Investment News: Money Morning

Motorola Makes Merger Moves; AIG in Accounting Trouble; Societe General Offers Bargain Shares; Delta and Northwest Close to Merger; Emirate International Plans $5 Billion Algiers Investment; Venezuela Changes Banks; Australia Raises Inflation Concerns; Gazprom Gives Ukraine Slight Reprieve

• Motorola Inc. (MOT), the third largest mobile phone maker, is in talks to combine with Nortel Networks Corp. (NT), which would result in a joint venture valued at $10 billion, The Wall Street Journal reported, citing sources close to the possible deal. Motorola, who has been losing ground to industry leaders Nokia Corp. (NOK) and Samsung Electronics Co. Ltd., has been investigating various options, including the sale of their mobile phone unit. Investor Carl Icahn, who holds a 5% stake in Motorola, is using his influence to put pressure on the lagging phone maker to come up with a deal that will profit shareholders.

• American International Group Inc. (AIG), the world’s largest insurer, announced that auditors had found some discrepancies in the way the firm’s derivatives portfolio had been valued, Reuters reported. The insurance firm is no stranger to accounting scandals, as the current troubles are reminiscent of the scandal that led to the 2005 ouster of former CEO Maurice "Hank" Greenberg. "[We] believe AIG management will have an extremely difficult time regaining investor confidence," Standard & Poor’s said in a note to investors yesterday (Monday).

• Seeking to assure shareholders sickened by its recent $7.2 billion trading scandal, French bank Societe Generale (OTC: SCGLY) announced it aims to raise nearly $8 billion by offering shares at a 38.9% discount, Reuters reported.  The bank also announced an addition $870 million in new write-downs.

• Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWA) may be weeks away from announcing a merger agreement, Bloomberg reported, citing unnamed sources familiar with the talks. The deal would make for the world’s biggest airline company. Labor support is critical, as Delta’s pilot union helped diffuse a hostile takeover by U.S. Airways Group Inc. (LCC) last year.

• Emirates International Investment Co., an Abu Dhabi-based investment group, plans to spend $5 billion on homes, shops and a park in Algeria’s capital city of Algiers, Bloomberg reported. The Dounya Parc project will span 6.6 million square meters and will be completed in 2012.

• Venezuela has begun moving oil revenue into Swiss banks to avoid a possible seizure of funds by Exxon Mobil (XOM), which could result from a contentious legal battle. Last week, Exxon won a court ruling that froze assets belonging to Venezuelan state oil company PDVSA. According to Reuters, PDVSA has told clients that all of their payments should now be made to UBS Bank (UBS) in Switzerland. This occurred just days after Exxon lawyers told Dutch Antilles banks that PDVSA accounts would have to maintain their existing balances.

• Australia’s central bank warned yesterday (Monday) that further interest rate hikes might be necessary as it attempts to subdue "uncomfortably high" inflation that is now forecast to reach 3.75% later this year, the Financial Times reported. "Absent a further shift in economic risks to the downside … monetary policy is likely to need to be tighter in the period ahead," the Royal Bank of Australia (RBA) said in its quarterly monetary policy statement.

• Gazprom OAO, the Russian natural gas monopoly, has agreed to delay by eight hours a deadline for Ukraine to negotiate a settlement for $1.5 billion in debt before shutting off a quarter of that country’s natural gas supply. Gazprom had threatened to shut the valves on natural gas supplies from Russia to Ukraine after 10 a.m. today (Tuesday). However as the two parties failed to reach an agreement Monday, Gazprom issued a statement saying that it would delay the deadline until 6 p.m. Tuesday. In an earlier dispute in January 2006, Gazprom shut off all natural gas intended for domestic consumption in Ukraine but continued to ship supplies intended for transit to Western Europe.

February 12th, 2008

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