Corn Products wants out of Bunge merger; JDA to drop price on i2; hints of Microsoft/Yahoo deal renewed

By Cristal Cody

New York, Nov. 5 -Election celebrations were wrung dry by lunch Wednesday, with indexes falling amid investor concern over president-elect Barack Obama's impact on the economy.

Two companies also cited the dismal economy Wednesday in announcements they will back out of current merger agreements.

Corn Products International Inc. said that it wants out of the $4.4 billion acquisition by Bunge Ltd.

JDA Software Group Inc. also said Wednesday that it wants i2 Technologies Inc. to cancel its shareholder meeting so it can negotiate a lower purchase price.

Meanwhile, Epicor Software Corp. continues to fight back against a reduced buyout bid by New York hedge fund Elliot Associates LP.

Some good news did come out Wednesday with renewed hints of a Microsoft Corp./Yahoo! Inc. deal after the Justice Department put an end to a planned Yahoo and Google Inc. advertising agreement.

By the end of the day Wednesday, the Dow Jones Industrial Average had dropped nearly 500 points and the major indexes fell more than 5%.

The Dow fell 486.01, or 5.05%, to 9,139.27. The S&P 500 fell 52.98, or 5.27%, to 952.77, and the Nasdaq Composite Index fell 98.48, or 5.53%, to 1,681.64.

Corn Products wants out of Bunge deal

Westchester, Ill.-based Corn Products International gave no reason for the change of heart against the merger with Bunge.

The company said that as part of the merger terms, the board may withdraw or change its recommendation with five days' notice to Bunge.

Bunge also has the right to force Corn Products to hold a shareholders' meeting or to recoup up to $10 million in expenses.

Corn Products spokesman Dave Prichard did not return calls seeking further comment.

Alberto Weisser, chairman and chief executive officer of White Plains, N.Y.-based Bunge, said the company believes a merger would still deliver long-term value.

"Consequently, we have no intention of revising the terms of the transaction," he said in a statement. "We intend to evaluate carefully, with the best interests of Bunge's shareholders in mind, our options of either terminating the agreement or proceeding to shareholder votes under the existing agreement."

BMO Capital Markets analyst Kenneth Zaslow said the merger isn't completely kaput.

"Will the deal ever happen? Maybe," he said.

Zaslow said the key to watch is whether Corn Products hires a new chief executive to replace Sam Scott, who is retiring.

If the deal is dead in the water, Corn Products likely will hire a permanent CEO to develop the company's long-term strategy.

"If the deal is in play, no new CEO will take the position, only to sell the company to [Bunge] and be out of a job," he said.

Corn Product shares closed up 2.91% to $26.14 in trading Wednesday. Shares have traded from $17.51 to $54.96 over the past 52 weeks.

Bunge shares fell 2.54% to close at $44.16 a share. Shares have traded from $27.60 to $135 over the past 52 weeks.

Investors sense Microsoft/Yahoo combo ahead

Investors smelled a Microsoft/Yahoo deal Wednesday after Yahoo and Google Inc. abandoned an advertising agreement that the U.S. Department of Justice had threatened to block with an antitrust lawsuit.

Yahoo stock was up 8.9% in early afternoon trading before settling up 4.27% at $13.92 Wednesday. Shares have traded as low as $11.25 and as high as $31.79 over the past 52 weeks.

The Justice Department said Wednesday that Yahoo and Google's agreement would have harmed competition for online search advertising and search syndication.

Although Microsoft has said it is no longer interested in buying Yahoo, analysts and investors think the company will try again at a lower price.

Yahoo also has been discussing a possible merger with AOL, which could prompt Microsoft to move quickly.

"You really have a frustrated shareholder base at Yahoo with limited alternatives, so the Street is hoping for some type of deal with Microsoft," said Clayton Moran, an analyst for the Stanford Group Co.

"The failure of the Google partnership increases the likelihood of some type of Microsoft deal," he said. "It doesn't necessarily mean the likelihood of a sale to Microsoft, but possibly the sale of its search business or some type of search partnership between Yahoo and Microsoft."

Microsoft shares closed at $22.08, down 6.16%. Microsoft's stock has traded from $20.65 to $36.72 over the past 52 weeks.

Google shares fell 6.73% to close at $342.24 in trading Wednesday, still above a 52-week low of $309.44 but well off a 52-week high of $747.24.

JDA wants i2 for less

JDA Software said Wednesday that it wants i2 Technologies to adjourn the company's shareholders' meeting scheduled for Thursday so it can open talks over a lower purchase price.

Shares of i2 Technologies sunk 28.63% to close at $10.42, near its 52-week low of $10.01. The stock has a 52-week high of $18.80.

Scottsdale, Ariz.-based JDA said because of the adverse effect of the continuing credit crisis, available credit terms would result in unacceptable risks and costs to the combined company at the original offer of $346 million in cash.

JDA Software's $450 million five-year senior secured credit facility has not been successfully syndicated, which played a part in the company's decision, according to a bank loan market source.

"No surprise given the market. Nothing pulled. Nothing changed. Still in flux," the source said regarding the credit facility.

JDA shares dropped 10.73% to close at $12.23 in trading. The stock has traded from $10.07 to $25.50 over the past 52 weeks.

James Friedman, an analyst with the Susquehanna Financial Group, a market maker in the shares of both JDA and i2 Technologies, said the deal is risky, but a combination continues to make business sense.

"There are a lot of synergies in the merger," he said. "My guess is that JDA is trying to be disciplined about price, but they are committed to the deal. That's the most likely scenario, but there's definitely a risk to the financials. You don't know if i2 shareholders will approve a lower price."

JDA made the bid for i2 Technologies in August.

Under the original purchase agreement, i2's common stock would be converted into the right to receive $14.86 per share in cash and each issued and outstanding share of i2's series B convertible preferred stock was going to be converted into the right to receive roughly $1,095 per share in cash plus all accrued and unpaid dividends.

Dallas-based i2 Technologies said Wednesday that it planned to meet with advisors and the board of directors later in the day to determine its next move.

If i2 holds the shareholders meeting, JDA said it will exercise its discretionary right under the agreement to take up to 60 days to arrange debt financing.

Patrick Walravens, an analyst with JMP Securities, said that i2 Technologies may decide "whether it would make sense to re-engage with other interested parties at some point. The good news is that the original process included two other bidders who ended up bidding $13.50 and $13.25 per share."

Few Epicor shares tendered for Elliot

Epicor Software Corp. said Wednesday that the board of directors unanimously recommends shareholders reject New York hedge fund Elliot Associates LP's reduced offer.

Elliot lowered its offer on Tuesday for Epicor from $9.50 a share to $7.50 a share.

Epicor's board already had rejected the first offer.

Only 82,094, or 0.14%, of Epicor's outstanding shares have been tendered as of Monday, according to Epicor and Elliot.

"Our board of directors has maintained from the beginning, and continues to believe, that Elliott Associates' offer is opportunistic and would deprive stockholders from benefiting from the value associated with Epicor's current and planned retail and ERP business software solutions," said Tom Kelly, president and CEO.

"The recommendation of our board of directors that stockholders not tender their shares to Elliott Associates remains unchanged."

A market source said that other bidders also have shown interest in Epicor and Elliot's reduced price could push shareholders to pressure the board to permit Elliot and others to conduct due diligence.

Epicor shares fell 6.61% to close at $6.50 in trading Wednesday. Shares have traded from $5.69 to $12.65 over the past 52 weeks.

Mentioned in this article:

Bunge Ltd. NYSE: BG

Corn Products International Inc. NYSE: CPO

Epicor Software Corp. Nasdaq: EPIC

Google Inc. Nasdaq: GOOG

i2 Technologies Inc. Nasdaq: ITWO

JDA Software Group Inc. Nasdaq: JDAS

Microsoft Corp. Nasdaq: MSFT

Yahoo! Inc. Nasdaq: YHOO

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