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Valero may raise $3.5 billion through retail arm auction: sources

NEW YORK, Thu Sep 27, 2012 – Valero Energy Corp. is selling its retail business, which operates gas stations and convenience stores, through an auction that could fetch more than $3.5 billion and has lured the interest of private equity firms and convenience-store operators, people familiar with the matter said.

Valero’s retail business, which consists of nearly 1,000 U.S. stores and some 775 units in Canada, has around $450 million in annual earnings before interest, tax, depreciation and amortization and could sell for around 8 times EBITDA, or about $3.5 billion, two of the people said.

The U.S. refining company had said in July it would split off its gas station and convenience stores, and cited a tax-free spinoff to shareholders as one of the options.

Valero, which is being advised by Credit Suisse Group on the retail split, has sent financial information about the unit to interested parties and is expected to receive initial offers in October, those familiar with the matter said.

Several big private equity firms, including TPG Capital LP and Carlyle Group LP, are among the parties that are taking an initial look, one of the people said.

Large convenient store chains such as Alimentation Couche-Tard Inc. or 7-Eleven would also likely have some interest, two other people said.

U.S. commercial paper market shrinks for fourth straight week

NEW YORK, Thu Sep 27, 2012 – The amount of seasonally adjusted U.S. commercial paper contracted for a fourth consecutive week in the week ended September 26, Federal Reserve data showed on Thursday.

U.S. seasonally adjusted commercial paper outstanding fell $18.1 billion to $990.1 billion in the latest week.

Non-seasonally adjusted commercial paper outstanding – which some analysts consider is a more reliable reading than the seasonally adjusted one since it has been distorted by the financial crisis – declined $14.8 billion to $970.2 billion.

U.S. non-seasonally adjusted foreign bank commercial paper outstanding, however, rose $4.9 billion to $129.8 billion.

Goldman to pay $12 million to settle “pay-to-play” probe

WASHINGTON, Thu Sep 27, 2012 – Goldman Sachs Group Inc. agreed to pay about $12 million to settle charges that it violated “pay-to-play” rules in a case involving undisclosed campaign contributions to a former Massachusetts state treasurer who was a candidate for governor in the state, U.S. securities regulators said on Thursday.

A former vice president in Goldman’s Boston office, Neil Morrison, worked on the campaign of Timothy Cahill around the same time that he was also soliciting underwriting business from the Massachusetts treasurer’s office, the Securities and Exchange Commission said.

Goldman settled without admitting or denying the charges. The SEC also charged Morrison, and the case against him continues.

A Goldman spokesman, Michael DuVally, said in a statement the firm detected Morrison’s activities, fired him, and alerted and cooperated with regulators.

“We accept responsibility for the consequences of his unauthorized actions under the terms of the settlements announced today and are pleased to resolve these investigations,” DuVally said.

A lawyer for Morrison did not immediately respond to a request for comment.

Tempur-Pedic to buy rival Sealy as specialty bed dominance slips

LEXINGTON, Ky., Thu Sep 27, 2012 – Tempur-Pedic International Inc. will acquire rival mattress maker Sealy Corp. for about $242 million and assume about $750 million in debt, as rivals snip away at its once-dominant position in specialty beds.

Tempur Pedic, which pioneered the specialty beds market with foam-based technology developed by NASA, is attempting to regain market share from fast-moving rivals that are also chasing the burgeoning market for foam mattresses, popular with aging baby boomers.

The offer price of $2.20 per share represents a 3 percent premium to Sealy’s Wednesday close of $2.14. Sealy shares were trading above the offer price at $2.22 in pre-market trade on Thursday, indicating that some investors expect a higher offer.

Tempur-Pedic shares were up 8 percent at $28.98.

Tempur-Pedic said it had received consent from shareholders holding about 51 percent of Sealy, the long-time market leader. It said no other shareholder approvals are needed to complete the deal.

Private equity firm Kohlberg Kravis and Roberts & Co. owns about 44 percent of Sealy, a remnant of its $1.5 billion deal in 2004 to take the company private.

Earlier this year, Sealy’s second-largest shareholder, H Partners, launched an attack on KKR, accusing it of wiping out 90 percent of the mattress maker’s value, saddling it with debt, and milking it for fees.

Tempur-Pedic said it has secured $1.77 billion in financing from Bank of America for the deal and to pay down existing Sealy and Tempur-Pedic debt. Tempur-Pedic had long-term debt of $680 million as of June 30.

Merrill Lynch will act as lead arranger and bookrunning manager for the debt.

After the deal, Tempur-Pedic and Sealy will continue to operate independently and Sealy EO Larry Rogers will remain CEO of Sealy and report to Mark Sarvary, Tempur-Pedic’s CEO.

Job growth stronger in year to March than first thought

WASHINGTON, Thu Sep 27, 2012 – The U.S. economy likely created 386,000 more jobs in the 12 months through March than previously estimated, the Labor Department said on Thursday in a preliminary estimate of its annual “benchmark” revision to closely watched payrolls data.

Once a year, the department compares its non-farm payroll data, based on monthly surveys of a sample of employers, with a much more complete database of unemployment insurance tax reports.

It said its latest comparison suggests the level of employment in March was 0.3 percent higher than it had previously stated.

A final benchmark revision will be released in February along with the department’s report on employment in January. Government statisticians will use the final benchmark count to revise payroll data for months both prior to and after March.

A breakdown by industry sector showed 453,000 more total private sector jobs were created than initially thought, including 145,000 more jobs in the trade, transportation, and utilities category, plus 85,000 more in construction.

In contrast, the benchmark revision lowered the estimate for job creation in the government sector by 65,000, while it found that 25,000 fewer manufacturing jobs had been generated over the 12 month period than previously thought.

Durable goods drop worst since recession

WASHINGTON, Thu Sep 27, 2012 – New orders for long-lasting U.S. manufactured goods in August fell by the most in 3-1/2 years, pointing to a sharp slowdown in factory activity even as a gauge of planned business spending rebounded.

The Commerce Department said on Thursday durable goods orders dived 13.2 percent, the largest drop since January 2009, when the economy was in the throes of a recession. Orders for July were revised down to show a 3.3 percent increase instead of the previously reported 4.1 percent gain.

Economists polled by Reuters had expected orders for durable good  – items from toasters to aircraft that are meant to last at least three years – to fall 5 percent.

Last month, the drop in orders reflected weak aircraft and automobiles demand. Boeing received only one aircraft order in August, down from 260 in July, according to information posted on the plane maker’s website.

Transportation equipment tumbled 34.9 percent after racing ahead 13.1 percent in July. Excluding transportation, orders fell 1.6 percent after dropping 1.3 percent the prior month. Economists had expected this category to rise 0.3 percent after a previously reported 0.6 percent fall.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.1 percent, halting two straight months of hefty declines. That was above economists’ expectations for 0.5 percent gain.

RadioShack CEO steps down as company tries to hasten revival

FORT WORTH, Texas, Wed Sep 26, 2012 – U.S. consumer electronics chain RadioShack Corp. said CEO James Gooch will step down effective immediately, as the company seeks to revive its flagging fortunes.

“The board decided that the timing was right,” said company spokesman Eric Bruner.

“Moving forward with the decision sooner rather than later will help establish the right leadership to address the company’s challenges,” Bruner said.

The change comes at a time when RadioShack is struggling with low margins and vacancies in key executive positions.

The company, whose shares were up 2 percent in pre-market trading, reported an unexpected loss for the second quarter and suspended its dividend to help pay down debt.

RadioShack, once famous as a source of parts and tools for radio and electronics enthusiasts, has been increasingly focusing on selling low-margin phone calling plans and smartphones, particularly the Apple Inc. iPhone.

The company, which has a market value of about $255 million, was bumped off the S&P MidCap 400 index this week as its market capitalization was too small for it to be included in the S&P 1500. The shares have lost nearly three quarters of their value this year.

RadioShack said its board was conducting a search for a successor and would not rule out internal candidates. CFO Dorvin Lively will be the acting CEO.

Gooch, 44, joined RadioShack as CFO in 2006 and became CEO in May 2011.

RadioShack’s stock was up 2 percent at $2.61 in premarket trading.

Columbia Banking to buy West Coast Bancorp for $506 million

TACOMA, Wash., Wed Sep 26, 2012 – Columbia Banking System Inc. said it would buy West Coast Bancorp for about $506 million to expand its footprint in Washington and Oregon, the latest in a slew of deals in the community bank sector.

There have been 5 deals by publicly listed community banks this month, with values ranging from $3 million to over $900 million. Industry experts have predicted an increase in small bank mergers in the next few years.

The combination of Columbia Banking and West Coast Bancorp would have about $7.2 billion in assets and over 150 branches. There are over 7200 banks in the United States, the vast majority of which have less than $10 billion in assets.

Columbia Banking said it would pay for the deal with $264.5 million in cash and 12.8 million shares.

West Coast shareholders can choose to receive payment in common stock, cash or a combination of the two.

Columbia said West Coast shareholders would receive about $23.10 per share, a 14 percent premium to the stock’s Tuesday close.

West Coast shareholders would own about 24 percent of the combined bank.

Columbia said the deal would add to its earnings per share immediately and that it would be able to cut about a quarter of West Coast’s operating expense base.

Columbia’s shares closed at $18.85 on the Nasdaq on Tuesday. West Coast’s stock closed at $20.18.

Mortgage applications rose as rates hit new lows: MBA

NEW YORK, Wed Sep 26, 2012 – Applications for U.S. home mortgages rose last week as interest rates dropped to record lows in the wake of the Federal Reserve’s latest stimulus efforts, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 2.8 percent in the week ended Sept 21.

The MBA’s seasonally adjusted index of refinancing applications climbed 3.3 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, added 0.7 percent.

The refinance share of total mortgage activity increased to 81.2 percent of total applications, the highest share since early August.

Fixed 30-year mortgage rates tumbled 9 basis points to average 3.63 percent, the lowest level in the history of the survey.

The drop in rates followed the Fed’s announcement it will purchase $40 billion in mortgage-backed securities every month until there is improvement in the labor market.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.