Fisher Scientific, Emmis up on buyout announcements; Unifi plans eight-year deal

By Paul Deckelman and Paul A. Harris

New York, May 8 - Fisher Scientific International Inc.'s junk bonds were solidly higher Monday on the news that the Hampton, N.H.-based maker of laboratory equipment and other scientific gear will be acquired by smaller rival Thermo Electron Corp. in a $10.6 billion acquisition. Waltham, Ma.-based Thermo Electron will also assume $2.2 billion of Fisher Scientific debt.

Also on the merger and acquisitions front, bonds of Indianapolis-based Emmis Communications Corp. were higher on the news that the radio broadcasting company's chief executive officer has offered to take it private in a leveraged buyout.

From out of the distressed precincts came the word that Movie Gallery Inc.'s bonds were several points higher on apparent investor optimism ahead of the company's release of quarterly numbers later this week.

In general, however, traders said the session was a bore, with not much activity going on outside of those news-specific names; they said market players were instead hunkering down to await the outcome of the two-day meeting of the Federal Reserve Board's policy-making Federal Open Market Committee, which takes place Tuesday and Wednesday.

In the primary arena, meantime, Unifi Inc. was heard by syndicate sources to be planning an offering of eight-notes, and Education Management Corp. was getting ready to hit the road on Tuesday to market a planned two-part note offering.

Out of the European segment of the junk market came pre-deal price-talk on offerings from Lottomatica SpA and Europcar Amag Services AG. And Polypipe was heard bringing a 10-year sterling-denominated deal.

Back among the secondary names, a trader, when asked what was new and exciting, emphatically answered "not high yield." While he saw a "pretty positive tone," he said that activity levels were restrained, with players reluctant to do much of anything before the Wednesday afternoon announcement of what the Fed is going to do next - most opine that the central bank is likely to continue tightening interest rates for at least another couple of meetings before finally deciding that the tightening that began two years ago as an inflation-fighting measure has gone on long enough.

Merger boosts Fisher Scientific

One of the few features he saw in an otherwise bland market was Fisher Scientific, whose 6 1/8% notes due 2015 were up three points at 99.5 bid, 100.5 offered, while its 6¾% notes due 2014 were also up a trey, at 102 bid, 103 offered.

A market source at another desk saw the 6 1/8s actually up more than four points on the day at 100.5 bid, and the 63/4s up two points at 102.5. He pegged the company's 6½% notes due 2013 at 100.75, its 8% notes due 2011 at 106.75, its 8% notes due 2013 at 108.25 and its 8½% notes due 2012 at 105.75, all up a point on the session.

Yet another trader saw the 6 1/8s "wrapped around par" and up four points on the day.

However, Fisher's New York Stock Exchange-traded shares rose only a modest $2.22 (3.01%) to $75.95 on the news, although volume of 17.5 million shares was about 17 times the norm.

Thermo Electron - with annual sales about half those of Fisher - has proposed buying its larger sector peer and assuming the latter's debt in order to create a powerhouse in the scientific equipment industry. The combined company - whose products mostly complement one another rather than compete - would have the broadest selection of one-time and re-usable products in the industry, and combined pro-forma revenues dwarfing their remaining competitors.

Thermo Electron is offering Fisher shareholders two shares of Thermo common stock for each Fisher share. Based on Friday's closing price for Thermo of $39.45 per share, the offer values Fisher at $78.90 per Fisher share, or a 7% premium over Fisher's closing price Friday at $73.73.

Assuming the all-stock deal is completed, Thermo's shareholders would own about 39% of the combined company, and Fisher shareholders the remaining 61%.

Emmis jumps on LBO bid

Also on the buyout front, Emmis Communications' 6 7/8% notes due 2012 were seen up as much as 1½ points Monday, on the news that the company's CEO wants to take the company private. A trader who saw that large a gain was quoting the bonds at 98 bid, 99 offered, although another trader saw a more restrained ¾ point rise to 97.5 bid, 98.5 offered.

Emmis CEO Jeffrey H. Smulyan plans to acquire the roughly 83% of Emmis he does not already own in a $567 million deal, which values Emmis at $15.25 per share in cash. Smulyan also plans to refinance some of Emmis' preferred stock and $656 million in outstanding debt.

The Emmis buyout appears to be Plan B for Smulyan, who up until a week ago was in the running to buy the Washington Nationals baseball team, before being outbid by the eventual winning bidder. The end of his bid for the Nationals freed his resources for the Emmis bid, which would have been unlikely had the investment group that he lad managed to top the $450 million winning bid for the Nationals put forward by another syndicate, led by Maryland real estate tycoon Theodore Lerner.

But Smulyan may have to top his own bid for Emmis to get the deal done, since the company's Nasdaq-traded shares soared $2.82 (21%) Monday to $16.25 - a dollar above the per-share price Smulyan is proposing - which observers take as a sign that investors believe the company is worth more than Smulyan has valued it and may hold out for more money. Volume of 8.7 million shares was nearly 16 times the usual turnover.

Primus higher on sale

A trader said that Primus Telecommunications Group Inc.'s 12¾% notes due 2009 were up 1½ points at 76.5 bid, 77.5 offered, helped by the McLean, Va.-based telecom company's sale of its 85% stake in its operations in India. Primus will realize net proceeds of about $14.4 million, before any closing adjustments.

Nortek up after IPO filing

Elsewhere, the trader mentioned that Nortek Inc.'s 8½% notes due 2014 "popped three points" to around the 78 bid, 79 offered level, after the Providence, R.I.-based manufacturer of ventilation equipment's parent company NTK Holdings Inc. revealed plans to an initial public offering in a filing with the Securities and Exchange Commission.

The company said that the net proceeds of the share offering are expected to be used to repay indebtedness of NTK Holdings and Nortek, including approximately $205 million of new debt expected to be incurred in the near future by NTK Holdings under a new senior unsecured loan facility. The net proceeds of that new debt, in turn, are expected to be used to pay a dividend of approximately $174.9 million to the stockholder of NTK Holdings and, together with cash on hand at Nortek, to make a distribution of some $54 million to participants under the 2004 Nortek Holdings, Inc. Deferred Compensation Plan.

Eastman Kodak gains on sale hopes

The trader further said that Eastman Kodak Co.'s 7¼% notes due 2013 were up ¾ point to 97 bid, 98 offered; he said the fallen-angel bonds of the Rochester, N.Y.-based photography and imaging giant - which fell on Friday in response to its sixth straight quarterly loss - were better after a weekend blurb in Barron's suggested that it may realize as much as $4 billion in proceeds should it sell its healthcare imaging operations - more than many observers initially thought it might get.

Movie Gallery rises

A trader in distressed notes said Movie Gallery's 11% notes due 2012 moved up to 61 bid 62 offered up from levels in the high 50s on Friday. "That was the one I saw move the most today [Monday]," he said.

It was believed that investors - including holders of the company's bank debt - were buying on optimism that the company's quarterly earnings numbers due out Thursday will show that the Dothan, Ala.-based video rental store chain operator's fortunes are starting to turn around after months of negativity.

Primary focuses on Europe

A quiet Monday in the primary market saw most of the news flow come out of Europe, as Netherlands retailer Victoria Acquisition II BV, issuing for Vendex KKB VB, priced the session's sole transaction.

Meanwhile details emerged on other euro-denominated business, most of it expected to price by Friday's close

Vendex comes at price talk

Victoria Acquisition II BV, a financing vehicle for Vendex KKB VB, priced the day's only deal - a non-rated €460 million issue of nine-year floating-rate PIK notes at par to yield three-month Euribor plus 800 basis points on Monday, on top of the price talk.

Citigroup and Deutsche Bank Securities were the underwriters.

Proceeds, along with cash on hand, will be used to repay shareholder loans and other shareholder funding instruments, as well as €275 million of senior bank debt.

Education Management launches $760 million.

In the U.S. primary market, Education Management Corp. announced that it will begin a roadshow on Tuesday for its $760 million two-part offering of notes.

The Pittsburgh-based provider of private post-secondary education is offering a $320 million tranche of eight-year senior notes and a $440 million tranche of 10-year senior subordinated notes.

Credit Suisse, Goldman Sachs & Co., Merrill Lynch & Co. and Banc of America Securities are joint bookrunners for the acquisition deal.

Lottomatica, Europcar talk deals

Aside from Education Management, the remainder of Monday's primary market news emerged from Europe.

Lottomatica SpA talked its €750 million offering of 60-year hybrid securities (Ba3/BB) at 8¼% to 8½% on Monday.

The roadshow will conclude in Paris on Tuesday, and the offering is expected to price mid-week.

Credit Suisse is the bookrunner for the acquisition deal from the Rome-based manager and operator of lottery games.

Also Europcar Amag Services AG issued price talk on its €500 million two-part notes offering.

The Switzerland-based car rental arm of Volkswagen AG is talking its seven-year senior subordinated secured floating-rate notes at Euribor plus 375 to 400 basis points.

Meanwhile the company is talking is eight-year senior subordinated unsecured fixed-rate notes at 8 1/8% to 8 3/8%.

Tranche sizes remain to be determined.

The Deutsche Bank-led acquisition deal is also expected to price mid-week.

Polypipe launches PIK floaters

With the Vendex floating-rate PIK notes deal having priced on Monday, Doncaster, England-based building materials company Polypipe Holdings plc announced plans to sell £65 million of 10-year floating-rate PIK notes later this week via Deutsche Bank.

Proceeds will be used to refinance a loan and fund a dividend.

The Polypipe transaction is the third floating-rate PIK notes deal to surface in as many days, with Deutsche Bank being involved in all three transactions.

Last Thursday Houghton Mifflin LLC and Houghton Mifflin Finance, Inc. priced a $300 million issue of Libor plus 675 basis points floating-rate PIK notes (Caa2) at 99.00.

Deutsche Bank Securities and Goldman Sachs & Co. led the Boston educational publisher's divided deal.

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