Court turns down Hexion; Quiksilver sale on track for November; GM loses bailout; skeptics eye Foundry

By Cristal Cody

New York, Oct. 31 - It was more tricks than treats on Friday for companies wanting to finish their deals, but the Street didn't spook as easily and finished the week up after its worst month in 21 years.

Hexion Specialty Chemicals' $6.5 billion leveraged takeover of Huntsman Corp. may be on the brink of falling apart after the New York Supreme Court turned down Hexion's request on Friday to require the banks to extend their financing agreement.

Also, Quiksilver Inc. said Friday its sale of the Rossignol business is on track to close in November.

General Motors Corp. lost out a treat after the Bush administration said "no way" to a $10 billion loan to keep the automaker afloat and to fund the acquisition of Chrysler LLC.

Also Friday, Foundry Networks said the shareholders meeting to approve the company's $2.6 billion acquisition by Brocade Communications could be rescheduled a second time.

Meanwhile Friday, the market made inroads on recent losses as it closed out its worst month since 1987.

The Dow Jones Industrial Average rose 144.32, or 1.57%, to 9,325.01, and the S&P 500 index rose 14.66, or 1.54%, to 968.75, while the Nasdaq composite index rose 22.43, or 1.32%, to 1,720.95.

Supreme Court turns Hexion down

Huntsman Corp. shares plunged 26.01% to close at $10.10 in trading Friday after the New York State Supreme Court denied a request to extend a funding commitment that is crucial to Hexion Specialty Chemicals' $6.5 billion leveraged takeover of Huntsman.

Michael Judd, an analyst with Greenwich Consultants, said it seems the judge's decision was based on a technicality.

"It's more important to deal with the merits of the company and whether the combined enterprise would be solvent," he said. "I don't think you can read anything into this since there's nothing that involved the company's operations."

Credit Suisse AG and Deutsche Bank AG both wanted to back out of the deal, saying that a combination of Huntsman and Hexion, a unit of private equity firm Apollo Management LP, is not viable.

The two companies combined would have 21,000 employees, 180 facilities and more than $14 billion in annual sales.

Hexion sued Credit Suisse Group and Deutsche Bank in New York on Wednesday.

Under the judge's decision, the commitment letter for the two banks to fund the deal will expire Nov. 1.

Huntsman will hold a third quarter earnings conference call on Nov. 6.

Quiksilver merger to close

Investors pushed Quiksilver Inc. shares up 8.37% in afternoon trading on the news it will sell off its poorly received Rossignol business, even if it's at only for 40% of the original price.

"That they're able to sell it for anything is a positive," said Jeff Mintz, an analyst with Wedbush Morgan Securities.

Quiksilver agreed to sell the ski equipment business in August for €100 million to Chartreuse & Mont Blanc, a group led by Rossignol's former chief executive. On Friday it announced the price had been cut to €40 million.

But investors pushed the stock up Friday in anticipation of the deal going through.

"The fact that they just renegotiated the terms, it's a pretty good chance it will close in the next week or so," Mintz said.

Quiksilver said in a statement Friday that the sale is expected to close in early November.

Shares of Quiksilver closed up 3.19% to $2.59.

GM handout a bust

General Motors Corp. didn't receive the treat it wanted when the Bush administration said Friday that it would not provide GM with cash to buy Chrysler.

But that could change with Tuesday's presidential election.

"The wild card is when we get a new president, he could do an immediate package for them," said Jeff Embersits, chief investment officer with Shareholder Value Management. "I would bet if Barack wins, there's going to be a bailout."

GM had asked the government for a $10 billion loan to keep the company operating and to possibly fund the acquisition of Chrysler, which is privately owned by Cerberus Capital Management.

Embersits said a bailout would be wrong because the cost structure is out of line, but the battered auto industry would have political support.

"There's no sign of hope from a pure business side, but the government will probably intervene in a short-term favorable way," he said.

Cerberus Capital Management will probably continue to seek a buyer for Chrysler, but "the question is price," he said.

GM shares closed at $5.79, down 4.61%.

Foundry vote may get another delay

Foundry Networks said Friday that the shareholder meeting to approve a buyout valued at about $2.6 billion from Brocade Communications might be rescheduled again.

The meeting, scheduled for Nov. 7, may be delayed until December if a definitive agreement is reached between Foundry and Brocade Communications.

Foundry and Brocade reached an agreement this week "in principle" to amend the acquisition agreement between the two companies.

Under the tentative agreement, Foundry shareholders will receive $16.50 a share in cash.

Foundry shareholders also could receive the proceeds from $50 million, or 33 cents a share, in auction-rate securities held in the company's portfolio if the company can liquidate the securities before the acquisition closes, Foundry said in a statement.

Manuel Recarey, an analyst with Kaufman Brothers, said the lack of a definitive agreement implies considerable risk.

"From what Brocade has said, it has lined up $1.1 billion in financing between them and Morgan Stanley, but there are still questions about the financing," he said. "In today's environment, people take a skeptical view."

Foundry shares fell 0.54% to close Friday at $14.85.

Verizon, Alltel move forward

In other news, Verizon Wireless received the green light from the Justice Department Thursday to buy Alltel Corp. for $28 billion, which includes the assumption of $22.2 billion in debt.

Verizon must sell assets in 22 states as part of government conditions.

The Federal Communications Commission is expected to vote Tuesday on the merger that would create the nation's largest wireless carrier.

Verizon shares fell 2.72% to close at $29.67 Friday.

Also Friday, IKON Office Solutions shareholders approved Ricoh Co.'s acquisition for $17.25 a share and the transaction closed.

IKON shares closed up 0.64% to $17.23 in trading Friday.

In other news, Tracinda Corp. said Friday it plans to offer to buy 14 million shares of Delta Petroleum Corp. at $11 a share.

Tracinda, owned by billionaire Kirk Kerkorian, already owns 35% of Delta. The additional shares will push the company's ownership to 48.53%.

Delta Petroleum shares rose 3.18% to close Friday at $9.40 in trading.

Mentioned in this article:

Delta Petroleum Corp. Nasdaq: DPTR

Foundry Networks Inc. Nasdaq: FDRY

General Motors NYSE: GM

Huntsman Corp. NYSE: HUN

IKON Office Solutions NYSE: IKN

Quiksilver Inc. NYSE: ZQK

Verizon Communications: NYSE: VZ

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