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Pre-Market: Medtronic Gets an Irish Tax Shelter; Brent Crude Rises to $114


New York State manufacturing surges in May.

Stock futures pointed toward a lower open on Monday. Before the opening bell, Dow Jones (INDEXDJX:.DJI) futures fell 0.28% to 16,695. Nasdaq (INDEXNASDAQ:.IXIC) futures moved lower, falling 0.27% to 3,768.75.  Futures on the S&P 500 (INDEXSP:.INX) were down 0.27% to 1,923.


Medtronic Inc. (NYSE:MDT), the world's second largest maker of medical devices, will acquire Dublin-based device maker Covidien Plc (NYSE:COV), for $42.9 billion in cash and stock. Medtronic is paying roughly a 29% for Covidien, based on its closing price on Friday. The acquisition will provide a significant tax advantage for Medtronic, which will move its headquarters from Minneapolis to Ireland, using the country as a tax shelter and freeing up $14 billion in cash Medtronic has kept overseas to avoid US taxes. In addition, Covidien's portfolio could give Medtronic the advantage it needs to overtake Johnson & Johnson (NYSE:JNJ), the world's largest medical-device maker. Shares of Medtronic rose 12.04% in pre-market trading. Covidien rose 33.66%.

Siemens (OTCMKTS:SIEGY) and Mitsubishi Heavy Industries (TYO:7011) are expected to announce a joint bid for French energy equipment manufacturer Alstom (OTCMKTS:ALSMY), challenging an existing $13.5 billion offer by General Electric (NYSE:GE) made in April. GE has faced opposition from the French government despite Alstom's board approving the deal. The Siemens-Mitsubishi deal is complex -- leaving Siemens in control of Alstom's highly valued gas turbine business, and Mitsubishi with Alstom's power distribution equipment assets -- but it looks to appease the French by allowing the French government to retain influence and preserving Alstom's brand name and identity. GE fell 0.22% before the opening bell.

North American pipeline operator Williams Companies Inc. (NYSE:WMB) has announced it will acquire Access Midstream Partners LP (NYSE:ACMP) for $5.99 billion, making Williams the pipeline industry's largest gathering and processing master limited partnership (MLP). A further merger between the companies assets, which has yet to be approved, would create an MLP valued at $100 billion. MLP is attractive in the pipeline industry because it is tax-exempt. Shares of Williams rose 10.24% ahead of the open. Access was up 5.57%.


The Empire State manufacturing index surged 17.7 points in May to a reading of 19.1, showing huge momentum in the New York state manufacturing sector. The reading, which was the highest since June 2010, was coupled with a 13-point gain in employment in the sector. At 9:00 a.m., the US Treasury will release its international capital data, which tracks financial instruments including Treasury securities, agency securities, corporate bonds, and corporate equities into and out of the United States. The Federal Reserve will report its monthly industrial production index at 9:15 a.m. The National Association of Home Builders will deliver its monthly housing market index  at 10:00 a.m.

Global Markets

Rising Brent crude prices drove global stocks lower at the top of the week. A barrel of Brent had been projected to reach $116 by the end of the year. Now, for the first time in nine months, Brent is trading as high as $114, after Iraqi militants defeated the military in Iraq's northern region and are moving toward Baghdad. Iraq is OPEC's second largest producer of oil and is projected to provide 60% of the group's growth through the rest of this decade. In China, the central bank extended its reserve-requirement cut to more national banks including China Merchants Bank Co. and Industrial Bank Co. in an effort to bolster its stimulus. Meanwhile, China surpassed the US as the world's biggest issuer of corporate debt.

In Europe, stocks retreated for a second day. The Ukraine conflict suffered its bloodiest day since the conflict began after 49 Ukrainian soldiers died when pro-Russian rebels shot down a military transport plane. Meanwhile, Gazprom (OTCMKTS:OGZPY) reduced its gas supplies to the Ukraine after Kiev and Moscow failed to agree on the price of future gas deliveries and Kiev failed to meet the deadline to pay off its gas debts to Russia.

Twitter: @brokawbrokaw
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