BAE buys up MTC; United Rentals gives up; Harrah's set to close, has eyes set on Europe

By Evan Weinberger

New York, Dec. 24 - Dayton, Ohio-based defense contractor MTC Technologies Inc. will have a very merry Christmas this year. Not only was the company awarded a $4.1 million United States Air Force contract to service Philippine Air Force cargo planes, the company agreed to a merger with British defense giant BAE Systems, Inc.

The $24 per share offering comes out to a total of around $367 million, and with BAE's assumption of MTC's outstanding debt, the deal moves closer to $450 million.

"MTC Technologies is an excellent addition to BAE Systems," said Walt Havenstein, president and chief executive officer of BAE Systems. "This acquisition helps us become an even more effective prime contractor and provider of technical solutions and services, which means we will have a greater capability to meet our customers' most demanding needs, specifically in the areas of readiness and sustainment."

MTC will become a part of BAE's Customer Solutions operating group, which is based in Arlington, Va.

BAE has major contracts with the U.S. Navy to provide maintenance for much of its equipment. MTC has similar, and growing, contracts with the Army and Air Force.

The deal is expected to close in the first half of 2008.

Shares of MTC (Nasdaq: MTCT) went through the roof Monday, gaining $5.72, or 32.17%, to close at $23.50.

Peace at hand in United Rentals-Cerberus fight

And that was pretty much all that was stirring on the day before Christmas.

Greenwich, Conn.-based construction rentals firm United Rentals Inc. announced Monday that it would not appeal a judge's ruling in its case against Cerberus Capital Management Friday. Instead, United Rentals will seek to have Cerberus pay the $100 million break-up fee that was a part of the agreed-to $4 billion takeover.

Cerberus and United Rentals signed the deal in July. Cerberus broke it off in November.

United Rentals stock (NYSE: URI) picked up 79 cents, or 4.41%, to close at $18.70.

Light activity in pre-holiday market

Las Vegas-based casino operator Harrah's Entertainment Inc. announced Monday that it received the final regulatory approval necessary for the largest private equity takeover ever in the gaming industry.

The National Indian Gaming Commission approved the $17.7 billion leveraged buyout of Harrah's by Apollo Management and Texas Pacific Group. The private equity shops will pay $90 per share to Harrah's stockholders.

The deal is now expected to close early next year.

A report in London's Daily Telegraph Monday reported that Harrah's appointed Deutsche Bank and Morgan Stanley to help search for strategic options in the European gambling sector. That could include a bid for British casino group Rank.

Harrah's stock (NYSE: HET) moved up 52 cents, or 0.59%, to $88.85 Monday.

That gain was in line with the broader markets Monday, which saw extremely light volume. The New York Stock Exchange has a policy of never being closed for four consecutive days, so market players had a trading session but with an early close to deal with Monday. "It's a macho thing," one market watcher said. "They brag about the fact that they're not closed four days."

The Dow Jones Industrial Average closed at 13,549.33, a gain of 98.68, or 0.73%, on the day.

The Nasdaq picked up 21.51, or 0.80%, for a 2,713.50 close.

And the Standard & Poor's 500 closed at 1,496.45, a gain of 11.99 points, or 0.81%.

Markets were buoyed by word that Merrill Lynch had secured up to $6.2 billion in private financing from Temasek Holdings, the sovereign equity fund of the Singapore government, and American mutual fund manager Davis Selected Advisors.

Merrill Lynch also announced the sale of the corporate finance, equipment finance, franchise, energy and healthcare finance units to General Electric's finance unit for around $1.3 billion Monday.

While the news of the deals didn't create all that much buzz - neither was unexpected nor particularly unusual - a trader said he had heard of some activity in response to the news. "MER sounds like a good deal on both accounts, although I just had a very smart financial sector hedge fund shorting it," he said.

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