After dealflow started strong earlier in the week, deal announcements were practically nonexistant Thursday as the sky seemed to be falling on the weight of possible credit rating downgrades and sobering earnings news. Meanwhile, a few stocks such as Willis Group Holdings Ltd.[WSH] and Cos. [MMC] -- because of renewed deal talks between them -- and Kellogg Co. [K] -- for its announcement of an acquisition of a Russian food company -- showed some signs of strength. The few bright spots were no consolation as the markets continued their freefall for the third day in a row. The DOW closed down 306.95, or 2.46%, to 12,159.21, and the Nasdaq fell 47.69, or 1.99%, to 2,346.90.
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Bond insurer Ambac Financial Group Inc. [ABK] got walloped on news that credit ratings agency Moody's Investors Services may downgrade the company below its current triple-AAA rating. The downgrade would eliminate the insurer's ability to garner new business. Investors were also spooked by a letter sent by Ambac minority stakeholder, Investment Advisor Evercore Asset Management LLC, to the insurer's board. The letter opposed the insurer's plan to raise additional capital, saying: "The notion of issuing equity with the stock now at a small fraction of that late December price is simply absurd. It is impossible for the value of future business to even come close to offsetting the dilution that will occur."
Meanwhile, Merrill Lynch & Co.'s [MER] morning earnings announcement that it lost $9.8 billion and would not sell stakes in cash cows BlackRock Inc. [BLK], and Bloomberg set the stage for the dour market.
Despite the sea of red on the market floors, dealmakers still managed to get some M&A deals done. Kellogg acquired one of Russia's largest cereal, biscuits and convenience producer, the United Bakers Group. Terms of the deal weren't revealed. Additionally, CNBC reported renewed deal talk between Willis Group and insurer Marsh & McLennan, sending shares of both companies up. In 2006, Marsh & McLennan rebuffed Willis' offer of a takeover. - Gerald Magpily
