TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Mega merger? DuPont and Dow Chemical (NYSE:DOW) are in talks to merge in what would be the largest deal ever in the U.S. chemical industry.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Uncertain future. A popular, yet controversial, path to U.S. citizenship is under scrutiny, putting billions of dollars in commercial real estate at risk.
MATHISEN: And porch pirates. What’s being done to prevent Grinches from stealing your Christmas right from your front door.
All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, December 9th.
EPPERSON: Good evening, everyone. I’m Sharon Epperson, in tonight for Sue Herera.
MATHISEN: And I’m Tyler Mathisen. Welcome, everyone.
A flip-flop day in the market. More on that in a moment.
But we begin tonight with a reported merger that would create a chemicals powerhouse. According to reports, two of America’s oldest companies, DuPont and Dow Chemical (NYSE:DOW), are in advanced merger talks. Both have market values around $60 billion, and the deal will likely be billed as a merger of equals.
“The Wall Street Journal” reports the combined firm would then split into three focused on agriculture, specialty chemicals and materials, and that sent shares of both companies soaring. Both Dow component DuPont and Dow Chemical (NYSE:DOW) rallied about an equal amount, a little less than 12 percent.
If the deal goes through, it would cap a tumultuous year for DuPont, whose CEO stepped down in October after winning a proxy battle waged by an activist investor. And a merger would be one of the year’s biggest.
MATHISEN: Why? Why would DuPont, founded more than 200 years ago, and Dow, more than 100 years old, the top two suppliers of industrial chemicals and crop seeds, join forces?
Growth? Sure. A slow-growth economy is not a great way to keep shareholders of an industrial giant happy, let alone restive activist shareholders, the kinds that have bedeviled both companies in recent years.
Dow’s CEO, Andrew Liveris, who reportedly would become executive chairman of the new country, is said to have pursued a DuPont deal for more than a decade, and DuPont’s brand-new CEO, Edward Breen, is said to have been in talks not only with Dow, but with Syngenta, also a seed-maker.
But a Dow/DuPont mega company would become the world’s second largest chemical company with $90 billion in sales, trailing only Germany’s BASF. The new company would sell 17 percent of the world’s pesticides and be the third largest supplier of crop chemicals.
U.S. farmers would buy nearly half their corn seed and almost 40 percent of their soybeans from the newly combined company. Shareholders might like those numbers, but the farmers who buy those seeds will probably be heard from when the Justice Department tries to figure out whether the deal passes regulatory muster.
DENNIS BERMAN, THE WALL STREET JOURNAL: If it does go through, there will be significant concessions, certainly more than the company’s willing to make in the first go-round. This is going to be a political issue. It’s about jobs, it’s about the economy, it’s about two companies that people actually know the names of and probably care about.
MATHISEN: Dennis Berman wrote a column in today’s “Wall Street Journal” about this year’s rash of large-scale mergers.
2015 is already the record-holder with more than $4.3 trillion worth of deals done. Pfizer (NYSE:PFE) buying Allergan (NYSE:AGN) for $150 billion. Anheiser Busch InBev landing SABMiller, $106 billion there. And Charter Communications (NASDAQ:CHTR) taking over Time Warner (NYSE:TWX) Cable for $55 billion.
And while Berman sees the logic in the DuPont/Dow deal, he also questions whether some of the mergers are motivated for the right reasons.
BERMAN: It seems that the mantra or the emotional state of the U.S. executive is, I don’t want to lose my job, I want to play it safe, I don’t want to lose. And as any coach knows, if you’re playing a sport and you’re playing not to lose versus playing to win, that has its own set of consequences, and we’ll see what those are in the years ahead.
MATHISEN: And we will see about this possible deal, perhaps as early as tomorrow.
EPPERSON: Now to a deal coming undone. Yahoo (NASDAQ:YHOO) confirmed what we reported last night, the company is abandoned its plan to spin off its Alibaba stake into a separate company, and instead, potentially spin off its core business.
CNBC’s David Faber spoke exclusively with Yahoo (NASDAQ:YHOO) CEO Marissa Mayer and board member Maynard Webb, and asked about their strategy to change the company.
(BEGIN VIDEO CLIP)
MARISSA MAYER, YAHOO CEO: We still feel that the forward spin we originally proposed is likely to be tax-efficient. But that said, we did overall see indications, certainly in the market, around uncertainty as to the tax treatment and the duration of time it might take in order to get to resolution. And so, given that, we feel it’s prudent at this time to look at alternatives like the reverse spin.
But this is really a board-level question, so I can also hand that to Maynard.
DAVID FABER, CNBC: Well, I’ll ask it as well, if you don’t mind. Mr. Webb, to the extent it is a board-level question what took you so long, then in coming to that conclusion? Why spend nine months and had your investor base so focused on this potential spin only to say, wait a second, now, we suddenly realize these things might trade at a discount? What changed?
MAYNARD WEBB, YAHOO CHAIRMAN: Well, first of all, the investor perception and the overhang became much clearer as we went closer to actually affecting the spin. Also, we have been discussing this for months with a lot of attention to detail and a lot of help from advisers. And we are certainly convinced that if we went forward, it would be very, very legal and would return great shareholder value.
It just would take too long for us to get through all the clarity we need, and we felt very certain that the unrest was — the overhang for the stock for that length of time would destroy too much shareholder value.
(END VIDEO CLIP)
EPPERSON: Mr. Webb also said the board has complete confidence in Yahoo (NASDAQ:YHOO) CEO Marissa Mayer, but shares of Yahoo (NASDAQ:YHOO) slid more than 1 percent today.
MATHISEN: On Wall Street today, there was a big rally followed by a big decline. The Dow Jones Industrial Average rose triple digits early on, encouraged by the reported merger news between DuPont and Dow. But then oil prices turned south, and so did stocks.
By the close, the blue chip Dow index fell 75 points to 17,429. It was up as much as 200. The NASDAQ also dropped 75 and the S&P 500 was lower by 15 points.
As for oil, prices fell for a fourth straight day, ignoring an unexpected drawdown in stockpiles. Prices settled at $37.16.
Bob Pisani now with more on today’s big run-up and rundown in stocks.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another volatile day for the markets. Stocks moved into positive territory early on the strength of a drawdown in crude inventories, but the market reversed almost immediately through a series of very large sell programs that came through the market between about 11:00 a.m. and 1:00 p.m. Eastern Time, which stopped almost all the sectors in the S&P 500 2 percent to 3 percent.
Even the so-called FANG stocks — Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOG) — all dropped in tandem, initially dropping about 2 percent.
What happened? Oil going from positive to negative again did not help, and several large participants either wanted to sell stocks, maybe for tax purposes, or they were putting on new short positions.
The simplest explanation is that for the moment, most traders believe any bounce in the market will be short-lived, and therefore, any rally should be sold.
For NIGHTLY BUSINESS REPORT, I’m Bob Pisani at the New York Stock Exchange.
EPPERSON: Wholesale inventories fell in October, this as firms continue to try and work off high inventory levels. According to the Commerce Department, wholesale inventories fell 0.1 percent, which was below expectations. Inventories are a key component of the nation’s gross domestic product.
MATHISEN: Consumer spending is an important part of the economy, of course, and especially so at this time of year. But in order to spend, Americans have to feel good about the economy.
And as Steve Liesman reports, that may not be the case this year.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: As Americans head to the malls this holiday shopping season, they’re less optimistic on the economy than they were a year ago, and that could depress spending.
The CNBC All America Economics Survey finds just 22 percent of the public viewing the economy as improving. It’s a five-point drop from last year. And key economic indicators, including views on whether home prices will go up and whether wages will rise, they weakened at the start of the Christmas season.
The poll of 800 Americans nationwide finds just 13 percent planning to spend more this year compared to last.
On the plus side for consumers are lower inflation and gas prices. Only 59 percent of respondents said prices for everyday goods will go up next year. That’s the second lowest percentage in the nine-year history of the survey. Data like that has some economists actually upbeat on the consumer this holiday season.
JOHN SILVIA, WELLS FARGO: The dollars being stronger means that imported goods are a little bit cheaper, price of gasoline being a little bit lower, on a sustained basis also means that real incomes are going up as well. And what we see is the American consumer, particularly in services, a little more tourism, a little more travel involved, that’s been very positive for the American consumer.
LIESMAN: So, it could be that more spending this year ends up in gifts for experiences like movie or concert tickets, rather than retail gifts. Twenty-five percent of respondents say they want to receive experience, but only about 5 percent of Americans are giving them.
The survey also found some evidence that online traffic could be peaking, 38 percent chose it as one of their top two places to shop, but that’s the same percentage as last year, so the dollar amount spent online could still grow strongly, but not so much the number of online eyeballs.
In contrast to views on the economy, attitudes towards the stock market have improved. 37 percent of respondents say this is a good time to invest. An equal percentage said it’s a bad time.
Last quarter, Americans were net negative on stocks by 13 points.
For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.
EPPERSON: An increasingly popular and controversial doorway to U.S. citizenship may be closing. It was a program designed to create U.S. jobs through real estate development, but fraud and mismanagement now have it under fire from the very lawmakers who created it.
Diana Olick has our story.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: On the other side of the tracks, literally, from Washington, D.C.’s Union Station, a graffiti-covered trash transfer station is being converted to new office and retail space. Part of the money for the project is coming from foreign investors who in return will get U.S. visas.
ANGELIQUE BRUNNER, EB5 CAPITAL FOUNDER: My focus is these transitioning neighborhoods, and EB-5 has been an absolutely critical tool at maintaining the momentum.
OLICK: EB-5 is the technical name for the program, which was designed to trade job growth for U.S. citizenship. The most lucrative and controversial part of the program expires this week. Without it —
BRUNNER: I don’t think projects like this get done. I think they sit.
OLICK: At stake is the program’s so-called Regional Centers. A developer can apply to be one and then pool foreign cash for a larger project. The foreign investor must pay at least $500,000 and create 10 jobs in order to get a U.S. visa. But by doing so through the centers, indirect jobs are counted, and that’s where the controversy lies.
AUDREY SINGER, BROOKINGS INSTITUTION: Some of the new projects, for example in New York, are in areas that look like they’re super rich, wealthy areas that couldn’t possibly have high unemployment. And it’s the case that those areas are defined within a bigger area with high unemployment. And so, they qualify.
OLICK: New York City’s Hudson Yards is a glaring example. The related companies, the developer behind the project, was able to qualify for EB-5 funding, the same at San Francisco’s shipyard development by Lennar (NYSE:LEN), as well as several other projects in major cities.
SINGER: Other places that are, say, in rural areas or in localities that don’t have the resources and the cache that a New York project would are not going to be able to see as many investors come to those areas.
OLICK: EB-5 wasn’t very popular when it was created back in the ’90s, but for the first time in 2013, it hit its limit of 10,000 visas and then did it again last year.
Why? Because cash-heavy Chinese, the vast majority of EB-5 investors, increasingly want U.S. citizenship, and because U.S. developers can’t get the cash they need from still risk-averse banks.
BRUNNER: Banks look at a project like this and their first answer is no. Their second answer is maybe, and their last answer is, OK, we’ll give you some of the money.
OLICK: As cases of fraud against both developers and investors rise, some on Capitol Hill want to end the project entirely. Others want more oversight.
Angelique Brunner would be fine with the latter, as long as it keeps the wheels rolling.
For NIGHTLY BUSINESS REPORT, I’m Diana Olick in Washington.
EPPERSON: You can read more about this controversial real estate visa program, just head to our Web site, NBR.com.
MATHISEN: And still ahead, the hot, new company benefit that is attracting debt-saddled millennials.
EPPERSON: In Washington, the House introduced a short-term funding bill to keep the government up and running for a few days past the December 11th deadline. The House will reportedly vote on the stop gap legislation on Friday. Lawmakers are negotiating a $1 trillion bill that would pay for government operations through September.
MATHISEN: Alaska’s governor is looking to do something the state hasn’t done in 35 years. He wants to institute a personal income tax. The low price of crude is creating a hole in the oil-dependent state’s budget. Petroleum revenue provided about 90 percent of the money for available spending. That’s now down to 75 percent.
EPPERSON: The Chinese capital has issued its first red alert for pollution. Smog so thick has created an environmental state of emergency. Schools are closed, people are staying inside, and businesses and economic activity has virtually come to a standstill right now.
Eunice Yoon reports from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is what a red alert for smog looks like in Beijing. The haze is so thick that the buildings over there are barely visible. Most people are not outdoors, and if they are, many of them are wearing masks.
The pollution level right now is 12 times what the WHO considers unhealthy. This is the first time that the government has issued its highest alert for an emergency response system that it put in place two years ago.
And what that means is that it’s cutting a lot of different types of activity in the city, like construction. Normally, that construction site would be very busy. Also, the government is shutting thousands of factories around the area, and it’s also restricting traffic.
Even the Beijing mayor himself has gone out on the streets to literally stop cars that shouldn’t be on the road. The World Bank estimates that there’s a cost to all of this air and water pollution, the equivalent of 6 percent of China’s GDP.
The American Chamber of Commerce has also said that now more than half of the international companies that it surveyed has said that it’s become very difficult to recruit senior management because of the bad air.
The tourism industry is also taking a hit because people don’t want to come here for their vacation. For those of us who are already here, we should be getting a reprieve soon. The air is supposed to clear by Thursday at noon.
For NIGHTLY BUSINESS REPORT, I’m Eunice Yoon in Beijing.
The fallout from the slump in commodity prices is where we begin tonight’s “Market Focus.”
Freeport-McMoRan announcing it will suspend its dividend and cut capital spending by $1 billion over the next two years. The company says its plan to get rid of its annual dividend of 20 cents a share will enhance liquidity. Shares up nearly 4 percent on that news to $6.99.
Lululemon now posted earnings that missed estimates as increased inventories and spending on international expansion squeezed the Yoga wear retailer’s margins. The company cut profits forecast for the year and gave disappointing guidance for the current quarter. Shares down 13 percent today to $45.31.
And Citigroup (NYSE:C) says it expects trading revenue to fall as much as 20 percent as compared with last quarter. The company’s chief financial officer says the market’s reaction to whether or not the Fed hikes interest rates will determine how steep the decline is. Shares slipped 1 percent to $52.81.
EPPERSON: Tyler, Korn/Ferry saw its sales rise in the recent quarter helped by a recent acquisition, but the staffing company’s earnings missed consensus, and shares were off more than 2.5 percent to $35.97.
American Airlines saw its passenger traffic rise in November. The company also reaffirmed its fourth-quarter guidance, saying it expects unit revenues to be down. Shares fell 2 percent to $43.65.
And General Electric (NYSE:GE) is reportedly in advanced talks to purchase Halliburton’s drilling services unit, which could go for $5 billion. The division is being sold to clear the way for Halliburton’s takeover of Baker Hughes (NYSE:BHI). General Electric (NYSE:GE) rose a fraction to $30.47, but Halliburton (NYSE:HAL) was more than 5.5 percent higher to $38.30.
MATHISEN: In real estate, there are now more than 9 million more renters than they were just a decade ago, according to a new study. That is the biggest jump on record, and they are paying more than ever before.
The Harvard Joint Center for Housing Studies says one in five are paying more than 30 percent of their incomes on rent, and the number of people paying more than half their incomes on rent went from 7.5 million to more than 11 million in just the last decade.
EPPERSON: Another sobering survey shows that about 20 percent of Americans believe they will never be able to pay off their debt. That’s slightly higher than last year. According to creditcards.com, those making $75,000 a year are the least likely to be debt-free, and about half of those in debt say they’ll remain that way into their 60s.
MATHISEN: Debt relief could be coming for some who have big student loan debt. With student debt at more than $1 trillion, some employees are offering student loan repayment programs in hopes of attracting debt-saddled millennials, but will this trend catch on?
So far, just 3 percent of companies offer this perk. Here to discuss this is Andrew Josuweit, CEO at Student Loan (NYSE:STU) Hero.
Andrew, welcome. Good to have you with us.
How does this work, and how do you get to become — the companies that have it, how do you become eligible to take part in it?
ANDREW JOSUWEIT, STUDENT LOAN HERO CEO: Yes, so, companies are essentially willing to either make a lump sump payment on an annual basis or after a certain clip. So, if you’re with the company after a one-year anniversary or two-year anniversary, you’ll then be entitled to a $1,000 or $2,000 student loan payment, or some other companies are currently paying out on a monthly basis straight out as a cash statement.
EPPERSON: Now, Andrew, this is a taxable payment that they’re making to help you pay off your student loans, and some may say with the average student loan debt at $35,000 when they graduate, that $1,000 or $5,000, and the fact you have to be there several years to get that money in some cases may not be enough to really make a dent.
JOSUWEIT: Yes, the reality is a lot of borrowers need a cash flow solution today. So, if I was to roll out this program for a company, I would recommend doing it on a monthly basis, immediate effectively. And then they’re going to be able to capitalize on the fact that they’re prepaying the debt and they’re not going to accrue interest on that debt over time.
Whereas if you’re getting a lump sum at the end of a one-year or five-year anniversary, it doesn’t make sense because you’ve accrued interest on that debt.
MATHISEN: I assume you’re one who thinks this will become a more popular perk at more and more companies. What do the people in the target audience, the millennials, think of it, and does it make a company that much more appealing to them?
JOSUWEIT: Yes, well, you know, the reality is the baby boomer population is starting to leave the workforce, and we’re seeing a really large population of millennials enter the workforce. So, the job fight for retaining talent is really high right now, and I think the perks base in general is just heating up, and this is just a perk that really relates to the demographic.
Historically, it was the retirement accounts and the 401(k), and the reality of the situation is you should pay off your student loans because that’s a guaranteed debt that you’re going to be paying, versus a retirement account is not always guaranteed.
So, our advice is typically to prepay your student loan debt. So, I think it’s really relevant to the times.
MATHISEN: Andrew Josuweit with Student Loan (NYSE:STU) Hero, thanks very much. Appreciate your time.
EPPERSON: And coming up, holiday shoppers beware. What some companies are doing to make sure porch pirates don’t steal your Christmas.
MATHISEN: Here’s what to watch tomorrow. Volkswagen will hold a news conference on the current state of the investigation into its diesel emissions scandal. On the data front, a report on import and export prices is out, and a read on the labor market. We get those weekly jobless claims numbers. And that’s what to watch Thursday.
EPPERSON: A lawsuit against uber expanded today. A San Francisco district judge ruled that tens of thousands of drivers could be added to the class-action lawsuit against the ride-hailing company. Drivers contend they are employees and are entitled to reimbursement for expenses, including gas as well as maintenance.
MATHISEN: Well, as more people buy more things online, more packages are arriving at folks’ doorsteps, often sitting there until someone gets home to bring them inside. And while those packages sit, thieves make their move.
Morgan Brennan takes a look at what’s being done to prevent these scrooges from ruining the holidays.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Package thieves, porch pirates, Grinches that stole Christmas. As more people go online to do their shopping, package theft has soared. Data is limited, since many shipping companies and retailers don’t parse it out. FedEx (NYSE:FDX) doesn’t share stats and UPS will only say reported incidents are, quote, “scant.”
But insurancequotes.com estimates 23 million Americans have had packages stolen from their homes before they could open them.
LAURA ADAMS, SENIOR INSURANCE ANALYST: If a shipping company fulfills their obligation and delivers the package the way that you paid for, you as the consumer are responsible for it, if it’s stolen.
BRENNAN: A number of businesses have sprung up to address this issue, including Doorman.
Zander Adell, the delivery start-up CEO, says 20 percent of package deliveries fail on the first attempt in urban areas, including an estimated 2 million packages that were delayed or went missing due to theft last year.
That’s why he co-founded Doorman, to make the delivery process more convenient and secure.
ZANDER ADELL, DOORMAN FOUNDER & CEO: We give you a new shipping address for everything you buy online. That stuff goes to our warehouse, and then once it arrives, you can use our app to schedule a delivery from 6:00 p.m. until midnight, seven days a week, in one-hour windows.
BRENNAN: Doorman’s service costs $4 per package and is available in New York, San Francisco and Chicago.
But it isn’t the only company trying to tackle this. UPS offers several services, including its access point network, which allows packages to be dropped at thousands of local businesses. FedEx (NYSE:FDX) recently rolled out an app called Delivery Manager. And Amazon (NASDAQ:AMZN) has experimented with lockers.
Many companies offer tips to keep packages from getting plundered, including requiring a signature on the delivery and routing it to a location where someone can actually accept it. All of this to thwart porch pirates, but also to help make the final and most expensive leg of a packages journey, the so-called last mile, more efficient overall.
For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan.
MATHISEN: And finally tonight, “Time Magazine” has named German Chancellor Angela Merkel its person of the year. The magazine made the decision based on many factors, including Merkel’s handling of Europe’s economic crisis tied to Greece’s troubles and the migrant crisis. It also noted her leadership in response to what it called Putin’s creeping theft of Ukraine.
Merkel, who grew up in East Germany before the country was reunited, has been dubbed by “Time” the most powerful woman in the world.
You and I used to both work at Time Incorporated. Always a big day there. I think she’s a worthy choice. I would have chosen the people of Paris.
EPPERSON: Yes, certainly now, definitely the people of Paris, but I think Merkel definitely is the most powerful woman in the world.
MATHISEN: Yes, I wouldn’t apologize for it, but that’s the first choice.
That’s tonight’s NIGHTLY BUSINESS REPORT for tonight. I’m Sharon Epperson. Thanks so much for watching.
MATHISEN: And I’m Tyler Mathisen. Thanks from me as well. Have a great evening, everybody, and we’ll see you back here tomorrow night.