Motorola to split; Clear Channel, sponsors sue banks; shareholders file against Bear; Take-Two rejects bid

By Aaron Hochman-Zimmerman

New York, March 26 - A losing day in the market saw the litigation begin to pile on Bear Stearns Co. over its deal with JPMorgan Chase & Co.

Still, the not-so-surprising filings had no negative effects on Bear's price.

The legal actions continued as Thomas H. Lee Partners and Bain Capital Partners along with Clear Channel Communications Corp. sued their finance team alleging tortious interference.

Clear Channel's share price suffered interference during the session, but the company and its equity sponsors still expressed their commitment to the deal.

Fellow broadcasters XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. were both down on the day as consumer advocates lobbied the Federal Communications Commission to scrap the deal.

In the technology sector, Motorola Inc.'s stock was rising as it announced it would halve itself in search of more "flexibility."

On the software side, Take-Two Interactive Software Inc. shares were slightly better as it officially turned down the offer from Electronic Arts Inc.

In finance, National City Corp. performed well as it was rumored to have a target on its back courtesy of either Wells Fargo & Co. or U.S. Bancorp.

Also, Fifth Third Bancorp slipped after it bought nine branches of Atlanta's First Horizon National Corp.

Its deal with First Charter Corp. is still pending federal approval.

The Dow Jones Industrial Average ended off by 109.74, or 0.88%, at 12,422.86, while the Nasdaq Composite Index gave up 16.69, or 0.71%, to finish at 2,324.36.

The S&P 500 was lower by 11.86, or 0.88%, to close at 1,341.13.

So long Moto

Shares of Motorola (NYSE: MOT) tacked on $0.26, or 2.66%, to end at $10.02 as the company announced it will divide itself into its "mobile devices" and "broadband and mobility solutions" halves, according to a press release.

Both are expected to be publicly traded, a market source said.

"Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus - as well as more targeted investment opportunities for our shareholders," said Greg Brown, Motorola's president and chief executive officer.

Struggling Motorola has been under pressure to produce better results from investor Carl Icahn.

The proposed split will likely complete in 2009 as a tax free distribution to shareholders.

Take-Two leaves $2 billion

Also in technology, shares of Take-Two (Nasdaq: TTWO) added $0.09, or 0.35%, to close at $25.91 as its board formally rejected the $26 per share or $2 billion offer from Electronic Arts (Nasdaq: ERTS) calling it "inadequate," in a press release.

Shares of Electronic Arts slipped $0.72, or 1.43%, to $49.46.

Take-Two was defiant during its March 12 earnings call and is still awaiting the next release in its popular Grand Theft Auto series on April 29.

"We are effectively working toward a process to review all available options to maximize [shareholder] value, either as an independent company or in combination with a third party, and are open to beginning informal discussions starting now. Our stockholders' interests would hardly be served by accepting an offer from EA at the wrong price and the wrong time. As a result, the board recommends that stockholders not tender any of their shares to EA," said Strauss Zelnick, chairman of Take-Two.

Clear Channel in the quicksand?

Meanwhile, shares of broadcaster Clear Channel (NYSE: CCU) sank by $5.64, or 17.32%, to finish at $26.92 as the $26 billion deal with Thomas H. Lee and Bain Capital was again the subject of market speculation.

"It's trading as though they're not expecting it," a market source said.

After the close, Clear Channel joined its potential buyers Thomas H. Lee and Bain Capital which filed with the Supreme Courts of both New York and Texas against the deal's financing team made up of Morgan Stanley, Credit Suisse, The Royal Bank of Scotland, Deutsche Bank, Wachovia and led by Citigroup, according to a press release.

"We are disappointed and dismayed that the banks have chosen not to fund the transaction under the terms of the binding commitments they entered into almost a year ago. It seems clear that lenders' remorse set in when credit markets worsened," the release said.

"Now they are trying to walk away from their commitment letter which clearly states that they bear all the risk that conditions in the debt markets might change. The banks are attempting to do so by changing the deal in ways no responsible purchaser could ever accept - replacing an extended, long-term financing package of at least six years that they've been committed to all along with a short-term three-year bridge financing," the release continued.

"We want to do this deal. We are ready to close, have funded the equity portion of the purchase consideration, maintain our enthusiasm for the investment, and are fully prepared to fulfill our contractual obligations to complete the deal," Thomas H. Lee and Bain said in another statement.

"It seems like everyday something different there," a market source said.

Consumer group jamming satellite deal?

Elsewhere on the radio dial, shares of XM Satellite Radio (Nasdaq: XMSR) lost $0.61, or 4.52%, to $12.89 while shares of Sirius Satellite Radio (Nasdaq: SIRI) gave up $0.07, or 2.27%, to end at $3.02.

The combination of the satellite radio providers was approved by the Department of Justice Tuesday, but the deal is still waiting for the blessing of the FCC.

However, a market source said that the FCC's commissioner Robert McDowell took a call pertaining to the deal on Tuesday from a representative of the Consumer Coalition for Competition in Satellite Radio, a group which opposes the deal.

Covad gets FCC go ahead

Meanwhile, shares Covad Communications Group Inc. (AMEX: DVW) took on $0.02, or 2.21%, to end at $0.97 as the FCC granted it approval for its $1.02 per share merger with Platinum Equity.

The deal is expected to close on April 15, according to a company press release.

Bear Stearns readies for court

In the financial sector, shares of Bear Stearns (NYSE: BSC) added $0.27, or 2.47%, to finish the session at $11.21 as the lawsuits to block the transference of shares to JPMorgan (NYSE: JPM) began to roll into Delaware and New York.

Bear will likely move to stay the restraining order filed in Delaware, in order to deal with suits filed in New York including one from the Greek Orthodox Archdiocese Foundation which filed in the U.S. District Court in the Southern District of New York, according to a market source.

Bear plans to file its motion on Thursday.

The suits were not unexpected, but "it's not going to be anything big," a market source said.

"Something else can mess up the deal but this wouldn't," he said.

There may be a different result "if they get into litigation with [JP] Morgan," he said.

Suits against JPMorgan are likely, he said, but many questions will have to be answered at the Bear Stearns shareholder meeting where the deal will face approval.

JPMorgan shares slipped by $1.95, or 4.23%, to close at $44.11.

National City in crosshairs?

Also, shares of National City (NYSE: NCC) were better by $0.31, or 2.78%, to close at $11.45 as two bidders were rumored to be sniffing around the Cleveland-based bank.

"I think they were [Wells Fargo & Co.] and [U.S. Bancorp]," a market source said.

"Both would do well if it occurs," the source said with optimism for a completed deal.

Shares of Wells Fargo (NYSE: WFC) dropped $1.25, or 3.90%, to 30.81 finish at $30.81.

Shares of U.S. Bancorp (NYSE: USB) gave back $0.91, or 2.61%, to end the day at $33.90.

National City recently benefited by $2 billion from the March 19 initial public offering of Visa Inc. (NYSE: V).

Fifth Third adds nine

Shares of Fifth Third (Nasdaq: FITB) lost $0.87, or 3.74%, to finish at $22.38 as it reached an agreement with First Horizon (NYSE: FHN) to revive its purchase of First Horizon's nine Atlanta-area branches, according to a press release.

First Horizon shares fell $1.16, or 6.54%, to $16.57.

Both sides have pending litigation over the first attempt to complete the deal, but have agreed to drop the suits as soon as the transaction is completed.

"We are pleased that with this transaction we have completed the sales of our First Horizon Bank branches that we announced last September. We are focusing our capital on our higher-return full-service banking businesses that are located primarily in Tennessee, where we have the largest business and consumer market share," said Gerald Baker, First Horizon's chief executive officer.

Fifth Third's $1.1 billion or $31 per share deal to buy of First Charter (Nasdaq: FCTR) is still pending the review of the Federal Reserve.

First Charter stock was lower by $0.30, or 1.10%, to $27.02.

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