Market thrills to Bankrate bid; Alpha promotes Foundation Coal buy; PepsiCo mum on deals

By Cristal Cody

Tupelo, Miss., July 22 - Bankrate, Inc. may be getting out while the getting's good with its $521 million cash buyout by private equity firm Apax Partners LLP, a market observer told Prospect News on Wednesday.

In other situations, Alpha Natural Resources, Inc. said Wednesday that its $1.50 billion acquisition of Foundation Coal Holdings Inc. makes sense now more than ever despite a major shareholder's objections.

Also on Wednesday, PepsiCo Inc. posted a higher second-quarter income, but executives declined to discus the soft-drink maker's pending offers to acquire Pepsi Bottling Group Inc. and PepsiAmericas Inc.

Meanwhile, a weeklong stock rally came to a stop on Wednesday.

The Dow Jones Industrial Average slipped 34.68 points, or 0.39%, to close at 8,881.26.

The Standard & Poor's 500 lost 0.51 points, or 0.05%, to end at 954.07, while the Nasdaq Composite index rose 10.18 points, or 0.53%, to 1,926.38.

Bankrate to go private

Apax plans to launch a tender offer by July 28 to acquire Bankrate at $28.50 a share, a bid that represents a 15.80% premium over Tuesday's stock closing price.

Shareholders representing about 24.00% of Bankrate's outstanding shares have agreed to support the deal, and Bankrate's board of directors unanimously approved the transaction.

The buyout must receive shareholder approval and is expected to close at the end of the third quarter.

Bankrate spokesman Kayleen Keneally told Prospect News on Wednesday that the deal also will need Hart-Scott-Rodino antitrust clearance.

The North Palm Beach, Fla.-based company operates personal finance web sites, including Bankrate.com, which pools data on financial products such as auto loans, credit cards and home equity loans.

In a separate release, Bankrate said its preliminary second-quarter profit fell 53.00% to $1.93 million, or 10 cents a share, from $4.10 million, or 21 cents a share, a year ago.

Revenue also is expected to fall to $31 million in the quarter from $40.20 million in the same period last year.

Sameet Sinha, an analyst with JMP Securities LLC, told Prospect News on Wednesday that the company is getting out while it can based on the quarterly results.

"The numbers looked way below our expectations, which implies the operating environment for the company was worsening, so this would've meant a bad next few quarters," said Sinha, who had expected revenues of $38.30 million.

Apax, which operates in the United States, Europe and Asia, is providing all of the financing for the acquisition from its equity funds under management.

Sinha said the all-equity, no-debt deal should sail through a regulatory review.

"The board of directors just need shareholder approval and a sign off from the FTC, which shouldn't be a problem," he said.

Bankrate's stock closed up $4.03, or 16.37%, at $28.65 on Wednesday. Shares have traded from $15.77 to $41.92 over the past year.

Alpha touts Foundation union

Alpha said in a shareholders presentation on Wednesday that this is a great time for a union with Foundation Coal.

On Monday, Duquesne Capital Management, LLC, which holds 8.31% of Alpha's outstanding stock, said the firm will not support the merger over concerns about exposure to lower profit-making markets.

Alpha and Foundation shareholders are scheduled to vote July 31 on the merger.

"We would reiterate this is an excellent transaction for both companies' shareholders and all of the assumptions we originally thought through still hold," Alpha said in presentation remarks released in a form 425 filing with the Securities and Exchange Commission on Wednesday.

Alpha said the share premium "is not excessive by any means. Our analyses indicate that this is one of the most opportune times for ANR to make this stock-for-stock acquisition versus any other time in the two companies' history as public companies."

The union of Foundation, a Linthicum Heights, Md.-based thermal coal producer, and Alpha, an Abingdon, Va.-based steelmaking metallurgical coal supplier, will create one of the country's top coal companies.

Under the terms of the agreement, Foundation shareholders will receive 1.084 shares of the new company for each share of Foundation.

Foundation's stock added 39 cents, or 1.23%, to close at $32.18.

Alpha shares rose 28 cents, or 0.92%, to $30.69.

Pepsi keeps quiet

PepsiCo chief executive officer Indra Nooyi stayed mum on the beverage company's offers to acquire its largest bottlers during its earnings conference call with analysts on Wednesday.

Nooyi said executives would not discuss "any aspect of our proposed acquisition of our anchor bottlers. However I do want to note that we and our bottling systems are continuing to interact normally with respect both to our ongoing operations as well as to our 2010 planning."

Pepsi Bottling and PepsiAmericas turned down PepsiCo's $6 billion cash-and-stock offer made in April as too low.

PepsiCo has offered $14.75 in cash plus 0.283 of a share of PepsiCo for each share of Somers, N.Y.-based Pepsi Bottling Group and $11.64 in cash plus 0.223 of a share of PepsiCo for each share of Minneapolis-based PepsiAmericas.

Most market observers expect PepsiCo to make a higher offer if it wants to get the deal done.

"Nothing from today makes any of us think any differently about the offer they have out there," an analyst told Prospect News on Wednesday. "Northing the company spoke out about gave us further clarity about when this is getting done."

Purchase, N.Y.-based PepsiCo on Wednesday posted a higher second-quarter income of $1.66 billion, or $1.06 a share, compared to $1.70 billion, or $1.05 a share, a year ago.

PepsiCo shares fell 51 cents, or 0.90%, to close at $55.89.

Pepsi Bottling's stock rose 4 cents, or 0.12%, to close at $33.40, while shares of PepsiAmericas lost 2 cents, or 0.08%, to $26.42 on Wednesday.

Mentioned in this article:

Alpha Natural Resources, Inc. NYSE: ANR

Bankrate, Inc. Nasdaq: RATE

Foundation Coal Holdings Inc. NYSE: FCL

PepsiAmericas Inc. NYSE: PAS

Pepsi Bottling Group Inc. NYSE: PBG

PepsiCo Inc. NYSE: PEP

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