Afternoon Review

Boeing (BA) -6.45%
As Delta Air Lines integrates its fleet with that of recently acquired Northwest Airlines, both carriers intend to seek “significant” changes to aircraft orders that both carriers had placed individually with Boeing. The combined company is likely to scale back a Northwest order for Boeing’s new 787 Dreamliner, and ask Boeing to expand a Delta order for the more expensive 777-200LR, which carries more passengers and is better for long overseas routes.

A change in Delta’s orders is unlikely to disrupt its manufacturing schedule or hurt its bottom line because of the 895 booked orders queued up behind Northwest for 787s. Before its merger with Northwest, Delta flew only aircrafts made by Boeing companies, but will now consider aircrafts from Airbus and other manufacturers too.


Johnson & Johnson (JNJ) -5.55%
JNJ announced that they will acquire breast-implant maker Mentor Corporation for $1.07 billion in cash. JNJ said the purchase will give JNJ the “opportunity to strengthen its presence in aesthetic and reconstructive medicine.” The acquisition is expected to close in the first quarter of 2009 and will hurt earnings by 3 cents to 5 cents a share for the year.

This is JNJ’s second acquisition in as many weeks. Last week JNJ bought Omrix Biopharmaceuticals, which manufactures and markets biosurgery and immunotherapy products. Strong cash flow and a healthy balance sheet lend support to JNJ’s decision to go on the hunt. The company has already produced more than $20 billion in operating cash flow year-to-date. Moreover, $14 billion of cash and equivalents has been sitting on JNJ’s balance sheet since the end of the third quarter.

Here is Deal Journal’s look at the “$1 Billion Bet on Vanity”


Rohm & Haas (ROH) +3.52%, Dow Chemical (DOW) -3.34%
DOW, which is buying ROH for $15.4 billion, signed definitive agreements to sell a 50 percent stake in its basic-plastics unit to Kuwait’s Petrochemical Industries to help pay for its ROH purchase.


Intel (INTC) -8.99%
Chipmakers declined after the Semiconductor Industry Association said global sales of the equipment fell 2.4 percent in October because of a worldwide economic slowdown and lower prices for memory products.

Citigroup (C) -22.20%
Citi continues to reshape its portfolio, shedding unnecessary holdings while focusing on more strategic assets. Citi plans to sell its Japanese trust, NikkoCiti Trust and Banking and estimates they could receive roughly $418 million for the trust.

Separate reports indicate a Citigroup fund is entering a deal to purchase a highway operating unit from Spanish company Sacyr Vallenhermosos for $10 billion.


Quick Hits

• S&P has deleted 30 companies from its S&P 500 stock index so far this year based on their shrinking market values, including 16 since September 10. In September, S&P lowered the bar for inclusion in the index to $4 billion from $4.5 billion.
• Bloomberg reports that Dell (DELL) lost the weekend sales battle against Hewlett-Packard (HPQ) in Best Buy stores. According to a survey from Thomas Weisel Partners, customers preferred Hewlett-Packard PCs five-to-one over Dell’s during the three-day weekend.
• It's official, we have been in a recession since December 2007.

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Peter Lazaroff, Junior Analyst