Accredited jumps on reduced Lone Star offer; Olin up after $417 million purchase of Pioneer

By Sheri Kasprzak

New York, Aug. 31 - Accredited Home Lenders Holding Co. saw its shares climb substantially on Friday after Lone Star Fund V subsidiary LSF5 Accredited Investments, LLC cut the offer price on it merger.

The news sent shares of Accredited's stock way up. Sell-side traders, also, said the news was a positive, not only for Accredited but also for Lone Star, which has contested its obligation to complete the merger. Earlier this month, Accredited took Lone Star to court in order to force the equity firm to seal the deal.

In other merger news, Olin Corp. settled its merger with Pioneer Cos. Inc. in a $417 million transaction.

The move sent shares of Olin up by 30 cents with shares of Pioneer edging up by 4 cents.

Lone Star drops price on merger

Moving back to the Accredited/Lone Star agreement, Lone Star sent a letter Friday to Accredited's board of directors offering to drop its offering price to $8.50 from $15.10. The revised price still represents a 35% premium to the Aug. 30 close.

"As you are aware, parent and purchaser recently extended the expiration date for the current offer until Sept. 12, 2007, our fourth extension," said the letter to Accredited's board of directors from Lone Star on Friday.

"It is very clear to us that the company is unlikely to be able to satisfy the conditions to the offer prior to Sept. 12, 2007, and will in all likelihood not be able to meet those conditions even if the offer is extended beyond that date. The current impasse between the company and Lone Star over the completion of the offer, which is the subject of litigation in Delaware Chancery Court, ultimately benefits neither Lone Star nor the company's stockholders. Among other things, we believe, and apparently the company also believes based on previous public statements, that under current conditions, the company may suffer further declines in value and have a difficult time surviving as a going concern."

Sell-side traders give thumbs up

"They [Lone Star] realize that the stock will eventually be worthless so why pay $15.50 a share for something that will be worth zero sooner than later?" asked one sell-said trader.

"They realized that they can't back out so they did the next best thing - drop the offer price," said another sell-side trader.

An analyst agreed with that.

"That sounds pretty accurate to me," he added. "They were trying to leave the deal but they knew they had no legal out. I think they've realized that if they have to buy, they might as well reduce the price at which they're willing to buy."

In addition to dropping its offering price, Lone Star wants to amend the merger terms so that the board of directors would be able to solicit proposals from third parties and terminate the Lone Star agreement if any favorable agreement is made by a third party.

The move improved shares of Accredited with the troubled mortgage lender's stock jumping by 41% before the opening bell. At 2 p.m. ET, the stock was up 37.56%, or $2.37. By the end of the day, the stock was up 43.42%, or $2.74, to close at $9.05 (Nasdaq: LEND).

In August, Accredited took Lone Star and its affiliates to court to keep the private equity firm from backing out of the deal.

Lone Star had tried to back out of the merger because it had no obligation to close the tender offer of Accredited's stock, contending that Accredited's financials had "drastically deteriorated" since the June agreement to merge.

In other mortgage news, shares of Countrywide Financial Corp. edged up on Friday, gaining 21 cents, or 1.07%, to close at $19.85 (NYSE: CFC).

Thornburg shares off

On Friday, shares of Thornburg Mortgage Inc. slipped, a day after the mortgage lender secured $500 million from the sale of 10% cumulative convertible preferred stock.

The stock fell by 3 cents to settle at $11.78. On Thursday, when the deal closed, the stock gained 65 cents, or 5.82%, to end at $11.81 (NYSE: TMA).

In the offering, Thornburg sold 20 million shares at $25 each. The preferreds are convertible at $11.50 each, a 3% premium to the company's $11.16 closing stock price on Wednesday.

Underwriter Friedman, Billings, Ramsey has a greenshoe for up to 3 million additional shares.

Sell-side traders agreed on Thursday that the move was a good one and the company needed the capital boost to help its liquidity problems.

Olin buys Pioneer

In other merger news, Olin sealed its $417 million acquisition of chlorine maker Pioneer Cos.

The merger sent shares of Olin up 30 cents, or 1.42%, to end the week at $21.44 (NYSE: OLN).

Pioneer's stock edged up by 4 cents to close at $35.01 (Nasdaq: PONR).

Olin purchased the shares of Pioneer at $35 per share, a 19% premium over Pioneer's stock price before the deal was announced in May.

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