds funds to GM's coffers as it gears up for crucial contract negotiations with unionized workers, although it also means losing a profitable division.

GM shares rose 91 cents, or 2.43 percent, to $38.32 in afternoon trading.

The sale to Onex Corp. and The Carlyle Group includes seven manufacturing plants in Indianapolis and its global distribution network and sales offices. A production facility in Baltimore, which makes conventional and hybrid transmissions for pickup trucks and sport utility vehicles, will remain with GM.

The Detroit automaker said the deal, expected to close as early as the third quarter of 2007 pending union and regulatory approval, is part of an effort to raise money and focus on its core business. It said in January it was considering a sale of Allison.

"This is another important step to strengthen our liquidity and provide resources to support our heavy investments in new products and technology," GM Chairman and Chief Executive Officer Rick Wagoner said in Thursday's statement. "At the same time, this sale will position Allison for growth with strong partners in Carlyle and Onex, which have well-established track records of working effectively with their management teams, unions and employees."

Pete Hastings, an auto industry corporate bonds analyst with Morgan Keenan & Co. in Memphis, Tenn., said GM likely viewed the business as nonessential and decided it would rather have the cash as it approaches contract negotiations later this year with the United Auto Workers. Key to those talks will be striking a deal for health care and other benefits for current employees and retirees, which many manufacturers say hinders their ability to compete against foreign rivals with cheaper labor costs.

"They've already got a war chest of sorts, and I think they're adding to it just to take care of what I would call a critical issue," Hastings said. "It's one of the remaining big items that they need to take care of."

In a note to investors, JPMorgan analyst Himanshu Patel said proceeds from Allison came in higher than anticipated and said the move may indicate that GM wants to create a retirees' health care fund similar to one approved by the United Steelworkers at Goodyear Tire & Rubber Co. late last year.

In that pact, Goodyear created a $1 billion retirees' health care fund that gets it off the hook for future health insurance benefits.

GM leaders, including Wagoner, previously have expressed interest in the Goodyear deal, but the company wouldn't directly comment Thursday on the speculation.

"We are looking at a variety of alternatives to address the health care burden," said GM spokesman Dan Flores. "We aren't going to speculate on the options we are exploring, but our focus is on working with the UAW to develop solutions together."

Indianapolis-based Allison designs and builds commercial-duty automatic transmissions, hybrid propulsion systems and parts for trucks and buses, off-highway equipment and military vehicles. The company boasts an 80 percent market share of all medium- and heavy-duty commercial transmissions, with annual revenues of more than $2 billion.

The Carlyle Group is a Washington, D.C.-based private equity firm, and Onex Corp. is a Toronto-based investment conglomerate. The two will be equal partners in the deal, both sides said.

Greg Ledford, Carlyle's managing director, said the new owners aim to eventually take Allison public. He said Carlyle and Onex would assume all UAW contracts for employees from GM, although he would not comment on any possible changes during collective bargaining later this year. The firms have no plans to close any of the seven plants, he said.

"I think it's the best automotive industrial company that I've every seen," Ledford said.

David Kudla, chief executive of Mainstay Capital Management, said in a note to investors Thursday that the new ownership "could create synergies in the military and government business units resulting in more military contracts."

In a telephone interview, Kudla said the deal increases GM's short-term liquidity and helps it finance its North American turnaround plan, but it also constitutes the shedding of another of the automaker's profitable divisions. GM sold 51 percent of its GMAC financing arm last year to a consortium of investors.

"It's debatable as to whether transmissions are considered core or noncore to an automotive company, but certainly from a business analysis, it's a division you'd like to have," he said.
Source : http://www.forbes.com

Western Digital to Buy Drive-Device Maker

Western Digital Corp., in agreeing to buy Komag Inc. for about $1 billion, underscored pressures on makers of disk drives to control key components for making the data-storage devices.

Komag, of San Jose, Calif., makes rotating disks that serve as data-recording media inside of drives. Western Digital, a major Komag customer based in Lake Forest, Calif., said that buying the component supplier would help the company keep pace with technology and pricing changes in the fiercely competitive industry.

"This acquisition puts us in position to be in greater control of our own destiny," said John Coyne, Western Digital's president and chief executive officer.

It could also help make Western Digital more competitive with Seagate Technology, which ranks No. 1 in drive revenue and has long manufactured most of its own disks internally. Western Digital, which says it is No. 2 in the drive market, in 2003 bought Read-Rite Corp. to create an internal source of recording heads -- another component Seagate has long built in-house.

But the deal, announced Thursday, also creates challenges for Western Digital. Komag, in a simultaneous announcement, projected a 30% drop in second-quarter revenue and a "substantial operating loss for the period."

Besides Western Digital, Komag also sells disks to Seagate as well as Hitachi Ltd. Though it plans to keep offering disks to those competitors, they may seek other suppliers, causing a quarterly revenue decline of $25 million to $30 million for three quarters or so, acknowledged Tim Leyden, Western Digital's vice president of finance.

Western Digital agreed to pay Komag holders $32.25 a share in cash. That represents a 9% percent premium over the price of Komag's shares at 4 p.m. yesterday, when the stock traded at $29.58, up 49 cents. But the stock had risen over the past several days amid rumors of a deal, analysts said.

Shaw Wu, an analyst at American Technology Research, called the price tag "quite expensive." But he and Richard Kugele, who tracks the industry for Needham & Co. agreed that the deal could help Western Digital.

"I think this type of merger was inevitable and was probably just accelerated by the softening conditions at Komag," Mr. Kugele said.
Source : http://online.wsj.com

U.S. tightens controls on Chinese seafood imports

Agency officials said the action, which takes effect immediately, covers farm-raised shrimp, eel, catfish, and two other kinds of fish, basa and dace, from China, which is the world's largest producer of farmed fish and the third-largest exporter of seafood to the U.S.

Importers will be allowed to distribute Chinese seafood after proving to the FDA that the products are not contaminated with illegal veterinary drugs or food products, officials said. Suppliers are required to provide a third-party laboratory analysis of their products and show documentation proving compliance with both Chinese and U.S. production standards to get imported seafood into the country, the FDA said.
Chinese fish farmers use four substances that are illegal in the U.S. to protect seafood from exposure to fungi, according to the FDA. Three have been shown to be carcinogenic and one may increase resistance to a "critically important class of antibiotics," officials said.
"FDA is initiating an import alert against several species of imported Chinese farmed seafood because of numerous cases of contamination with drugs and unsafe food additives," said Dr. David Acheson, the agency's assistant commissioner for food protection. "There is no imminent threat to public health because of the low levels of contaminants. However, the banned substances could cause serious health problems if consumed over a long period of time."
The agency is not asking for products to be withdrawn from the market, said Margaret Glavin, FDA's associate commissioner for regulatory affairs.
"We're not asking for ... people to take (seafood) out of their freezers and return it or throw it away," she said. "This is a long-term health concern, not an acute health concern.
"We don't know how much of this product is in the country," Glavin said, because there is no labeling requirement to designate the country of origin.
Shrimp and catfish are two of the 10 most frequently consumed seafood products in the U.S., according to the FDA. Chinese imports account for 7 percent of American shrimp consumption and 10 percent of catfish consumption, according to the National Fisheries Institute, a trade group.
"Consumers are going to be able to get catfish and shrimp ... at a comparable price," Stacey Viera, the group's spokeswoman, said Thursday. "For the seafood companies, this is something ... (that) will add an extra layer on the import process."
FDA officials brushed aside questions about increased scrutiny of Chinese products, saying extensive reviews dating to 2001 led to the import alerts.
"The focus recently has been on Chinese products," Acheson said.
Companies in half a dozen countries, including the Philippines and Mexico, are also on import alert for using the same contaminants, Glavin added.
Source : http://www.marketwatch.com

U.S. Fed leaves key interest rate unchanged at 5.25 percent

The U.S. Federal Reserve decided Thursday to leave a key interest rate unchanged at 5.25 percent, where it has stood for a year.

This was the eighth consecutive time that the central bank held the federal funds rate, interest commercial banks charge each other on overnight loans, steady at 5.25 percent since late June 2006.

After boosting rates at its 17 regular policy-setting meetings in a row over two years, the Fed paused in August last year and left rates alone in September, October, December, January, March and May.

As a result of the Thursday decision, commercial banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain at 8.25 percent. The prime rate responds to changes in the federal funds rate.

The decision was widely expected by economists even though government data showed that the economy had slowed down significantly in the first three months. The tiny 0.7 percent rate was much slower than the 2.5 percent pace in the previous quarter.

The housing slump, which started last year as interest rates were rising, was a big drag to the economic growth in the first quarter.

Investment in home building plunged by 15.8 percent, on an annualized basis, in the first quarter, deeper than the 15.4 percent drop previously estimated.

However, the economy has not lost all momentum for expansion. Continued increases in personal consumption expenditures had been a major pushing force.

Many economists expect the economy to expand at an annual rate of 2.3 percent to 3 percent in the April-to-June quarter.

A statement issued Thursday by the Fed showed that the central bank is still concerned more about inflationary pressures than slowdown in economic growth.

In the statement, the Fed said that economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector.

"The economy seems likely to continue to expand at a moderate pace over coming quarters," it added.

As for inflation, the Fed said readings on core inflation have improved modestly in recent months. Excluding volatile energy and food, the core inflation has been closely watched by the central bank as a key inflation measure.

However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated, said the Fed. "Moreover, the high level of resource utilization has the potential to sustain those pressures."

In these circumstances, the Fed's predominant policy concern " remains the risk that inflation will fail to moderate as expected. "

Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information, the Fed said.

Analysts believe that the Fed could hold interest rates steady through the rest of this year and well into 2008.
Source : http://english.people.com.cn