Republic puts up roadblocks for Waste Management; IBM buys Ilog; Lenox looks for options

By Aaron Hochman-Zimmerman

New York, July 28 - A difficult day in the equity markets saw Republic Services Inc. make a more difficult time for a possible takeover by Waste Management Inc.

A change to the company's bylaws prevents individuals or companies from scooping up large portions of the waste hauler.

With the new rules in place, Republic will either be taken out at a strong price or will be allowed to go ahead with its merger with Allied Waste Industries Inc.

Also, china and flatware producer Lenox Group Inc. continued to explore deal-land in search of strategic alternatives.

Without a buyer for the entire firm, the company claims it has been in negotiations to sell off certain assets.

In technology, International Business Machines Corp. was able to see eye to eye with software firm Ilog SA as the two announced an agreement for IBM to buy the French company in a $340 million tender offer.

Elsewhere in energy, Sempra Energy was looking up at Mobile, Ala.-based EnergySouth Inc. as the deal sent EnergySouth's shares soaring.

In the broader market, the Dow Jones Industrial Average sank by 239.61, or 2.11%, at 11,131.08, while the Nasdaq Composite Index gave up 46.31, or 2.00% to finish at 2,264.22.

The S&P 500 lost 23.39, or 1.86%, to close at 1,234.37.

Republic piles deck against WM

As poison pills are concerned, Republic Services' recent changes to its bylaws bring it closer to serving up something closer to a rotten apple than a poisoned apple.

The company adopted a shareholder rights plan which caps the acquisition of shares at 10% for most shareholders or at 20% for those who already hold at least 10%, the company said in a press release.

However, the rule was waived in special cases for investors such as the Bill and Melinda Gates Foundation and Cascade Investments LLC.

The move was aimed at Waste Management, which has tried to get between a $14 per share deal for Republic to buy Allied Waste.

"I think poison pill is a little bit of an extreme," said Friedman, Billings, Ramsey & Co. analyst Brian Butler. "There's only some specific instances where these changes are going to have an effect."

"They're hurdles, but they're not barriers," he said about Waste Management's chances of making a better offer for Republic.

On July 14, Waste Management offered $34 per share for Republic, which would have been a "tremendous price," Butler said.

"If Waste Management makes an offer that's acceptable to management and the shareholders, this will occur," he said about the Waste Management takeover of Republic.

The moves by Republic's board were intended to dissuade Waste Management from "trying to strong arm" Republic out of its deal with Allied Waste, which would create a strong challenger to Waste Management's dominance in the waste removal industry.

The question over whether or not Waste Management is eventually successful "all comes down to how much Waste Management is willing to pay," Butler said.

"I think a deal has to be in that $38 to $40 [per share] range," he said.

If Allied Waste and Republic are given a clear path to merging, "overall, it's a positive for the industry and that includes Waste Management," Butler said.

"Somewhere deep down I'm sure Waste Management would rather not have a strong second, but I don't think that was their prime motivation," he said about Waste Management's $34 per share offer.

At the close on Monday, shares of Republic Services (NYSE: RSG) fell by $0.66, or 2.02%, to $32.05.

Shares of Allied Waste (NYSE: AW) slid by $0.14, or 1.21%, to $11.47.

Shares of Waste Management (NYSE: WM) were lower by $0.68, or 1.90%, to $25.07.

Lenox still searching for options

Lenox Group was trading up even as it announced it has been unable to find a buyer for the entire company, according to a press release.

However, the company still plans to explore strategic options, the release said.

One of the options it is considering is fracturing off and selling just the Department 56 business.

The company claims it is in "advanced discussions regarding the sale," the press release said.

Lenox is also in discussions with is creditors over its balance sheet and ways the company might refinance its term loan and credit facility.

Second fiscal quarter results are expected on Aug. 7.

Shares of the Lenox Group (OTCBB: LENX) took on $0.01, or 4.17%, to close the session at $0.25.

IBM downloads Ilog

IBM announced it plans to acquire France's Ilog for $15.70 (€10) per share or $340 million through a cash tender offer in France and in the United States, according to a joint press release.

The offer represents a 37% premium to Ilog's closing price on Friday.

The French Ilog "offers tools and technologies for business managers, analysts, architects and developers to use as they analyze, plan, track and improve business processes," the release said.

"Companies across all industries are looking for technologies to help them manage their processes with more flexibility so they can keep up with changing business conditions," said Tom Rosamilia, general manager of IBM WebSphere, in a statement.

"Ilog's software allows businesses to more effectively manage and automate the decision making process, giving companies an opportunity to react with incredible speed and accuracy. IBM has partnered with Ilog for over a decade, and by adding Ilog's capabilities to IBM's software portfolio, this is a great combination to provide value to our clients," he said.

Approximately 10% of Ilog's shares have already been tendered, according to a market source.

Shares of IBM (NYSE: IBM) fell by $2.28, or 1.77%, to $126.25.

EnergySouth shoots up like a weed in springtime

Shares of EnergySouth were headed north on Monday as the company agreed to be acquired by Sempra Energy for $61.50 per share or $510 million, according to an 8-K filing.

"This acquisition supports our natural gas strategy by expanding our Gulf Coast operations to serve key markets where gas demand outpaces the national average," said Donald Felsinger, chairman and chief executive officer of Sempra Energy, in a statement.

"These new assets complement our existing operations in the region and position us for future growth," he added.

Sempra also announced it will finance the deal with cash on hand and new debt.

"We believe these high-cycle, well-located storage facilities will continue to increase in value in volatile natural gas markets," said George Liparidis, president and chief executive officer of Sempra Pipelines & Storage.

Shares of EnergySouth (Nasdaq: ENSI) jumped $9.44, or 18.82%, to close at $59.60.

Shares of Sempra Energy (NYSE: SRE) gave up $0.25, or 0.46%, to end the day at $54.23.

The deal is expected to close by the end of 2008.

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