Justice Department promises Live Nation, Ticketmaster probe; VMware shares jump on sale buzz

By Cristal Cody

Tupelo, Miss., Feb. 11 - Investors sent a sure sign of their feelings on a union between Live Nation, Inc. and Ticketmaster Entertainment, Inc. as the Justice Department promised a thorough antitrust review on Wednesday.

Ticketmaster shares fell $1.14, or 18.54%, to close at $5.01, while Live Nation's stock dropped 83 cents, or 17.22%, to $3.99.

Looking ahead to potential deals, Cisco Systems, Inc. has acquisition plans, and VMware, Inc. is attracting attention as a possible target. Shares of VMware jumped $1.65, or 6.77%, to close at $26.04.

In other action, Emageon Inc. said Wednesday it is evaluating its options after Health Systems Solutions, Inc. said it does not have the funding to close the $62 million buyout. The fallout could leave the company choosing bankruptcy as an option, an analyst said Wednesday.

Meanwhile, stocks moved up Wednesday as key lawmakers said they reached an agreement on a $789 billion economic stimulus bill that will create jobs and help those hit hardest by the recession. The House and Senate could vote on the bill this week.

The Dow Jones Industrial Average gained 50.65 points, or 0.64%, to close at 7,939.53.

The S&P 500 index rose 6.58 points, or 0.80%, to 833.74, while the Nasdaq Composite index added 5.77 points, or 0.38%, to 1,530.50.

Justice probes Live Nation, Ticketmaster deal

Justice Department spokesman Gina Talamona said that the "antitrust division is committed to vigorous enforcement of the merger antitrust laws and will conduct a thorough investigation of the proposed Ticketmaster/Live Nation transaction."

Talamona said the typical length of an investigation "depends" and is taken on a "case by case" basis.

One market observer estimates the probe could put the deal's closing into the first half of 2010.

Michael Rapino, Live Nation's chief executive officer, said Tuesday that he expected to close the deal by the second half of 2009.

Live Nation representatives did not return calls for comment on Wednesday.

Ticketmaster spokesman Albert Lopez said the company had no comment in response to the Justice Department statements.

Analysts say the deal carries high risk because of antitrust concerns.

Beverly Hills, Calif.-based Live Nation is the largest producer of live concerts in the world, and West Hollywood, Calif.-based Ticketmaster is the leading entertainment ticketing and marketing company.

In the all-stock merger, Ticketmaster shareholders will receive 1.384 shares of Live Nation stock for each share of Ticketmaster they hold.

VMware shares jump on buyout buzz

Cisco Systems reportedly has long wanted software maker VMware and owns about 2% of its outstanding shares. VMware parent EMC Corp. holds 84% of the company's stock.

Cisco and VMware representatives were not immediately available for comment.

Brent Bracelin, an analyst with Pacific Crest Securities, said the market has speculated for two years about potential Cisco acquisitions.

"Cisco is interested in making some acquisitions. The company reiterated it plans to target the 100-employee type firms," he said.

However, Palo Alto, Calif.-based VMware employs more than 6,600 people.

Cisco has about $29 billion of cash and securities. On Monday, the company launched a $4 billion debt sale.

"But I wouldn't assume just because they raised money that they will immediately go out and buy a company," Bracelin said.

Cisco shares closed up 12 cents, or 0.75%, to $16.17.

Emageon buyout on shaky ground

Emageon's buyout was expected to close on Wednesday after being postponed from December.

But now, Health Systems said that it does not expect Stanford International Bank Ltd. will provide the funding to close the deal and no other funding is currently available.

Emageon shares lost $1.11, or 44.22%, to close at $1.40 on Wednesday.

Health Systems Solutions shares closed unchanged at 75 cents.

Emageon shareholders approved the sale on Dec. 17.

Health Systems agreed to pay $2.85 a share in cash for the Birmingham, Ala.-based information technology system provider, a price that is a 37% premium to the stock's closing price on Oct. 13.

Emageon will receive a $9 million escrow deposit from Health Systems if the deal falls through.

"This obviously puts them in a bind," an analyst said Wednesday. "It's undetermined right now how much cash the company is generating or burning. The company has a decent product but current management ran it into the ground and didn't anticipate the market changes and now they're looking for an exit."

Bankruptcy may be an option if Health Systems does not find another backer to fund the deal, he said.

"HSS is a small company trying to buy a bigger company," the analyst said. "They are going to have trouble finding someone willing to finance that type of transaction."

Mentioned in this article:

Cisco Systems, Inc. Nasdaq: CSCO

Emageon Inc. Nasdaq: EMAG

Health Systems Solutions, Inc. OTCBB: HSSO

Live Nation, Inc. NYSE: LYV

Ticketmaster Entertainment, Inc. Nasdaq: TKTM

VMware, Inc. NYSE: VMW

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