Marsh & McLennan Companies, Inc. (NYSE:MMC) shares rallied over two points today after a Toronto investment firm controlling around 1.1 million shares urged the company to spin off two of its business units. K.J. Harrison & Partners said the insurance broker's performance had "deteriorated financially and operationally" and that its strategy was flawed.

"In our view, holding companies are effective only when they demonstrated that they can add value through excellence in capital allocation and management selection and retention," said K.J. Harris CEO Jim Harrison. "Marsh & McLennan is currently doing neither. Consequently, the share price trades 40% below our estimate of the underlying enterprises and these enterprises are each at a disadvantage to competitors."

K.J. Harrison demanded that the company put a proposal for such a split off in the proxy for the company's next annual meeting. It is likely, given this analysis, that other shareholders will jump on board. Similar actions taken on other holding companies have resulted in significant value being unlocked for shareholders. Combined, these factors make MMC a stock worth watching!

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Citigroup Inc. (NYSE:C) reportedly received a call from an invetment banker suggesting that it explore the possibility of merging with Bank of America (NYSE:BAC) as the bank deals with billions of dollars in writedowns stemming from losses in the subprime and credit markets. The rumor caused a spike in the stock, but the two banks immediately dismissed it as nothing more than rumor.

Citigroup's board responded by calling the approach "totally out of hand" saying that no discussions have taken place. Meanwhile, Bank of America said it never authorized a formal proposal to Citigroup. And finally, a person familiar with the matter reportedly said that Citigroup would be unlikely to consider such a merger as the bank would be very difficult to manage.

The rumor gained traction due to Citigroup's recent $7.5 billion cash infusion from the Gulf Arab emirate of Abu Dhabi, which gave it fresh capital to repair the subprime mess and explore other opportunities.The new Arab emirate will be the bank's largest shareholder following the transaction. Many speculated that the company may use this cash to acquire other bank stocks that are cheap as a result of the crisis.

In the end, this is news that is worth following. After all, there is likely to be continued speculation on the use of the funds Citigroup acquired. Bank stocks are also up today on hopes that the Fed will cut interest rates once again. Combined, these factors make C a stock worth watching!

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Transocean Inc. (NYSE:RIG) shares are up over four percent in today's trading as the stock continues its run despite a credit downgrade from Fitch. The stock is up recently on an announcement of its inclusion in the S&P 500, which will force many mutual funds to begin acquiring the shares during their next rebalance. It also marks the company as an industry giant.

So, is this downgrade worth worrying about? Well, Fitch downgraded the company's debt to BBB-, two notches above "junk" status, because of Transocean's intent to devote free cash flow during the next two years towards debt repayment. Luckily, the company has a very strong backlog and recently increased the diversification of its fleet, meaning that this may not be such a bad idea. In the end, the company will probably not have a problem with cash.

However, the company did establish a 364-day $15 billion bridge loan to fund its cash dividend to shareholders (as a result of the SantaFe merger), which will be reduced through a combination of debt and equity. This is what has caused some concern by the credit agency and several institutional investors because it means the company will be leveraging itself substantially in order to unlock value in its future cash flows in today's dollars.

In the end, Transocean is banking on the fact that it is underleveraged given its future cash prospects. This may be true, but we now know how quickly markets can turn when excess leverage is used. It was probably prudent for Fitch to cut ratings, but it doesn't mean their is a problem quite yet. Combined, these factors make RIG a stock worth watching!

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