morning call ... 06 06 2007

-We have seen the PE firms keep hunting for public firms, and they have growed their war chests, pressuring public firms to take action to stay beyond the reach. -A typical approach is asset sales. E.g GE sell its plastic operation and Citigroup investors ask for more assets sale and cost cutting. -defense mechnism: By selling underperforming asset, their price will increase. -Citigroup might boost its price by 37%, $100 bil, by splitting up the entire company. -implications is PE effect further lever up company balance sheet, might have a macro impact.