CHC up 40% on buyout news; shareholders eye Feb. 29 deadline for UnitedHealth-Sierra merger

By Paul A. Harris

St. Louis, Feb. 22 - The class A common shares of CHC Helicopter Corp. (NYSE: FLI) traded up 39.21% Friday on news that the helicopter services provider to the offshore oil and gas industry is being acquired by First Reserve Corp. in a $3.7 billion all-cash transaction.

CHC gained $8.43 per share to close at $29.93.

On the Toronto Stock Exchange, the company's class A shares (TSX: FLY.A) were up 38.25% to close at C$30.25, better by C$8.370. Meanwhile the class B shares (TSX: FLY.B) gained 28% to close at C$30.40, up C$6.65.

The board of directors of CHC has unanimously approved the deal in which First Reserve will acquire all outstanding class A subordinate voting shares and class B multiple voting shares for C$32.68 each, for a total of C$1.5 billion.

The deal, which will be financed with equity and with debt financing via Morgan Stanley, is expected to close during the second quarter of 2008.

In a Friday press release Mark McComiskey, managing director of First Reserve, said "CHC is an extraordinary company. The European and global leader in oil and gas and search and rescue helicopter services, with the world's largest independent helicopter support business, CHC has a worldwide footprint, the best safety record in the industry and a dynamic management team executing an exciting growth strategy."

CHC will remain in headquartered in Vancouver, B.C.

Time running out for Sierra

Meanwhile in the health care sector, a special situations equities analyst believes that the ticking clock may be a factor in the recent trading Sierra Health Services Inc.'s shares.

That's because UnitedHealth Group, Inc. has until the end of the month to obtain the approval of the U.S. Department of Justice for its merger with Sierra Health, a $43.50 per share in a transaction valued at $2.6 billion, or begin the entire application process anew.

And a new application process would no doubt be an arduous one, said the analyst, who agreed to speak on background.

Sierra Health (NYSE: SIE) gained $0.48 on Friday, up 1.16% to close at $41.96, but down nearly 2.7% from its Jan. 24 close at $43.12.

The special situations equities analyst recounted that the health care community in Nevada, led by Assembly speaker Barbara Buckley, a Democrat from Las Vegas, has denounced the merger, asserting that UnitedHealth can not be trusted with a virtual monopoly on health care coverage in the state.

UnitedHealth is reportedly seeking to alleviate antitrust concerns by shopping assets in Nevada, possibly to Wellpoint Inc., the analyst said.

Nevertheless Nevada regulators and health care professionals have been tuned into actions taken by California regulators in January against UnitedHealth subsidiary, PacifiCare.

On Jan. 29 California insurance commissioner Steve Poizner and Cindy Ehnes, director of the California Department of Managed Health Care, announced a joint action against PacifiCare companies, owned by UnitedHealth, in response to more than 130,000 alleged claims handling violations.

The regulators, having examined "hundreds" of consumer complaints, allege that PacifiCare has made wrongful denials of covered claims as well as incorrect payments of claims.

In addition the regulators allege PacifiCare lost documents including certificates of creditable coverage and medical records, failed to make timely acknowledgment of receipts of claims and made multiple requests for documentation that was previously provided.

"Each day, as the deadline come closer, it makes people a lot more worried," the special situations analyst said, adding that the approval process may be further complicated by the fact that this is an election year.

Earlier this month New York State attorney general Andrew Cuomo announced a planned lawsuit against UnitedHealth having to do with rates paid to out-of-network providers.

Meanwhile on Friday shares of UnitedHealth (NYSE: UNH) closed $0.44 lower, or down 0.92%, ending at $47.36 per share.

Shares of Wellpoint (NYSE:WLP) were also lower, down 0.40% or $0.30 to close at $73.93.

No end game for Times

A late rally in U.S. equities saw the major indexes finish the Friday session in positive territory.

Both the Dow Jones Industrial Average and the S&P 500 closed 0.79% higher.

The Dow finished the session at 12,381.02, up 96.72.

The S&P 500 closed at 1,353.11, up 10.58.

The Nasdaq, meanwhile, ended the day 0.16% higher, closing at 2,303.35, up 3.57.

Class A shares of New York Times Co. traded lower on Friday, despite news that hedge funds Harbinger Capital Partners and Firebrand Partners disclosed in filings made on Thursday that they have increased their stake in the Times to approximately 16% from approximately 12%.

That news had Ed Atorino, a media analyst Benchmark Co., LLC, scratching his head on Friday.

Atorino told Prospect News that given that the voting for nine of the Times' 13 board members is restricted to holders of class B shares, which are held in a trust for the company's owners, the Sulzberger family, the Harbinger/Firebird proxy fight for the remaining four board seats is difficult to parse.

"I don't see the end game here," the analyst said.

Antonino recounted that Harbinger wants the company to sell off all non-core assets, including the $1 billion New York Times building ("which it doesn't completely own," the analyst asserts) and sell its stakes in sports teams.

More astonishing to Atorino is that Harbinger wants the Times to sell the Boston Globe, at a time when the newspaper industry is depressed and the market for newspapers is down.

Equally astonishing, the media analyst added, is that Harbinger wants the company to sell About.com, a network of websites on topics including personal finance, consumer electronics, history and geography.

The About.com asset makes sense for the company, he asserted.

"Selling it would be a huge mistake."

New York Times shares (NYSE: NYT) closed at $19.03, down $0.66, or 3.35%, on Friday.

Noting that they had traded below $15.00 per share in mid-January, Atorino said the New York Times share price had gotten a nice boost from the Harbinger/Firebird buying spree.

However the shares may have drooped on Friday because people have a view that with a maximum of four seats on a 13 member board of directors, it is far from clear how Harbinger would advance its agenda.

Imperium to acquire ESS

Elsewhere, ESS Technology, Inc. and Imperium Partners Group, LLC announced that they entered into a merger agreement on Thursday under which Imperium will acquire all outstanding shares of ESS Technology for $1.64 per share in cash, representing a 36.67% premium over the closing price of ESS Technology's shares on Thursday.

The transaction is anticipated to close in mid-2008, subject to shareholder approval and certain other customary closing conditions.

ESS Technology, Inc. designs and markets high-performance digital video processors for the consumer market.

ESS Technology (Nasdaq: ESST)'s shares were up 26.67% on Friday, gaining $0.32 to close at $1.52.

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