Analyst forecasts Nyfix brokerage closure; JLL tightens Patheon grip; NCI shares slip

By Cristal Cody

Tupelo, Miss., Aug. 27 - NYSE Euronext, Inc. said Thursday that it will buy out Nyfix, Inc. for $144 million in cash to improve its trading platforms, but an analyst said the world's largest exchange operator also is likely to divest or close Nyfix's brokerage business for a better business fit.

Also on Thursday, JLL Partners, Inc. reiterated that it will not sell shares of Patheon Inc. to Lonza Group AG, but an analyst said it could be just a matter of time.

Meanwhile, shares of NCI Building Systems, Inc. slid 24.14% on Thursday after the metal building parts manufacturer said a $250 million investment that will be used to pay down debt will be delayed.

On Wall Street, stocks staged a late-afternoon rally after early morning losses.

The Dow Jones Industrial Average added 37.11 points, or 0.39%, to close at 9,580.63.

The Standard & Poor's 500 index rose 2.86 points, or 0.28%, to 1,030.98, and the Nasdaq Composite index closed up 3.30 points, or 0.16%, at 2,027.73.

Exchanges consolidate

Shares of Nyfix soared 89.53% to close up 77 cents at $1.63 on Thursday.

NYSE Euronext said it will acquire the New York company for $1.675 in cash per share, a 95.00% premium to the stock's closing price on Wednesday.

"This is an all-cash deal at a premium to the current market for Nyfix shares," Nyfix chief executive officer Howard Edelstein said in a statement. "Nyfix customers will also benefit greatly through the combination of two of the industry's leading trading communities, creating a global transaction marketplace connecting buy-side and sell-side, as well as from the strength of the NYSE Euronext platform and global brand."

NYSE Euronext said Nyfix will become part of the services provided by its subsidiary, NYSE Technologies, Inc., after the deal closes.

Nyfix provides broker-dealer services and electronic trading system software to process financial transactions.

New York-based NYSE Euronext's exchanges in Europe and the United States trade equities, futures, options and fixed-income and exchange-traded products. NYSE Euronext was formed through the 2007 merger of the New York Stock Exchange and European exchange operator Euronext.

Christopher Allen, an analyst with Pali Capital Inc., said in a research note on Thursday that most of the acquisition, including Nyfix's FIX trader communication network, should complement and strengthen NYSE Euronext's technology relationships.

"We expect NYX to divest, joint venture, or shut down NYFX's brokerage business as it does not really fit in NYX's portfolio of businesses," Allen said.

The deal must be approved by Nyfix shareholders.

NYSE Euronext spokesman Rich Adamonis told Prospect News on Thursday the only regulatory approval needed will be from the Securities and Exchange Commission.

The companies expect the transaction to close in the fourth quarter.

Nyfix representatives were not immediately available for additional information on a date for the shareholders meeting.

Shares of NYSE Euronext fell 27 cents, or 0.94%, to close at $28.52.

Patheon stuck in the middle

JLL Partners' $2.00-a-share tender offer for the remaining stock in Patheon that it did not own expired on Wednesday.

The New York private equity investment firm said Thursday that 33.86 million shares were tendered in the offer.

The firm controls 57.00% of Patheon's outstanding shares and does not plan to extend the offer for Patheon's additional outstanding stock.

In a separate statement, JLL said it "will not enter into negotiations regarding the Lonza proposal and that its Patheon shares are not for sale."

Lonza offered $3.55 a share for Patheon's stock earlier this month, but the proposal requires that the holders of at least 67.00% of outstanding shares accept the offer.

JLL said it views the offer as a "hostile attempt to adversely impact the competitive position of Patheon through an inappropriate review of Patheon's confidential information. The Lonza proposal will only distract Patheon management from driving growth in the business and cause Patheon management to devote time and resources in pursuit of a transaction that cannot be consummated."

A market source said Thursday that Lonza could justify a higher bid and "JLL will negotiate at the right price."

Basel, Switzerland-based Lonza's offer values Research Triangle Park, N.C.-based prescription drug and packaging manufacturer Patheon at about $460 million. Lonza makes research and development supplies for the pharmaceutical, health-care and life science industries.

"Although the impasse between Lonza and JLL could extend into next year, we believe that Patheon's price is likely to be upheld by potential corporate action and that Lonza will eventually bump the terms, meeting JLL's expectations on price," a market source said Thursday.

"However, we believe that there is a risk that Lonza will not be able to negotiate a transaction with Patheon on acceptable terms, within an acceptable time frame," the source said. "Lonza indicated that it wouldn't wait forever and its interest would wane past [the first quarter of 2010]."

Patheon's special committee of independent directors supports Lonza's offer. The company said it has signed a confidentiality and standstill agreement with Lonza and has agreed to not undertake any other deal negotiations through Sept. 30.

Patheon shares slipped C$0.04, or 1.30%, to close at C$3.03 on Thursday.

Lonza shares fell 0.39% to CHF 103.10.

NCI investment delayed

NCI said on Aug. 14 that it would launch an offer that was scheduled to open Friday to exchange cash and stock for its convertible note and give private equity firm Clayton, Dubilier & Rice, Inc. a 72.00% stake in the company as a way to reduce debt.

On Thursday, NCI said the offer will be delayed as it amends the terms and reduces Clayton, Dubilier & Rice Fund VIII, LP's stake to 68.50% in exchange for a $250 million investment in newly issued convertible participating preferred shares.

Under the exchange offer, convertible note holders will receive $500 cash and 390 shares for each $1,000 principal amount of notes tendered.

"This investment is part of a comprehensive solution to address NCI's significant near-term debt repayment obligations, reduce debt by $323 million and position the company for future growth," NCI said in a statement on Thursday. "Discussions are ongoing, but no agreement has been reached among the parties regarding any amended terms."

Houston-based NCI also said that its senior credit facility lenders have extended waivers of their loan conditions until Nov. 6.

NCI shares lost 84 cents, or 24.14%, to close Thursday at $2.64.

Mentioned in this article:

Lonza Group AG Swiss: LONN

NCI Building Systems, Inc. NYSE: NCS

Nyfix, Inc. Nasdaq: NYFX

NYSE Euronext, Inc. NYSE: NYX

Patheon Inc. Toronto: PTI

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