National City to raise $7 billion; Alliance lawsuit for Blackstone; Blue Coat to acquire Packeteer

By Aaron Hochman-Zimmerman

New York, April 21 - Stocks came in mixed on Monday as Bank of America announced disappointing earnings, but shares of Cleveland-based National City Corp. were headed deep underground after it announced its plan to raise $7 billion.

Shares were up in technology as Blue Coat Systems Inc. announced a deal to buy Packeteer Inc.

Also, Yahoo! Inc. looked better amid the threatened hostile bid by Microsoft Corp.

In energy, Grey Wolf Inc. shares slipped as after it met Basic Energy Services Inc. half way in a merger between Texan oil services firms.

Meanwhile, Alliance Data Systems Inc. was lower as it brought a lawsuit against Blackstone Group.

The Dow Jones Industrial Average ended lower by 24.34, or 0.19%, at 12,825.02, while the Nasdaq Composite Index added 5.07, or 0.21%, to finish at 2,408.04.

The S&P 500 gave up 2.16, or 0.16%, to close at 1,388.17.

National City goes to the well

Shares of National City (NYSE: NCC) sank by $2.30, or 27.61%, to finish at $6.03 as it released its first quarter earnings and announced that its board approved the raising of $7 billion.

"This strategic raising of equity capital provides National City with the financial flexibility to continue investing in and growing our core businesses, which are delivering solid results, while addressing the asset quality challenges posed by the disruptions in the credit and housing markets," said National City chairman, president and chief executive officer Peter Raskind in a press release.

"In addition, while we fully recognize that the dividend is an important element of return for our stockholders, the dividend reduction is consistent with our efforts to strengthen our capital position and is prudent given this environment," he said.

Corsair Capital will provide $985 million of the new capital, the rest will come from other investors including many of the bank's larger shareholders.

From its earnings release, National City reported a loss for the first quarter of $171 million, compared to a net loss of $333 million in the fourth quarter of 2007 and a gain of $319 million during the first quarter of 2007.

"The National City equity raise, while painful short-term to equity holders, is a major plus to their preferred [stock], debt holders," a market source said.

Yahoo! readies for hostile bid

As it heads into the last week before Microsoft's (Nasdaq: MSFT) threatened hostile bid, shares of Sunnyvale-based Yahoo! (Nasdaq: YHOO) improved by $0.12, or 0.42%, to $28.55.

Shares of Microsoft added $0.42, or 1.40%, to finish at $30.42.

The search engine may be in a better position to win a stronger offer after its first quarter earnings, the Wall Street Journal reported.

To the surprise of many market watchers, Yahoo! has been stonewalling Microsoft's offer since it was announced on Feb. 1.

Many feel the stalling and the rejections were all posturing to improve the offer or to find another buyer.

Yahoo! is reportedly in talks with Time Warner Inc.'s (NYSE: TWX) AOL.

Time Warner shares added on $0.11, or 0.74%, to $14.95.

Blue Coat wraps up Packeteer

Also in Sunnyvale, shares of Blue Coat Systems (Nasdaq: BCSI) tacked on $0.48, or 2.43%, to close at $20.25 as it announced it has reached a $7.10 per share of $268 million agreement with Packeteer (Nasdaq: PKTR).

Shares of Packeteer jumped $0.81 or 13.11%, to $6.99.

"The acquisition of Packeteer will enable us to extend our leadership in solving branch office application performance challenges and addressing security threats by adding an extensive, experienced sales channel, integrating our sales organizations and by reinvigorating the well-regarded PacketShaper product and adding it to our solution set," said Brian NeSmith, president and chief executive officer of Blue Coat Systems in a press release.

Blue Coat will fund the acquisition with cash on hand and an $80 million convertible notes financing, the release said.

The deal is expected to close in the second quarter.

Grey Wolf shakes with Basic Energy

Shares of Grey Wolf (AMEX: GW) dipped by $0.37, or 4.87%, to $7.23 while shares of Basic Energy Services (NYSE: BAS) were better by $0.42, or 1.63%, to close the day at $26.19 as the two energy firms combined forces in a merger of equals deal.

However, Grey Wolf was enough the alpha dog to keep its name in the deal to create the new $2.9 billion entity.

Grey Wolf shareholdings will receive $1.82 in cash and 0.25 shares of new Grey Wolf for each share and Basic Energy Services shareholders will receive $6.70 in cash and 0.9195 shares for each share of Basic Energy Services they own.

"With approximately 50% of Basic Energy Service's business focused on oil and approximately 95% of Grey Wolf's business focused on natural gas, this transaction results in a company with a diversified revenue stream in terms of exposure to oil and gas opportunities, involvement through the life of the well from drilling to production to well abandonment and a very broad geographic coverage, all of which is consistent with our stated strategic goal," said Thomas Richards, Grey Wolf's current chairman, president and chief executive officer, in a press release.

LifeCell eases as tender starts

Shares of LifeCell (Nasdaq: LIFC) were off by just $0.06, or 0.12%, to end the day at $50.49 as Kinetic Concepts (NYSE: KCI) announced it has commenced the cash tender offer to buy LifeCell.

Shares of Kinetic Concepts picked up $0.09, or 0.23%, to close at $39.36.

Also, a market source said a shareholder filed a class action suit against LifeCell in New Jersey for agreeing to the merger.

Gamco Investors Inc. increased its stake to 7% from 6%, the source said.

Alliance Data sues Blackstone

Shares of Alliance Data (NYSE: ADS) were lower by $1.03, or 1.95%, to end the session at $51.81 after it terminated its agreement to be acquired by Blackstone Group (NYSE: BX) on Friday and filed a suit in order to obtain a $170 million break up fee for what it considers to be breach of contract by the private equity firm.

"We have fully complied with all of our obligations under the merger agreement and any claims to the contrary by Alliance Data are purely self-serving ... Blackstone will defend this suit vigorously and does not intend to settle it," a Blackstone spokesman was quoted in the Wall Street Journal.

Shares of Blackstone fell $0.32, or 1.68%, to $18.70.

Blockbuster sniffs around Circuit City

In retail, shares of Blockbuster Inc. (NYSE: BBI) slid $0.05, or 1.63%, to end at $3.02 as it continued to turn over the idea of a combination with Circuit City (NYSE: CC).

Shares of Circuit City Stores Inc. managed to add $0.13, or 2.75%, to close at $4.86.

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