Pilots talking again; market watches Yahoo!, Microsoft; Industrial Distribution finds better offer

By Aaron Hochman-Zimmerman

New York, April 22 - Stocks went backtracking on poor earnings and record oil prices which had a perfect storm effect on a battered UAL Corp.

Also in aviation, prices of Delta Air Lines Inc. and Northwest Airlines Corp. were sliding as the pilots inched closer to seniority ladder talks.

In the closely watched battle for Yahoo! Inc.. prices eased down for both Yahoo! and potential acquirer Microsoft Corp., which says it is ready to launch a hostile bid this weekend.

In media, Clear Channel Communications Corp. stock was feeling better after the merger partners turned down an offer from the finance team to enter into binding arbitration.

Meanwhile, for the financial sector, shares were up as Fifth Third Bancorp. announced it expects to close its deal with First Charter Corp. by the end of the quarter.

Manufacturers, Industrial Distribution Group Inc. and Wesco Distribution Inc. slipped as Industrial Distribution found a better price from Platinum Equity Advisors LLC.

Also, Grey Wolf Inc. and Basic Energy Services Inc. were both trading lower as they announced more details for their merger.

The Dow Jones Industrial Average ended lower by 104.79, or 0.82%, at 12,720.23, while the Nasdaq Composite Index gave up 31.10, or 1.29%, to finish at 2,376.94.

The S&P 500 lost 12.23, or 0.88%, to close at 1,375.94.

Pilots try talks, airline sink

Shares of Northwest (NYSE: NWA) sank $1.59, or 17.55%, to $7.47 while shares of Delta (NYSE: DAL) also fell $1.40, or 17.07%, to $6.80 after the union representing the Delta pilots reached out to the Northwest pilots.

The Northwest pilots hope to work out a seniority ladder ahead of the agreed merger, a market source said.

Both airlines speculate that a merged entity would be less vulnerable to fuel costs.

Light sweet crude pushed toward $120 per barrel on Tuesday.

Fuel prices put more drag on the wings of United Airlines (Nasdaq: UAUA) reported a pre-tax loss of $542 million for the first quarter. United's shares were crushed by $7.88, or 36.77%, to close at $13.55 "driven primarily by a $618 million increase in consolidated fuel expense," a press release said.

The market gave "United a big whack today due to fuel costs," a market source said.

Also, Air France-KLM said its $220 million bid for the Italian airline Alitalia was "no longer valid."

Yahoo! awaits Microsoft's move

Market watchers' attention was drawn back to the tech tug o' war as shares of Yahoo! (Nasdaq: YHOO) stepped back just $0.01, or 0.04%, to $28.54 as reports speculated about its health ahead of its earnings release and the threatened hostile bid by Microsoft (Nasdaq: MSFT).

Microsoft shares dropped $0.17, or 0.56%, to close at $30.25.

"They just reported pretty decent earnings," a market source said about Yahoo!, which announced its results after the close.

If Microsoft goes hostile as planned this weekend, "it looks like they'll have to rethink their plan," the source said about Microsoft.

Microsoft's chief executive officer, Steven Ballmer said his company "will pay what makes sense for our shareholders."

"By that I kind of read: 'If the value is going to be added, we'll raise our bid,'" the source said, speculating about Ballmer's intentions.

"This is the first time he's spoken like that," the source said.

Clear Channel, buyers reject arbitration

In more traditional media, shares of Clear Channel (NYSE: CCU) improved by $1.25, or 4.39%, to $29.74 as the proposed equity buyers Bain Capital and Thomas H. Lee Partners rejected the finance team's offer of binding arbitration.

The sides have been in court over lawsuits filed by the merger partners to force the banks to finance the deal.

First Charter to close this quarter

In finance, shares of Fifth Third (Nasdaq: FITB) tacked on $1.55, or 8.00%, to close at $20.93 as it announced its $1.1 billion or $31 per share deal with First Charter (Nasdaq: FCTR) will close during the second quarter.

Shares of First Charter were better by $0.38, or 1.28%, to end the session at $30.08.

Basic Energy, Grey Wolf drop dead Nov. 30

Oil service provider, Basic Energy Services (NYSE: BAS) shares lost $0.20, or 2.77% to finish at $25.76 as more details emerged on its deal to create a new $2.9 billion oil services company with Grey Wolf (AMEX: GW). The transaction has a termination date of Nov. 30 and a $30 million break-up fee.

Shares of Grey Wolf dropped $0.20, or 2.77%, to $7.03.

The deal is expected to close in the third quarter.

Industrial Distribution gets $11.80 per share

In manufacturing, shares of Industrial Distribution Group (Nasdaq: IDGR) dipped by $0.04, or 0.34%, to $11.65 after Platinum Equity Advisors agreed to up its purchase offer to $11.80 per share from $10.30 per share, according to a press release.

The deal is capped at $110 million.

Platinum Equity added to its offer after the company determined that the offer from Wesco Distribution (NYSE: WCC) was a "superior proposal," the release said.

"We are pleased by Platinum Equity's decision to offer more value to IDG's stockholders for their company," said Richard Seigel, chairman of the board.

"At the same time, we obviously want to take advantage of the opportunity to permit Wesco and Luther King Capital Management to assess their respective interests in possibly acquiring the company at a price above the $11.80 per share that has been offered by Platinum Equity."

IDG was ready to accept orders until 5 p.m. ET on Tuesday.

Shares of Wesco slipped $1.14, or 2.78%, to close the day at $39.81.

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