Bank of America buying MBNA in $35 billion deal…AT&T shareholders okay $16 billion merger offer from SBC Communications…Valero Energy to put its name on Diamond Shamrock gas stations in Texas…
Bank of America is expanding its credit card operations with a $35 billion cash and stock deal. The third-largest bank by assets, Bank of America is buying MBNA, the world’s top independent credit card lender. The deal is expected to close in the fourth quarter of 2005. Under terms of the agreement, MBNA stockholders will receive about a-half share of Bank of America for each of their common shares. Also included will be about $4.125 per share. Based on Bank of America’s closing stock price yesterday, the deal is valued at $27.50 per share. Bank of America says 6,000 jobs will be slashed as a result of the merger. The company expects to achieve overall cost savings of $850 million, which would be fully realized in 2007, and it anticipates a restructuring charge of $1.25 billion. Savings will be achieved through job cuts, the elimination of overlapping technology, vendor leverage and marketing expense. After the deal is completed, Bank of America says it will be one of the world’s biggest credit and debit card issuers.
With the planned merger, the number of large credit issuers is shrinking. and consumers may be at growing risk of security breaches and high fees as result. Once the cash and stock deal is completed, Bank of America will have about 40 million active credit card accounts. Consumer expert Ed Mierzwinski with the U. S. Public Interest research group says with so large a customer base, Bank of America will be at greater risk of theft of personal information. He also says “consumers pay higher prices when they are captive customers of one giant firm.” Financial analyst Greg McBride with bankrate.com says current MBNA customers can expect to get more pitches from Bank of America looking to sell them more financial services.
AT&T shareholders today said “yes” to a $16 billion merger offer from San Antonio-based SBC Communications. About 98 percent of voting shareholders approved the merger, and about 71 percent of the outstanding shares were in favor of the deal–which will create one of the world’s largest telephone companies. The two rivals revealed in January that they planned to join forces. The merger would add long distance and business services to SBC’s local, wireless and internet products in several markets. The deal remains subject to regulatory approval from ten states and the federal government. Twenty-six other states have already OK’d the merger. The combination of the two companies is expected to be completed late this year or early next year if approved. The companies expect to eliminate about 13,000 jobs if they combine.
Chinese oil company CNOOC will press ahead with its takeover bid for Unocal. The state-owned firm says it will continue its efforts despite a scheduled Unocal shareholder vote on a competing offer by Chevron. Unocal sent shareholders proxy materials yesterday with a letter reiterating its board’s recommendation to accept the $16.5 billion Chevron offer. CNOOC’s chairman Fu Chengyu also tells the Associated Press that he is confident the Chinese company will persuade Washington the proposed $18.5 billion deal doesn’t pose any risks to U. S. national security. He calls the CNOOC deal a “good offer.”
The Royal Dutch/Shell Group of Companies will not be prosecuted for overstating oil and gas reserves, ending a Justice Department probe. U. S. Attorney David Kelly in Manhattan says a criminal prosecution of Shell “would not serve the public interest at this time.” The investigation was launched last year after the company disclosed it had overstated its proven oil and natural gas reserves by 23 percent from 1997 through 2002. Shell paid a $120 million fine imposed by the Securities and Exchange Commission for accounting fraud. Kelly says further penalties would likely have a severe and unintended disproportionate economic impact on thousands of innocent Shell employees.
Plans for new liquefied natural gas terminals in Massachusetts and Texas won federal approval today. The Federal Energy Regulatory Commission has approved seven other projects since 2003. The commission OK’d construction of the Golden Pass LNG Terminal and 120-mile pipeline in Jefferson County, Texas on the Gulf Coast. Commission Chairman Pat Wood, who said he owns property less than three miles from the site, said environmental concerns were handled well. The company agreed to restore wetlands to offset those lost due to the project. Commissioners also approved the Weaver’s Cove energy project for Fall River, Massachusetts.
Anadarko Petroleum has signed agreements for capacity on a planned expansion of the Maritimes & Northeast Pipeline system, which will be delivered from Anadarko’s liquified natural gas import terminal to be built in Nova Scotia. The capacity is for markets in eastern Canada and the U. S. northeast. Site preparation for the terminal has been underway, and first deliveries through the Bear Head terminal are set for late 2008.
BP today announced a joint venture with Houston-based ConocoPhillips, Shell Transport & Trading and Scottish & Southern Energy. The companies will begin work on a project to generate “carbon-free” electricity from hydrogen. BP says the project will make use of a power station in northern Scotland and export the carbon dioxide to a North Sea oil reservoir. The deal will require total capital investment of some $600 million. BP says initial engineering feasibility studies have been completed. The partners are now working to confirm the economic viability of the project. BP expects that review to be completed in the second half of 2006–allowing a final investment decision to be made next year. If approved, the group plans to start operation of the project in 2009.
Valero Energy will put its name on more than 1,800 Diamond Shamrock gas stations in Texas and seven other states. San Antonio-based Valero today announced the transition should be completed over the next two years at a cost of $70 million. The move will create about 2,900 Valero stations around the country. Valero’s teal-and-yellow color scheme is used at nearly 700 stations on the east coast and almost 400 in California. Valero is the nation’s largest independent oil refiner.
BHP Billiton is helping develop the Neptune oil and gas field in the Gulf of Mexico, approving the capital expenditure for its 35 percent share in the project. The deepwater field is about 120 miles off the coast of Louisiana. First oil is expected by the end of 2007 through a series of seven initial subsea wells tying back to a stand-alone tension leg platform. BHP Billiton is the designated operator of the field, in its partnership with Marathon Oil, Woodside Energy and Maxus Exploration.
Houston-based Spacehab is looking forward to Tuesday’s planned impact with a comet. The company’s Astrotech subsidiary provided key pre-launch processing facilities and services to NASA’s Deep Impact mission at its Titusville, Florida spacecraft processing facilities. The Deep Impact spacecraft spent 11 weeks at those facilities, overgoing pre-flight processing and checkout. An 820-pound washing machine-sized impactor will smash into the nucleus of the comet at 23,000 miles per hour at about 12:52 a.m. CDT. A flyby craft will pass within 310 miles to record the event and send results back to Earth. The nine-mile long, 3.7 mile-wide Tempel 1 comet, discovered in 1867, is about the size of Manhattan, and moves about the sun in an elliptic orbit between Mars and Jupiter every 5.5 years.
An additional U. S. Army contract worth about $219 million has been awarded to the tactical vehicles unit of Stewart & Stevenson Services. The contract modifications add another 1,706 Family of Medium Tactical Vehicles to an existing contract for FMTV trucks. Stewart & Stevenson has produced more than 29,000 FMTV vehicles from its Sealy plant in the past 14 years.
Texas today sued one of the nation’s largest drug companies–alleging it misrepresented the safety of a painkiller. Attorney General Greg Abbott says Merck and Company pushed to have Vioxx on the state’s list of approved medicine covered under Medicaid. The suit filed in Austin alleges Merck violated the Texas Medicaid Fraud Prevention Act. The lawsuit seeks $168 million. Officials at Whitehouse Station, New Jersey-based Merck didn’t immediately comment. Merck in 1999 began marketing Vioxx after brief clinical trials. The company withdrew the drug last September when research showed some patients who took it for a year and a half or more doubled their risk for heart attack and stroke. Texas pharmacists filled more than 700,000 Vioxx prescriptions under Medicaid at a cost of $56 million.
I-Sector Corporation of Houston is acquiring the network solutions business of InfoGroup Northwest for $1.9 million and I-Sector common stock. Oregon-based InfoGroup will become part of I-Sector’s InterNetwork Experts subsidiary, but will keep the InfoGroup Northwest name.
The U. S. Department of Labor’s Occupational Safety and Health Administration has cited Ramos Industries of Houston, proposing penalties of $100,000, for exposing employees to trenching and excavation hazards. OSHA is citing the company for operating an unprotected excavation while installing a concrete manhole at a Palmhurst, Texas worksite. Ramos employs about 254 workers.
Ericsson today opened a research and development center in Plano. The Swedish maker of wireless equipment plans to add about 370 jobs in Texas over the next year and a-half. Ericsson will operate the R&D center with a major customer–Cingular Wireless. Governor Rick Perry, Ericsson Chief Executive Carl-Henric Svanberg and Cingular officials were in Plano to announce the new center. The center opens with 30 employees in a building already housing Ericsson’s U. S. headquarters. It has room to add more than 100 additional engineers. The staff will work on telecommunications hardware and software and new functions for wireless devices.
Driver advocacy groups say a record number of vehicles will hit the road over the July 4th holiday weekend. Despite high gasoline prices, AAA estimates that more than 34 million people will be on the roads this weekend, up 2.6 percent from last year. Experts have also identified the 25 worst traffic bottlenecks in the country. They say the worst include the Oregon coast, the Tidewater region of Virginia, the Maryland/Delaware shore, Branson, Missouri and the outer banks of North Carolina. AAA is teaming up with the American Highway Users Alliance and Trip, a national transportation research group, to lobby Congress to pass a permanent highway and mass transit bill. They say funding is vital if rural areas that Americans now cherish are to remain accessible.