Lyondell leaps; CBOT surges; Foot Locker booted; 24/7 up; Riviera rises; Tweeter tumbles

By Ronda Fears

Memphis, May 11 - Lyondell Chemical Co. was lifted in a big way Friday on speculation that it is a buyout candidate following the announcement from Occidental Petroleum Corp., its biggest shareholder, that it was selling out, a trader said.

Another trader said the odd man out in the battle between Chicago Mercantile Exchange Holdings Inc. and IntercontinentalExchange Holdings Inc. to merge with CBOT Holdings Inc. will likely be a takeover target of one of the major stock exchanges once the dust settles. The saga of the options trading venues flared up again Friday with the Chicago Merc sweetening its offer for CBOT. ICE said it was evaluating whether to up its bid. All three were sharply higher in trade.

Foot Locker Inc. was kicked to the curb Friday after cutting its fiscal first-quarter projections by more than two-thirds on weak same store sales for the period, but a trader said it may spur the company to re-double its efforts to takeover Genesco Inc.

Riviera Holdings Corp. rose on a rival bid of $30 per share in cash from a group led by prominent Las Vegas real estate developer Ian Bruce Eichner and Dune Capital Management LP, besting a bid of $27 from a dissident investor group led by Riv Acquisition Holdings, which failed in a $17-per-share offer last year. The casino also said it has hired Jefferies & Co. to help explore strategic and financial alternatives, including a sale of the company. The stock (Amex: RIV) added $1.15, or 3.61%, to $33.

Having spun off Sally Beauty Holdings Inc. last year, another trader said there was widespread scuttlebutt that former parent Alberto-Culver Co. Inc. might go on the auction block in a situation much like Wendy's International Inc. did recently, following its spin-off of Tim Hortons Inc. last year. Alberto-Culver shares spiked early Thursday but spent the remaining part of the session in a freefall, he said. On Friday, the stock (NYSE: ACV) gained 47 cents, or 1.98%, to $24.15.

24/7 Real Media Inc. confirmed market chatter that has lingered in the name for months that it was a takeover target by hiring Lehman Brothers Inc. to help review strategic alternatives for the online advertising firm. Recent speculation has centered around a deal with Microsoft Corp. or WPP Group plc, one trader said. He said the move to explore a possible sale was cheered but many players think it "might be a little late in the game."

Tweeter Home Entertainment Group Inc. reported huge losses Thursday and said that as a result of not having enough cash to get out of leases on stores earmarked for closure - identified in a restructuring plan in March - it may file Chapter 11. A trader said the stock continued to decline Friday but distressed players were stepping up in the name on hopes that the company has salvageable assets.

Liberty Mutual Group's acquisition of Ohio Casualty Corp. could trigger a string of insurance takeovers, with Conseco Corp. as a likely name that big holders will push to get a deal. Conjecture that Conseco's big holders may well demand the company go on the auction block are not new, but the Ohio Casualty deal provides some support for such an argument, one trader said. Liberty Mutual is paying a 32% premium for Ohio Casualty; that deal was announced May 7. Conseco (NYSE: CNO) gained 44 cents, or 2.46%, to settle Friday at $18.35.

"The stock is acting well; they announced a buyback, but they disappointed again" with lower first-quarter results, the trader said. "Shareholders are going to force this one soon."

Lyondell seen as a target

On news that Occidental is selling out of Lyondell, traders said there was widespread speculation that it was the target of a takeover or would be soon. Occidental said it will divest all of its Lyondell Holdings - roughly 21 million shares, or an 8.3% stake.

First of all, one trader said, the news ordinarily would send a stock reeling because it typically signals a loss of faith in a certain story, and in this case was sold at a discount to the current market.

"It should have took a dive, but it was a rocket," the trader said.

Lyondell shares (NYSE: LYO) advanced $3.68 on the session, or 11.13%, to close at $36.75 with 15.4 million shares traded versus the norm of 2.8 million.

Occidental said it has sold 6,990,070 to a single purchaser in a private transaction at $32 per share - a slight discount to Thursday's closing price of $33.07. Occidental also entered into a total return swap agreement with respect to its remaining 14 million shares. The giant oil developer anticipates net proceeds of about $520 million from the sales.

Second, the trader said, the private buyer appears to be Russian-born billionaire Leonard Blavatnik, chairman of the privately held Access Industries - a Manhattan-based industrial investment company.

Al Chemical Investments, controlled by Blavatnik, made a filing with the Securities and Exchange Commission saying he had signed an agreement to buy 21 million shares in Lyondell at a price of $32.113 a share, or about $674.4 million. According to the filing, Blavatnik has a swap agreement with Merrill Lynch to buy the shares until April at that price.

Access Industries bought petrochemicals and plastics manufacturer Basell Polyolefins from Royal Dutch Shell and BASF for $5.7 billion in August 2005.

EI DuPont de Nemours & Co., which recently has espoused a strategy of growth for the international chemicals giant, could be interested, the trader said, or Dow Chemical Co., although he said the latter may be preoccupied with untangling the mess surrounding recent rumors that it was in buyout talks.

CBOT loser seen as a target

Whoever the third man out is in the battle for CBOT will likely become a takeover target of the bigger exchanges, another trader said. While CBOT, Chicago Merc and ICE shares were all higher Friday, a handful of buyside sources told Prospect News they were steering clear of the entire situation; one buyside trader said "I wouldn't touch it with a 10-foot pole.

The Chicago Merc sweetened its offer Friday for CBOT by $1.3 billion to an equivalent of $174.28 per share on Thursday's market, or $9.21 billion, in stock - boosted from its October bid of $149.68 per share, or $7.91 billion. A key change to the bid is that if the deal closes, Chicago Merc pledged the combined company would buy back up to $3.5 billion of stock, or 12% of outstanding shares, for $560 per share, in lieu of a $3 billion cash-out option in the original proposal.

CBOT shareholders are set to vote on the deal June 9.

CBOT swiftly deemed the $9.2 billion bid superior to the hostile offer from ICE, which is valued at an equivalent of $191.49 per share, or $10.1 billion, recommending shareholders accept the revised Chicago Merc bid.

The counteroffer had been anticipated ever since Atlanta-based ICE launched its surprise effort in March, disrupting the plans announced five months earlier for the Mercantile Exchange to buy CBOT for about $8 billion.

Foot Locker down, not out

Foot Locker Inc. was kicked to the curb Friday after reporting late the night before that same store sales in first quarter fell 5%; the company also slashed its first-quarter earnings forecast to a range of 10 cents to 11 cents a share from an earlier projection of 34 cents to 37 cents a share.

But a trader said the weak performance may spur the company to intensify its efforts to takeover Genesco Inc.

"They [Foot Locker] need to do something to bring sales up. Adding Genesco would be a means to diversify sales, too," the trader said.

"I think they will be motivated to find a way to come up with some more capital to buy Genesco, maybe pool with private equity or other investors."

Nashville-based Genesco is a specialty footwear, headwear and accessories retailer, which would add to New York-based Foot Locker's specialty athletic footwear retail business.

In late April Genesco rejected a $1.2 billion, or $46 per share, takeover offer from Foot Locker, saying that previous discussions about a buyout had mentioned prices between $48 and $50 per share; at the time, Foot Locker said it wasn't ruling out boosting the offer, but nothing has come of it since.

On Friday, both were lower with practically the entire field of retailers on poor retail sales figures.

Foot Locker (NYSE: FL) plunged $1.64, or 7.05%, to $21.63. Genesco (NYSE: GCO) lost 68 cents, or 1.35%, to $49.65.

Tweeter shut out, shut off

Tweeter reported sharp fiscal second-quarter losses Thursday and said that as a result of not having enough cash to get out of leases on stores earmarked for closure - identified in a restructuring plan in March - it may file Chapter 11.

Holders were "livid," as one trader put it, and the stock (Nasdaq: TWTR) fell a nickel, or 12.2%, to 36 cents, following a 70% dive the day before. Volume surged to 2.58 million shares versus the norm of 533,721.

"It's been trading like a bankrupt stock for a couple of weeks," the trader said.

"Now we are seeing the distressed guys come in because they think there will be a buyer for the company show up, that there is some value to the assets, the name."

He said the company's restructuring plan in March had provided some hope, "enough to bring in a few buyers and prop it up." But the latest development sent "everyone running for the door except the vultures."

In March, Canton, Mass.-based Tweeter said it would close 49 of its 153 stores, cut 20% of its staff and leave several major U.S. markets, including California and Tennessee. On Thursday, chief executive Joe McGuire said the company doesn't have enough capital to pay for the upfront costs of store closings, much less its long-term cash needs.

McGuire told The Associated Press that the company has reached settlements with about one-third of the landlords at its closed stores and if it can obtain similar deals with the remaining property owners, the company may avoid bankruptcy.

Tweeter posted a loss of $35.2 million, or $1.38 a share, for fiscal second quarter, compared with a profit of $424,000, or 2 cents a share, a year before, while revenue fell 13% to $163.3 million.

24/7 move seen coming

24/7 Real Media's step to explore a possible sale was cheered, although many players think it might be a little late in the game as takeover chatter in the online media name began in December on Publicis Group SA's buyout of interactive marketing firm Digitas Inc. at $1.3 billion

The stock (Nasdaq: TFSM) gained 27 cents, or 2.5%, to $11.06.

"It not anticlimactic, it's boring at this point in the game," said one trader. "There was decent volume today but we're not seeing the jump you would expect. Everyone was expecting this."

In the wake of the Digitas buyout, he said there was a rush to buy several online advertising names on expectations that it would spark more Madison Avenue mergers with Silicon Valley presences. He noted that Publicis paid a 23.5% premium for Digitas, but "we don't think 24/7 can pull down a bid like that; the stock has added a couple of bucks since the noise in December already."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.