Take-Two tumbles; Electronic Clearing falls; EGL off after hours; Bally up; Delta dumped

By Ronda Fears

Memphis, March 27 - Take-Two Interactive Software Inc. said Tuesday that it has received no offers to present at its annual meeting Friday and was continuing discussion with activist shareholders, but traders said it seems likely the shareholders' slate of board nominees will gain control of the board. While the stock tumbled on the news Tuesday, traders saw the pullback as a buying opportunity.

Auto parts supplier Lear Corp. said Tuesday the window for receiving competing bids to the $5.3 billion takeover offer by an affiliate of billionaire Carl Icahn, which owns about 16% of Lear, has closed without a counter offer. Lear agreed to the $36-per-share buyout offer Feb. 9, but it has faced opposition from Richard Pzena, who owns about 10% of Lear shares. On Tuesday, however, the stock (NYSE: LEA) remained above the takeover price but was coming down, ending with a loss of 8 cents at $36.54.

In another rivalry failing, EGL Inc. headed south in after-hours trade Tuesday as word spread through the market of a letter filed Tuesday at the Securities and Exchange Commission by chief executive Jim Crane that suggested a rival bid would not be pursued by Apollo Management to the management-led buyout offer of $38 per share the company accepted last week.

Yet another disappointment was seen as Electronic Clearing House Inc. and Intuit Inc. announced Tuesday that they have mutually agreed to end their merger that was inked Dec. 14, and on that news, Electronic Clearing House fell sharply but Intuit was propped up by speculation that it has another deal on the hook or may be a takeover target itself, according to a trader.

Adding to the pressure on New Century Financial Corp., France's fourth-largest bank, Natixis, plans on unloading $800 million in mortgage loans tied to the beleaguered subprime lender. That comes on the heels of Morgan Stanley putting $2.48 billion of mortgages from New Century on the auction block. Meanwhile, speculation remains rampant that the company will file bankruptcy soon. New Century (Pink Sheets: NEWC) traded as low as $1.25 in the session but closed at $1.41 for a loss of 15 cents, or 9.62%.

Homebuilders were weaker on lagging home sales data Tuesday, but Beazer Homes USA Inc. was a big loser in after-hours activity on reports that federal authorities are investigating the lending practices and some other dealings at the homebuilder. Many construction companies have lending subsidiaries, but some like Centex Corp. have sold off the subprime units, one trader noted. Beazer (NYSE: BZH) closed off by 91 cents, or 2.82%, at $31.41 and was seen lower by more than 10% from there after the close.

Bally Total Fitness Holding Corp. got a big bounce on small buy-ins, according to one trader, as the market waits to see if it will make an upcoming coupon payment. On March 16, the gym operator warned it may have to file bankruptcy if it is unable to restructure its $1.1 billion debt, which sent the stock reeling by nearly 75%.

"The first strong indicator of where the company [Bally] is heading should be on April 15. If they make their interest payment on time, that means they are working on something to restructure their debt due in October," said a stock trader. "If news comes out that they missed their interest payment or decided not to make it, run for the hills, because it will get ugly. They will likely conserve the cash and file Chapter 11."

Meanwhile, bankrupt air carrier Delta Air Lines Inc. said it expects to emerge from the reorganization process on April 30 and its new common stock to be listed on the New York Stock Exchange by early May. Thus, traders said the existing stock was getting "dumped big time." The stock (Pink Sheets: DALRQ) lost 8 cents, or 10.67%, to 67 cents, with 8.43 million shares traded versus the norm of 5.45 million shares.

EGL slips; Apollo bowing out

EGL was slipping in after-hours trade Tuesday, which according to a trader was due to a letter from EEO Jim Crane that suggests Apollo Management is bowing out of a rivalry to the management-led buyout offer of $38 per share the company accepted last week.

The stock (Nasdaq: EAGL) closed the session higher by 92 cents, or 2.35%, at $40.05.

"It hasn't filtered through yet," the trader said. "I think we'll see the big drop tomorrow [Wednesday]."

Last week, EGL accepted the $38 offer from Crane and investment funds affiliated with Centerbridge Partners LP and Woodbridge Co., which was boosted from a previous offer of $36. But, under stern criticism from activist stockholders, including Ramius Capital Group LLC partner Mark Mitchell, the Houston-based shipping company said it would take a rival bid speculated at $40 per share from Apollo Management into consideration.

In a letter to the EGL board and special committee filed Tuesday at the SEC, Crane said, "I am concerned about erroneous press reports stating that Apollo Management, LP was prepared to sign an acquisition agreement at a price higher than $38, and implying that the EGL's special committee somehow has not run a fair process.

"Although Apollo has publicly indicated that it may be willing to offer an amount in excess of $38 per share, my understanding is that, as I write this letter today, Apollo is not prepared to sign a definitive agreement with the company."

Take-Two takes hard hit

Video game maker Take-Two took a hit Tuesday on a statement from the board of directors that it will not have any offers to present at the annual meeting slated for Friday but is continuing to have discussions with activist shareholders OppenheimerFunds, D.E. Shaw, SAC Capital and Tudor Investments, which have staged a proxy battle to gain control of the board.

"Having no offers means more than likely the board changes will take place," said one trader.

"I see that as a positive."

Take-Two shares (Nasdaq: TTWO) fell $1.18, or 5.3%, to settle at $21.08.

Last week, Take-Two hit a string of new highs as the company relented to pressure to seek a buyout transaction and rescheduled its annual meeting to March 29 from March 23. There was speculation that the company could fetch $20 to $25 per share, and the leading potential buyer was THQ Inc. On Tuesday, THQ (Nasdaq: THQI) was off by 10 cents at $33.44.

The trader said some sellers of Take-Two on Tuesday were buying Grapevine, Texas-based GameStop Corp., the world's largest video game and entertainment software retailer. He said there does not appear to be a potential deal between the two, but GameStop reported a 72% increase in sales and 57% growth in net earnings for fiscal 2007 ended Feb. 3. GameStop (NYSE: GME) advanced $3.19, or 11.41%, to $31.16.

"I'm sure there are few speculators who are selling [Take-Two] now that they think a sale of the company may not happen. The stock jumped several dollars when the company made the announcement that it's up for sale," the trader said.

"It seems to me that this management may have been approached by the investors group, or vice versa, and they've arrived at some understanding of what's best for the company in the long term and what's best for the shareholders. There will be several positive after effects that will come out of this changeover as I see it."

Intuit players see another deal

In connection with the termination of Electronic Clearing House and Intuit's merger, another trader said there was chatter Tuesday that Intuit - a tax and accounting software firm with the TurboTax and Quicken franchises - may have another deal in the works or has been approached as a takeover target itself.

Intuit shares (Nasdaq: INTU) gained 18 cents on the day, or 0.66%, to $27.55.

"Intuit is going to be bought out very soon, I think," said one trader. "There have been rumors for months that Google is looking at Intuit, but there could be others."

Meanwhile, players were rapidly unwinding positions in Electronic Clearing House on the news. The stock (Nasdaq: ECHO) plunged $6.38, or 34.28%, to $12.23.

Electronic Clearing House also said Tuesday that it has been cooperating as a witness in a federal investigation relating to its internet wallet customers that provided services to online gaming web sites, whereby no action is anticipated against the company.

In November, Intuit inked a $1.35 billion acquisition of Digital Insight Corp., an online banking service to mid-market banks and credit unions. That, the trader said, could make it a target by online banking concerns like E*Trade Financial Corp.

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