Visa Inc. (NYSE: V) is set to go public tomorrow in what promises to be the largest initial public offering in U.S. history. Shares are expected to price at $44 per share in a $10.2 billion IPO that is second only to Commercial Bank of China's $22 billion IPo in 2006. Many investors are bullish on the offering after MasterCard (NYSE: MA) shares more than tripled since its offering in 2006 while both companies have been posting spectacular growth numbers.

The first concern that many investors cite with Visa is the poor economy, but this is a relatively insignificant issue for several reasons. It is important to realize that companies like Visa and MasterCard have been able to thrive during the credit crisis because they do not extend credit to cardholders. Instead, it is the issuing banks that take on the credit risks and are now facing defaults. Visa makes the majority of its income by charging vendors a small transaction fee each time a card is used.

The second major concern is that consumer spending is in decline and will hurt earnings. It is true that consumer spending is down, but credit card usage isn't slowing down at all. In fact, industry reports show that usage is on the rise. More than 55% of all U.S. transactions by 2011 will take place with credit cards compared to just 40% in 2005. Spending on luxury goods may be slowing, but consumers are starting to use credit cards for even their staple purchases like food and gas.

The third major concern is that the IPO will be too expensive to buy directly. The Visa IPO has been anticipated for quite some time, so it is likely that shares will soar on their first day of trading. As a result, many investors pushed their funds into rivals like MasterCard in order to benefit from the so-called "peer upside" that often affects related companies. Other investors put their money in companies that stand to directly benefit from the IPO. These companies include JP Morgan Chase (NYSE: JPM), which will cash in $1.3 billion, and others like Bank of America (NYSE: BAC).

In the end, the Visa IPO is one of the most anticipated one on Wall Street this year and will set the mood for a long time to come. The company itself is safe from many of the credit concerns facing the economy and will likely maintain its impressive growth rate. However, the popularity will likely push shares up and force many investors to take positions in other companies that may benefit from the rise. Combined, these factors make V a stock worth watching!

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Conseco Inc. (NYSE: CNO) plans to stick to its guns after being pressured to give up two board seats to Steel Partners. The activist hedge fund demanded two board seats in order to effect a review of strategic alternatives for the troubled insurance company. However, Conseco revealed today that it has been reviewing such alternatives for several months and has engaged Morgan Stanley as its strategic advisor through the process.

Conseco CEO Jim Prieur said, "We share with Steel Partners, as well as our other shareholders, a common interest in taking actions that will increase the value of the company for shareholders. In that regard, we have been working with a major investment bank for several months regarding strategic alternatives and plans to maximize shareholder value for Conseco. We believe, and hope Steel Partners would concur, that we already are exploring courses of action suggested by them."

Conseco also revealed fourth quarter numbers yesterday that many viewed as highly disappointing. The insurance company posted a net loss of $72.2 million, or 39 cents per share, including a $23 million net realized investment loss and a $68 million valuation allowance for deferred tax assets. Conseco faces a considerable amount of work ahead as it stabilizes its fundamentals while working with the SEC to correct any past errors.

In the end, shares are up today after yesterday's drop because Conseco appears to be dedicated to conducting a review of its strategic alternatives. Typically, this means that managmenet would be open to a sale that could unlock substantial value for shareholders. Since the stock is artificially depressed for non-material reasons, the likelihood of a strategic or financial buyer is significantly enhanced. This makes CNO a stock worth watching!

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The airline industry may be ripe for mergers financially, but pilots are finding themselves unwilling to negotiate. Delta Air Lines (NYSE: DAL) announced an overhaul of its operations today after talks with Northwest Airlines (NYSE: NWA) have reportedly hit a stalemate. The move should help the airline reduce its costs while it continues to work towards finding a potential suitor that would give it financial economies of scale.

A letter from Lee Moak, head of the Delta pilots union, said that the carriers haven't been able to negotiate a benefits and seniority agreement that satisfies both ends. It also refers to the discussions in the past tense, which suggests that further talks are not likely for the time being. This didn't come as a surprise to many investors as reports in the past indicated that negotiations were moving slowly on the negotiation of a key agreement.

Meanwhile, Delta announced that it will offer voluntary severance payouts to roughly 30,000 employees and cut domestic capacity by an extra 5 percent this year as part of its plan to deal with soaring fuel costs. A memo to employees noted that the airline's goal is to cut 2,000 frontline, administrative and management jobs through the voluntary program and other initiatives. The move will eliminate more than half of its 55,044 person workforce.

Fuel costs are beginning to become a serious problem for airlines, especially after OPEC announced that it would not raise production levels for the year. Delta's actions followed other initiatives like fare hikes and reduced routes by Northwest and Continental as airlines struggle to remain profitable. So far, Southwest Airlines (NYSE: LUV) remains as one of the only truly profitable airline despite recent grounded planes.

In the end, airlines are still facing many problems with high costs that need to be solved. A merger may have solved some of these problems by enabling the airlines to obtain an economies of scale whereby costs could be lowered through bulk purchasing of fuel and different routes could be combined to increase efficiency. Unfortunately, while the deal may have worked out financially, pilots shot it down once again. However, this is still a situation worth watching in case talks resume.

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The financial sector rebounded today on higher-than-expected earnings by two large investment banks while there are still many liquidity concerns floating around the marketplace for other firms with large exposure to subprime securities and illiquid fixed investments. Meanwhile, many analysts are expecting a wave a consolidation to hit the sector under government-funded bailouts for the remainder of those in trouble. Here are a few of the highlights:

Goldman Sachs Group (NYSE: GS) had successfully avoided the subprime crisis when its own traders made a big bet on a decline, but the tough credit markets are finally catching up to the world's biggest securities firm. The company announced a $1 billion loss on residential mortgage loans along with another billion dollar loss on credit products and investment losses. However, shares rose over 8 percent as the damage was far less severe than many predicted.

Lehman Brothers (NYSE: LEH) is another firm that was able to avoid the subprime crisis, but is now finally succumbing to the rough economic climate. The firm reported a 57 percent drop in its net income on weakness in its fixed income division. Its fixed income revenues declined 88 percent amid very poor liquidity in the credit markets forcing the company to write-down the value of many of its securities. However, the damage is less than what many were expecting.

Bear Stearns' (NYSE: BSC) second largest shareholder, Joseph Lewis, called JP Morgan's (NYSE: JPM) offer "derisory" and plans to vote against the buyout. Shares are being repriced for such a vote as many are now speculating that the deal will not be immediately approved. If the market continues to improve, the company may be able to negotiate for a higher price or other bidders could end up coming to the table. This speculation has shares currently trading at more than double the proposed buyout price.

Merrill Lynch (NYSE: MER) shares are up over 4 percent today despite a report by Wachovia citing it as the next riskiest brokerage after Bear Stearns. The firm still has some $30.4 billion in subprime exposure and the worst liquidity ratio at only 52 percent. However, many do not feel that the investment bank is in any real danger as the problems as Bear Stearns were seen as more of a management issue than a liquidity issue in the first place.

There is also some speculator that Lehman Brothers or Citigroup (NYSE: C) may be the next two banks to be acquired in a widely-expected wave of acquisitions to hit the financials following these large declines. The Federal Reserve can't buyout firms itself, so it tends to sponsor larger companies in acquiring weaker ones. We already saw this with the Bear Stearns-JP Morgan deal and may see it with these two companies if they end up showing increased exposure.

In the end, the financial sector is extremely volatile these days and promises to remain that way for some time. It will be interesting to see whether the Federal Reserve ends up sponsoring more buyouts while strong companies like Goldman Sachs and Lehman Brothers continue to impress the street.

Yahoo! Inc. (NASDAQ: YHOO) the internet search and media company that continues to tango with Microsoft Corporation (NASDAQ: MSFT) continues its attempt to prove its worth and strength with a press release today reaffirming its forecasts for the coming year.

The release claims cash flow may almost double to $3.7 billion in the next three years. Yahoo also predicted earlier this year that first-quarter sales for 2008 would be up to $1.38 billion with annual sales as high as $5.95 billion.

"Yahoo! is positioned for accelerated financial growth - we have a powerful consumer brand, a huge global audience and a highly profitable operating model," CEO Jerry Yang is quoted as saying in the press release. "With industry-leading tools, technology, people and platforms, Yahoo! is poised to capture growth in display advertising where we believe growth will be greatest. Combined with our recent progress in search monetization, Yahoo! is well positioned to provide the broadest range of products to our advertisers while delivering the most compelling experiences to users."

The obviously self-serving announcement is only the most recent in a long list of statements made since Yahoo rejected Microsoft's $44.6 billion unsolicited offer in February on the grounds that the price "substantially" undervalued the company - specifically, its stake in the number two Asian search engine.

Microsoft, the world's largest software maker, continues to pursue Yahoo while Google Inc. (NASDAQ: GOOG) also feels the need to get involved. Despite Google's recent acquisition of DoubleClick which raised concerns combined with a privacy policy that concerns watchdog groups, Google CEO Eric Schmidt predictably said, "We would be concerned by any kind of acquisition of Yahoo by Microsoft. We would hope that anything they did would be consistent with the openness of the Internet, but I doubt it would be." Translation: a Microsoft-Yahoo combination would be a competitive threat to our market domination and we at Google will say anything to stop it. Google is not an inept competitor, so such obvious concern about the deal bodes well for the logic of the acquisition and the advantages gained for Microsoft.

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BMC Software Inc. (NYSE: BMC) announced today that it would buy BladeLogic (NASDAQ: BLOG) for $800 million cash, valuing BladeLogic at $28 per share.

The $28 per share purchase price is almost a 20% premium to BladeLogic's closing price Friday, before the deal was announced. With this acquisition, BMC seeks to increase its portfolio of programs that automate customers' data centers. BMC has existing software suites that manage computer systems, but the BladeLogic acquisition is seen as adding strength to an area rife with competitors such as Hewlett-Packard Co. (NASDAQ: HPQ).

BladeLogic programs help simultaneously update programs and make changes over vast computer networks. For instance, if a new security patch becomes available, the program can automatically update individual PCs operating systems without necessitating a support person to go physically to every single network computer. BladeLogic's offerings also allow servers and PCs to be managed together.

"We coveted this business for a long time. Getting them to sell was not an easy process. It took time," BMC CEO Bob Beauchamp said in a conference call about the purchase. "Organizations around the world will spend more than $140 billion dollars this year running data centers. Automation is the only way IT can bring this spending under control and still meet the reliability and time-to-market requirements of their businesses.  BMC’s acquisition of BladeLogic will create the new IT Service Automation leader, unique in its ability to provide these critical capabilities.  It is a natural and very significant next step in our vision of Business Service Management.”

BladeLogic CEO Dev Ittycheria said on the conference call that his company's board shopped around for other offers after getting a proposal from BMC, though he didn't give details of the process. It was widely speculated that BladeLogic, given its relatively small size and attractive business, would be acquired.

BMC has said the deal will reduce its operating earnings next year but add to its profits by 2010. Though BladeLogic shareholders still have to vote on the deal, it has been unanimously recommended by the board and is expected to easily pass.

BMC shares are are down 6% on the news.

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Magellan Heath Services (NDAQ: MGLN) may be good at managing the health of its patients but the company is another story. The healthcare company's stock is trading more than 20 percent off of its 52-week highs and many shareholders are now demanding the company take action to unlock shareholder value. Unfortunately, the company has been unresponsive to these shareholders who are now threatening to take their argument public.

The Shamrock Activist Value Fund disclosed a 4.6% stake in Magellan and letter to the board of directors in their most recent Schedule 13D filing with the SEC. The activist hedge fund commended management for their recent acquisitions of NIA and ICOR but conveyed their belief that the company should now focus on integrating these two acquisitions and turn its attention to shareholders.

"Early indications suggest NIA is roughly tracking to plan and ICORE’s performance is lagging acquisition projections," said Shamrock in its letter. "We find it reasonable for shareholders to expect financial results that demonstrate that the Company’s strategy is one that can create value for shareholders. Until that time, we believe it imprudent for the Board to endorse additional acquisition activity."

Shamrock requested that Magellan authorize a $478 million one-time special dividend of $12 per share. The activist proposed that this be funded through a combination of the company's $315 million in unrestricted cash and billions in debt capacity. Unfortunately, Magellan management disagrees and that has many shareholders concerned that they may be interested in making more acquisitions instead.

"We have been disappointed by the Board’s decision to not meet and engage with us in a discussion concerning this issue," said Shamrock's Arik Ahitov. "Given the lack of response and what we believe is an ongoing risk factor and drag on the company’s valuation, we are left with no choice but to make our concerns public."

In the end, any acquisitions would likely lead to increased costs, pressured margins, and higher debt while a successful attempt to unlock value through a special dividend could result in a substantial rise in the stock's price. It will be interesting to see how the company responds to this public letter, but in the meantime, this is definitely a stock worth following!

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The CME Group Inc. (NYSE: CME) and Nymex Holdings Inc. (NYSE: NMX) finally inked a merger agreement that has been in the works since January when talks between the two were first disclosed. The move comes as CME is still working to integrate the recently acquired Chicago Board of Trade (CBOT) while other exchanges continue to eye M&A opportunities. The push towards so-called global exchanges has forced many of these deals through in order to not only grow but simply remain competitive.

The $9.3 billion deal will give Nymex shareholders cash and stock worth approximately $100 per share. This number is currently 15% higher than Nymex's current price due to risks with the deal and a decline in CME's share price- which lowers the value of the stock portion of the buyout. The two boards have approved the transaction, but it will be interesting to see how much shareholder support they will receive given the steep declines today.

The transaction also leaves only a handful of independent exchanges remaining. The next buyout candidate that many see is IntercontinentalExchange (NYSE: ICE), which specializes in over-the-counter futures. In particular, the firm is known for its U.S. Dollar Index futures. Notably, ICE has been on a bit of a buying binge of its own in the past in an effort to boost its energy-related products. However, a value of just $8.7 billion and consistently recordbreaking volumes on its exchanges certainly leave the door open.

Smaller acquisitions could include companies like MarketAxess Holdings (NDAQ: MKTX), which specializes in electronic trading of corporate bonds and fixed-income securities. This market may not be as hot as over-the-counter futures, but it does add a robust revenue stream and access to 647 active institutional investors that may be interested in other products. However unlike the futures exchanges, shares of this stock are well off of their 52-week highs.

In the end, the exchanges have seen over $46 billion in dealmaking over the past two years and it will likely not stop until the growth in the sector slows. The only remaining futures exchange is Intercontinental, which is already seen by many as a potential acquisition candidate. However, other small exchanges like MarketAxess could also see some deals in the works despite their slow growth. Combined, these factors make the exchange sector one worth following closely!

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Captaris Inc. (NDAQ: CAPA) shareholders received the best news one can hope for in these markets- an unsolicited buyout bid. The $4.75 per share bid currently on the table was made by Vector Capital and comes at a 36% premium to Friday's close. The software developer announced that it will review the $126 million bid and retained RBC Capital to explore other expressions of interest that it has received as well. So, is this a deal that is worth pursuing or is the company worth more?

"We have received unsolicited inquiries from multiple parties who have expressed an interest in a potential transaction with Captaris," said the company in a statement. "We plan to conduct a fair, orderly and broad-based process. This process will commence immediately and we expect to conclude it as expeditiously as possible. Our Board of Directors is committed to conducting a thorough evaluation of alternatives to enhance value for all Captaris shareholders."

Vector Capital, which already owns 10.2% of Captaris, said it was delighted that the company was seeking ways to enhance shareholder value but concerned it was not committed to completing its review expeditiously. "Hiring another capable investment bank, RBC Capital Markets, to replace Credit Suisse and conduct another strategic review comes across as a delaying tactic," Vector said in a letter to the board of directors.

So, why are so many people interested in Captaris? The stock may be trading with an astronomical multiple in today's terms, but with $1.77 per share in cash, a forward multiple of 38x earnings, a price-to-sales ratio of under one, and a book value of $3.55 per share, many are seeing it as a bargain. The shares are definitely on sale as well, trading down 41% during the last 52-weeks despite today's move towards the upside.

In the end, this is all good news for shareholders who could see higher higher bids emerge for the company. After all, Vector Capital is only a financial buyer, which traditionally offer much less than any strategic buyer. It will be interesting to see what other bidders emerge as the company moves forward with exploring their strategic alternatives. Investors should watch for any Schedule 13D filings by Vector Capital or other announcements made by the company via 8-K filings with the SEC.

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Stocks plummeted more than 200 points early this morning after news of an unprecedented bailout of embattled Bear Stearns (NYSE: BSC) hit the wires last last night. J.P. Morgan (NYSE: JPM) announced that it would purchase Bear Stearns for a mere $2 per share with $30 billion in financing provided by the Federal Reserve. The disappearing act that wiped out billions of dollars worth of value in a matter of days has investors on edge now more than ever.

The problems at Bear Stearns began when speculation of a liquidity crisis at the company hit the market. The rumors turned to reality when the steep drop in the company's shares caused many of its creditors to ask for more collateral that the highly leveraged firm didn't have available. The emergency bailout now involves J.P. Morgan guaranteeing all of these trading obligations and was designed to reduce the risk of the broader financial system freezing up even more.

Some Bear Stearns shareholders are also looking at the possibility of additional bids from other interested parties that could include private equity firms like J.C. Flowers & Co. and Kohlberg Kravis Roberts & Co. Currently, shares are trading well above the $2 per share buyout price despite many analysts now saving that there is zero possibility of any additional bidders. The reason is that nobody knows the extent of the damage while J.P. Morgan actually plans to lose $6 billion on the transaction.

Unfortunately, many other vulnerable investment banks took a major hit on the news and could suffer as a result. Lehman Brothers (NYSE: LEH) lost nearly a third of its value so far today while even strong companies like Goldman Sachs (NYSE: GS) took a nearly 10 percent hit. Not all of these investment firms have material liquidity problems, but the steep drop in share prices could force margin calls and cause some major problems.

In the end, Wall Street is still trying to come to grip with the fact that a major investment bank trading at over $57 per share days ago could lose so much value so quickly with a mere whisper of liquidity concerns. Today's bailout will keep the larger financial system liquid, but the future now looks more cloudy than ever as the body count from the mortgage meltdown and credit crisis keeps increasing on a daily basis.

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