Magna jumps on restructuring; Nucor gains on Nelson purchase; Inverness up after closing Cholestech deal

By Sheri Kasprzak

New York, Sept. 13 - Magna Entertainment Corp.'s stock got a boost Thursday after the horse racetrack operate announced strategic plans to eliminate its net debt by the end of 2008. The plan includes selling off assets, entering into strategic transactions with its gaming and racing subsidiaries and conducting a possible equity offering.

Both sell-side traders and analysts alike were enthusiastic about the plan from Magna, with one analyst claiming that the choice to look into an equity offering as a "last resort" is a smart move.

Shares of Magna took off after the restructuring plans were announced before the market opened.

Moving to merger news, Nucor Corp.'s shares were up on Thursday after the steel producer said it was buying New Salem, Pa.-based wire mesh maker Nelson Steel Inc. in a $54 million deal.

A sell-side trader said he felt the merger would bring additional value to Nucor's stock.

Meanwhile, Inverness Medical Innovations, Inc. clinched its acquisition of Cholestech Corp. Thursday, sending its shares up slightly.

The Nucor and Inverness mergers were two of few mergers announced Thursday.

Analysts and sell-side traders have noted earlier this week that merger and acquisition activity has tapered off with the "summer doldrums" still upon us. One sell-side trader said Thursday he feels activity will likely pick up again in the fall and winter months and the current lull is a product of the summer season.

"I have no doubt there will be a deluge of stuff going on later this year," he added.

In the troubled mortgage-lending sector, Countrywide Financial Corp.'s stock responded very well to news that it has secured $12 billion in funding just days after the nation's largest mortgage lender announced massive layoffs.

The news trickled down to other mortgage lenders with shares of Thornburg Mortgage Inc. and Washington Mutual both up.

Magna to restructure

Looking back to that Magna restructuring, the consensus is that the move is a good thing, especially since the company is planning to make strategic moves - like selling off assets - before moving to more dilutive measures, like an equity offering. It should be noted that the company does plan to raise $20 million in a private placement of its stock to hold it until the plan can be implemented.

"It's something they really needed to do," said one analyst. "I'm not saying every debt elimination plan is a good one or a solid one, but their [plan] seems to be solid. Sometimes the only solution is to sell off some assets and move on."

Another analyst said he feels assured since the equity sale is likely to be the last resort.

"They're trying to avoid dilution, which is good for their shareholders," he said. "I think they're really looking at the equity sale as a last possible resort."

A sell-side trader agreed.

"I think it is probably for the best that, at least for now, they avoid doing anything that will result in dilution," he said. "That's probably their strategy right now, to get together as much money as they can from the sale of assets and then figure out what their next step needs to be."

The stock responded positively.

Pre-market, Magna's stock was up 6 cents, or 3.23%. Just after the market opened, the stock skyrocketed by 18.28% at 9:41 a.m. ET. The stock ended the day up 19.89%, or 37 cents, at $2.23 (Nasdaq: MECA).

Magna is an Aurora, Ont.-based operator of horse racetracks.

A plan of action

Magna said Thursday it intends to eliminate its net debt by Dec. 31, 2008 by generating between $600 million and $700 million from the sale of assets and strategic moves with its racing, gaming and technology operations. The company is also considering an equity issuance in 2008.

The plan also includes arranging $100 million in funding to address its immediate liquidity concerns and to buy itself enough time to implement the plan. The funding includes a $20 million private placement of class A subordinate voting stock with Fair Enterprise Ltd. and an $80 million short-term bridge loan from a subsidiary of MI Developments Inc., the company's controlling shareholder.

Finally, Magna will appoint Tony Campbell of Knott Partners Management, LLC as its independent director.

"From the outset, the development of this plan to eliminate MEC's net debt and improve its earnings has been actively supported by the company's founder, chairman and interim [chief executive officer] Frank Stronach," said Jerry Campbell, the company's lead director, in a statement released before the opening bell Thursday.

"This plan, unanimously approved by MECs board of directors, has now firmly and publicly set us on a course to eliminate debt and improve operations."

Stronach went on to say, "I am also pleased that Tony Campbell has agreed to join our board of directors and am confident that he will provide important input as we move forward. As evidenced by the initiatives announced today, I continue to believe in MEC's vision and strategy and my belief in MECs place within the thoroughbred racing and entertainment industries remains strong."

Nucor shares climb

After announcing it will buy all of the assets of Nelson Steel, Inc., Nucor Corp. saw its stock rise on Thursday.

The Charlotte, N.C.-based steel products manufacturer said Thursday it will buy substantially all of the assets of Nelson in a $54 million cash transaction.

"It's going to add to their books so I think investors look at it as adding real value," said one sell-side trader. "It looks good to investors to add a profit-making asset so that's going to push the stock."

The acquisition is set to close in the fourth quarter.

By 1:20 p.m. ET, Nucor's stock was up 5.35%, or $2.82. The stock ended up 5.31%, or $2.84, to close at $56.30 (NYSE: NUE).

"The acquisition of Nelson is a good growth opportunity for one of our existing downstream businesses and complements and expands our wire mesh businesses at Connecticut and LEC," said Mike Parrish, Nucor's vice president, in a news release.

"We look forward to welcoming Nelson employees to the Nucor team."

The Nucor acquisition of Nelson is one of several mergers within the steel sector over the past month.

In late August, United States Steel Corp. bought Canada's Stelco, Inc. in a C$1.1 billion deal.

Earlier this week, shareholders gave the nod to Chaparral Steel Co.'s merger with Gerdau Ameristeel Corp. in a transaction valued at $4.22 billion.

Inverness buys Cholestech

Elsewhere, Inverness Medical sealed up its acquisition of Cholestech, sending its shares up.

Shares of Inverness were up 44 cents in pre-market action. By 1 p.m. ET, the stock had put on 2.94%, or $1.43. The stock ended the day up 20 cents, or 0.40%, at $48.76 (Amex: IMA).

In the acquisition, Cholestech shareholders received 0.43642 shares of Inverness for every Cholestech share held. There were 6,801,946 shares issued in the transaction.

Cholestech provides diagnostic tools to detect heart disease and inflammatory disorders. Waltham, Mass.-based Inverness makes diagnostic products.

"The acquisition of Cholestech together with our recent and pending acquisitions, provides Inverness with the unique ability to assess cardiac risk, diagnose cardiac conditions and potentially monitor the condition and response to therapy of cardiac patients," said Ron Zwanziger, Inverness's CEO, in a statement released Thursday morning.

"The Cholestech LDX System is one of the most established and respected monitoring platforms available to physicians and patients and we believe that this added access to physicians' office laboratories will provide broad benefits for many Inverness and Biosite products."

News of the acquisition comes just a few months after Inverness completed its acquisition of Biosite Inc. in a $92.50-per-share cash tender offer.

Countrywide gets funding

Shares of Countrywide Financial jumped on Thursday after the mortgage lender announced it has lined up $12 billion in financing through new and existing credit facilities.

The news comes just days after Countrywide said it plans to let go 20% of its workforce, making up about 12,000 employees, by the end of this year.

Countrywide's stock gained 13.9%, or $2.31, to close at $18.93, gaining another 7 cents after hours (NYSE: CFC).

Thornburg Mortgage's stock also climbed on Thursday, gaining 24 cents, or 1.8%, to end at $13.58 (NYSE: TMA). Shares of Washington Mutual also were up 33 cents to end at $35.56 (NYSE: WM).

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