Apple (NASDAQ: AAPL) will release its iPad 2 today. (Reuters)

The SEC charged a former Goldman Sachs (NYSE: GS) director as part of its huge insider trading investigation. (Reuters)

Brent oil moved back above $115 and world stock markets fell. (Reuters)

Silver reached a 31-year high and gold hit a new peak. (Reuters)

The House of Representatives passed a bill to fund the federal government for two additional weeks. (Reuters)

Verizon Wireless indicated that a new version of the iPhone would charge customers based on data usage and not a flat plan. (Reuters)

TNK-BP has offered to buy 5% of BP plc’s (NYSE: BP) stake for $8.16 billion. (Reuters)

States may pass laws which allow online gambling although federal laws prohibit it. (WSJ)

Both parties endorsed a new study by the Government Accountability Office which say the federal government has a large number of agencies overlap and cause waste. (WSJ)

Nouriel Roubini’s consulting firm says as much as $100 billion in municipal bonds will default. (WSJ)

Merck (NYSE: MRK) disclosed that the FDA rejected its multiple sclerosis drug.

Ben Bernanke talked to Congress about plans to end the Federal Reserve’s stimulus program. (WSJ)

Carl Icahn is trying to get two more board seats at Dynegy (WSJ)

Groupon may have trouble in the Chinese markets like those other US online firms have faced. (WSJ)

Apple Inc will offer technology support for small businesses. (WSJ)

Nintendo will rely on new 3D technology to turn its sales around. (WSJ)

Manufacturing rates improved in the US and Europe. (WSJ)

GM (NYSE: GM), Toyota (NYSE: TM) and Nissan showed strong US sales for February. (WSJ)

The Pew Center on the States says states based budgets on overly optimistic revenue forecasts. (WSJ)

Federal regulators are pressing for down payments of at least 20% for loans labeled “low risk” (WSJ)

Twitter is trying to establish relationships with small advertisers. (WSJ)

The Motion Picture Association of American picked Chris Dodd as its new CEO (WSJ)

American Airlines (NYSE: AMR) cut capacity because of high fuel costs. (WSJ)

J Crew Group (NYSE:: JCG) approved a $3 billion buyout by its CEO and private equity interests. (WSJ)

Tobacco which contains menthol does not increase smoker health risk, according to the FDA (WSJ)

AIG (NYSE: AIG) will try to sell its large ownership stake in Met Life. (NYSE: MET) (WSJ)

The Energy Information Administration said US natural gas output hit a record last year. (WSJ)

Delinquency rates on commercial mortgage -backed securities rose. (WSJ)

Some consumers spent large amounts on their credits cards during the holiday season. (NYT)

The top ten hedge funds made over $28 billion last year. (FT)

LasVegas (NYSE: LVS) has been hit by a federal investigation of its finances which may hurt its prospects in China. (FT)

Cadillac moved ahead of Lexus, Mercedes, and BMW in US car sales. (Bloomberg)

Douglas A. McIntyre

TPG Capital and Leonard Green & Partners offered $43.50 to acquire the company and again take J. Crew private.  To say that ‘conflicts of interest’ allegations have flown here would be an understatement. While not a management buyout from Chairman and & CEO Mickey Drexler, he is expected to remain here and will have a post-merger stake.

CNBC’s David Faber has reported and others are starting to report that the merger was approved by shareholders though the deal has not closed yet because of the pending court cases.

Shares of J. Crew are now up over 1% at $43.56, so the hope is that the private equity buyers will sweeten the bid further to get the hurdles overcome and to close the deal sooner.  The problem with premiums over the buyout price is that when a deal is done it often gets done only at the original terms.  It is not as if Green and TPG pose any antitrust issues here.

JON C. OGG

Bloomberg reports that Big Lots has received interest from private equity firms Thomas H. Lee Partners LP and Bain Capital LLC. Private equity firm Leonard Green & Partners LP has agreed to purchase Jo-Ann Stores Inc. (NYSE: JAS) for $1.6 billion. Green has also teamed up with TPG Capital on a $3 billion offer to buy J Crew Group, Inc. (NYSE: JCG).

What makes retail attractive to private equity? Perhaps the biggest component is brand. A strong brand, such as Jo-Ann or J Crew, continues to attract customers, even if sales fall during periods of economic weakness. Once the economy perks up, the thinking goes, consumers will return to their favorite brands.

The good brands also maintain their value and, provided the private equity firm doesn’t screw things up, can be sold again in a few years for a nice profit. Demand among consumers for Jo-Ann and J Crew should continue to be strong.

Let’s not forget about Dollar General Corporation (NYSE: GD) yet.  It is not a takeover candidate and likely will not be.  It was taken by private in a private equity buyout and then was refloated as a public company all over again.  A trend to watch…

But what about Big Lots and BJs? What value do these chains bring to the table that would justify price tags north of $3 billion? In the first place, there’s real estate. Big Lots operates 1,389 stores in 48 states. The company had more than 40.5 million square feet of store space at the end of 2009, with an average of nearly 30,000 square feet per store.

BJ’s operates 189 stores from Maine to Florida. The average store size is 113,000 square feet, and the company owns or leases about 1.7 million square feet of logistics facilities.

Besides real estate, the two retailers do offer some brand power, though not as strong as either Jo-Ann or J Crew. BJ’s operates in large population markets, but with limited geographic reach. Big Lots is spread more widely, but the smallish store size could be problematic.

The bigger problem that Big Lots and BJ’s face is whether or not they can keep their customers as the economy improves. This is a bigger problem for Big Lots because it plays at the very low end of the market. Brand loyalty based price is not a long-term winner.

We looked at other potential acquisitions in the retail space a few weeks ago.  If a private equity firm were indeed looking for a retail play, it seems that either American Eagle Outfitters, Inc. (NYSE: AEO) or Aeropostale, Inc. (NYSE: ARO) could both be had for about the same price as BJ’s or Big Lots and are better deals simply because of brand strength.

Big Lots has given back some yesterday’s gain, at $38.92 in afternoon trading, down from an intra-day high of $39.10.

Paul Ausick

Citigroup (NYSE: C) will probably post a profit for the fourth quarter. (Reuters)

Goldman Sachs Group (NYSE: GS) will exclude US investors from its sale of shares in Facebook. (Reuters)

The FCC and Department of Justice are near a deal to approve Comcast (NASDAQ: CMCSA) taking a majority interest in NBCU from GE. (NYSE: GE) (WSJ)

Global capital markets are concerned about whether the EU will quickly create a fund for faltering economies in the region. (Reuters)

Blockbuster has asked its bondholders for more money. (WSJ)

European shares hit 28 month highs. (Reuters)

Apple’s (NASDAQ: AAPL) results will rise sharply for the last quarter amid questions about the health of Steve Jobs. (Reuters)

Research In Motion (NASDAQ: RIMM) said it would honor an Indonesian ban against distribution of pornography. (Reuters)

The OECD says cyber attacks could badly damage global information infrastructure. (Reuters)

J Crew Group (NYSE: JCG) is close to settling shareholder lawsuits over a purchase of the company by Leonard Green and TPG Capital. (Reuters)

The “poison pill” takeover block will be reviewed in Delaware court. (WSJ)

Some technical investors believe the market is close to a major sell-off. (WSJ)

A number of regulations supposed to come from the Dodd Frank law are late. (WSJ)

OPEC raised its forecast for crude demand in 2011. (WSJ)

Airbus won a large order from Virgin. (WSJ)

US farmers may plant an extra 10 million acres of crops to handle rising demand. (WSJ)

The Boeing (NYSE: BA) 787 will resume test flights. (WSJ)

Rio Tinto (NYSE: RTP) said it had record ore output. (WSJ)

IBM (NYSE: IBM) has begun a push into business analytics software. (WSJ)

Republicans may try to block a rise in the debt limit of the US government. (WSJ)

Sales growth of US companies could be hurt by rising costs and American firms look to 2011 earnings. (WSJ)

Nokia (NYSE: NOK) will cut back on free music downloads. (WSJ)

Apple shareholder are upset the the company will not give out part of its nearly $70 billion in cash. (WSJ)

Foreign banks are aggressively borrowing money in the US because of low interest rates. (WSJ)

The price of Google (NASDAQ: GOOG) Android open source software gives it an advantage over other operating systems like Apple’s. (WSJ)

A former Julius Baer banker gave customer details to WikiLeaks. (NYT)

GE (NYSE: GE) will work with business interests in China to compete with Boeing (NYSE: BA) and Airbus. (NYT)

Support among strong EU nations for a larger regional bailout fund has risen. (NYT)

China’s funding of poor nations topped that of the World Bank. (FT)

State and municipal pensions face a $2.5 trillion shortfall. (FT)

Nearly half of all European securitization could be downgraded by S&P. (FT)

Citigroup (NYSE: C) still faces problems with its troubled mortgage portfolio. (Bloomberg)

Upper level households has been the key to a rise in consumer spending. (Bloomberg)

Douglas A. McIntyre

Apple Inc. (NASDAQ: AAPL) is back in the health focus as Steve Jobs sent a memo to employees saying that he is taking a second medical leave of absence in two years so that he can focus on his health.  Be advised, Frankfurt trading in Apple is generally quite thin but Frankfurt trading on Monday had Apple shares down about 6.7%.  If that were to hold in the U.S. on Tuesday then we’d be sitting just above $325 all over again.

BP Plc (NYSE: BP) rose 2% in London trading on Monday after it signed a ROSNEFT share exchange pact that allows it to get access into Russian oil.  BP made our own “Best Big Oil Stock for 2011″ but we would caution that if the Monday gain holds that BP’s ADR shares will be back above $50.00 for the first time since May after the Deepwater Horizon disaster.

E-Commerce China Dangdang Inc. (NASDAQ: DANG) is one where the plot is thickening over hot Chinese IPOs for US ADRs.  The quiet period is about to end and a blogging post from China Dangdang’s CEO criticized Morgan Stanley for under-pricing its IPO.  AT $33.86 on Friday, the post-IPO range has been $22.57 to $36.40 after its 17 million shares sold at $16..00 per share after an initial price target range of $11 to $13 per share.

Eurozone finance ministers will debate an increase in the region’s bailout fund. (Reuters)

Investors are looking for more strong banks earnings after the success of JPMorgan Chase’s earnings (NYSE: JPM).  (Reuters)

J Crew Group (NYSE: JCG) has received no rival bid to that from CEO Michael Drexler and private equity firms TPG and Leonard Green. (Reuters)

The euro fell over concerns that the EU rescue fund will not be increased. (Reuters)

The Organization for Economic Cooperation and Development (OECD) said a cyberattack could seriously damage the world’s financial sector. (Reuters)

The CEO of UBS (NYSE: UBS) pushed China to make economic reforms. (WSJ)

The Industrial & Commerce Bank of China will open a number  of branches in Europe. (WSJ)

The new CEO of Hewlett-Packard (NYSE: : HPQ) will overhaul top management. (WSJ)

Large retailers are pushing into the grocery business. (NYT)

Small European nations will have trouble balancing austerity and growth. (NYT)

AOL (NYSE: AOL) has put a large bet on hyperlocal media with Patch.com and the early results are promising. (NYT)

BP’s (NYSE: BP) stock swap deal with Rosneft, the Russian state oil company,has drawn criticism from the US. (FT)

China’s president questioned the role of the US dollar as the de facto global currency. (FT)

Germany indicated it might be flexible in changes to EU bailout facilities. (Bloomberg)

Fitch cut Greece’s credit rating to junk and capital fled to gold. (Bloomberg)

Douglas A. McIntyre

TPG Capital and Leonard Green & Partners LP offered $43.50 a share for J. Crew in November, and CEO Millard “Mickey” Drexler is to stay and maintain a stake in the company. The existing deal on the table has not gone without scrutiny after reports that Drexler had early contacts with representatives of Leonard Green and that TPG was given confidential information about J. Crew in September.  It is a quasi-MBO (or MBO-lite) and the expiration of the go-shop provision is coming up on January 15, 2011.

What is interesting about Sears as a possible buyer is that it did make a similar acquisition in the past when it acquired Lands End, a catalog retail apparel company.  J. Crew was originally thought of as a catalog company.  As of November 23, 2010, J. Crew operated 250 retail stores with the count being 221 J.Crew retail stores, 9 Crewcuts and 20 Madewell stores, as well as the J. Crew catalog business, JCrew.com, Madewell.com and 85 factory outlet stores.

Sears is a company that can use real help to differentiate itself in a fiercely competitive retail environment.  The company recently named apparel veteran Lana Cain Krauter as SVP and president of Sears Apparel.  Her experience is with Bealls Department Stores, J.C. Penney, Goody’s Family Clothing, and at Sears Roebuck in the Women’s Ready to Wear, Intimate Apparel, Accessories and Import teams.

The surprising company on the surface is Urban Outfitters Inc. (NASDAQ: URBN).  It caters to a younger audience with its Urban Outfitters name-brand and it also has Anthropologie, Free People, and Terrain.  It also is in the apparel wholesale business under the Free People and Leifsdottir brands.  Many investors are not as aware of Urban Outfitters’ outside brand initiatives.  It has a market cap of nearly $6 billion today.  The deal would be a game-changer for Urban… Thomson Reuters has estimates of $2.28 billion in revenues for the current January-2011 fiscal year and $2.64 billion in revenues for the January-2012 year.  Add in the estimates of $1.72 billion and $1.87 billion for the same periods of J. Crew estimates and suddenly Urban Outfitters could be a brand powerhouse.

If a rival bid surfaces, J. Crew’s Millard “Mickey” Drexler might find an ouster.  His rise back in the days of Gap Inc. (NYSE: GPS) came to an end after a firing by Gap’s Don Fisher.  If TPG and Leonard Green are not the buyers, Drexler may find himself pushed out again whether he holds a stake or not.

J. Crew shares are up 3.1% at $44.40 today, above the existing $43.50 deal on the table.  Sears is up 1.7% at $72.68 and Urban Outfitters is up 0.2% at $35.97.

The retail and apparel deals continue… and the plot thickens.

JON C. OGG

Leonard Green already had a 9.5% stake in BJ’s back in the summer.  There was already an expression of interest back then, and this new report seems to be that a BJ’s sale process is coming after the holidays and that Leonard Green remains an interested party.

Leonard Green & Partners, L.P. is well known private equity firm and its website shows current assets under management of approximately $9 billion in equity capital.  The firm was founded back in 1989 and it claims that it has invested in 53 companies with aggregate value of $44.4 billion.

As far as how BJ’s compares in size against Costco Wholesale Corporation (NASDAQ: COST), Costco has a market cap of $31.5 billion.  For annual sales estimates from Thomson Reuters: Costco is expected to post annual sales of $85.02 billion for the fiscal-year about to end and expected to post $92.01 billion for next year, which is way above the BJ’s estimates of $11.04 billion for this year and $11.86 billion next year.

BJ’s Wholesale Club Inc. shares are indicated up 6% at $47.20 in the pre-market.  Its 52-week range is $32.36 to $48.43 and its market cap based on a $44.47 close was listed as $2.43 billion.

JON C. OGG

Last month Green teamed with private equity firm TPG Capital to make a $3 billion offer for J. Crew Group, Inc. (NYSE: JCG). That deal has come under intense scrutiny since it was revealed that J. Crew’s CEO had unreported early contacts with representatives of Leonard Green and that TPG was given confidential information about J. Crew in September.

Recent interest in retailers is a little difficult to fathom. Retailing is, at best, a low-margin business that is very susceptible to changes in the economy. A fabrics and craft store like Jo-Ann could be seeing an uptick as the economy encourages people to make rather than buy clothing and other items for a home. But all the signs are that the economy is in for a boost in 2011, which should lower interest in sewing, although it could raise interest in craft hobbies like scrapbooking.

Jo-Ann’s CEO noted that going private would enable renovation of the stores and quicker expansion to increase market share. Maybe that will happen, but Jo-Ann is betting the ranch on it.

Jo-Ann Stores are seeing a jump in share prices of more than 30% on very heavy volume. Shares of J. Crew are also up marginally.

Paul Ausick

The proxy says that the CEO has his first contact with a buyout firm at “an introductory meeting on August 23, 2010, between a representative of Leonard Green and Mr. Drexler.” On September 15, buyout firm TPG was given confidential information about J Crew.

“On September 28, 2010, there was a conference call between Messrs. Drexler and Scully and representatives of TPG, during which Messrs. Drexler and Scully provided representatives of TPG with a high-level overview of the Company’s business and a general overview of the Company’s financial performance for the remainder of its 2010″, the proxy says.

“Between October 7, 2010 and October 11, 2010, Mr. Drexler contacted each other member of the Board to inform them of TPG’s potential interest in a transaction involving the sale of the Company. During the course of these conversations, Mr. Drexler informed members of the Board that he might be interested in participating with TPG in a transaction of this nature and discussed the need to form a special committee to evaluate any potential transaction.”

Drexler, clearly an interested party, kept his board in the dark about a potential sale and his possible equity position in the venture. He failed to disclose these details for nearly two months.

Drexler violated an number of ethical rules about the relationship between a CEO and his board. He also have SEC rules regarding the use of non-public material information. The private equity firms involved in the offer clearly had data about the company’s performance that was likely to affect its stock price. Shareholders had no such information.

Drexler’s actions are a prime example of a chief executive who put his own interests ahead of those of the stockholders of the company. The  J Crew board compounded the questionable behavior when it did not reveal the series of events to both the SEC and shareholders. Drexler was able to conduct what was little better than a  privately arranged sale of a public company without the active involvement of his board.

The J Crew board and SEC has an opportunity to punish Drexler for his actions by dismissing him and conducting a board and requesting a federal investigation of the events that led up to the sale. It is an insult to public company shareholders in general to do anything else. The SEC has publicly bungled a number of investigations and persecutions over the last several years. It now has a chance to prove its value as an agency.

Douglas A. McIntyre