Microsoft, Yahoo! near proxy war; airlines take it around again; Kinetic Concepts to buy LifeCell

By Aaron Hochman-Zimmerman

New York, April 7 - Earnings season began with a flat market, but the feud between Yahoo! Inc. and Microsoft Corp. intensified even as Yahoo!'s stock slipped only slightly and Microsoft was left unchanged.

Elsewhere in technology, Take-Two Interactive Software Inc. stock slipped as it insisted it would not consider buyout offers from Electronic Arts Inc. or other suitors until after the next installment of its hit Grand Theft Auto is released.

In pharmaceuticals, LifeCell Corp. saw a bounce after the announcement of the buyout offer from Kinetic Concepts Inc., which also added to its share price.

In finance, Washington Mutual Inc. jumped on news reports of a private equity investment, which may encourage National City Corp. to do the same rather than test the merger market.

Also, Delta Air Lines Inc. and Northwest Airlines Corp. agreed to flight test a new round of talks without the consent of their pilots.

The Dow Jones Industrial Average ended higher by just 3.01, or 0.02%, at 12,612.43, while the Nasdaq Composite Index slipped by 6.15, or 0.26%, to finish at 2,364.83.

The S&P 500 was able to add 2.14, or 0.16%, to close at 1,372.54.

LifeCell to sell

Shares of LifeCell (Nasdaq: LIFC) tacked on $7.31, or 16.94% to finish at $50.46 as it announced it will be acquired by Kinetic Concepts for $51 per share in a cash tender offer which represents an 18% premium over Friday's closing price, according to a press release.

Shares of Kinetic Concepts (NYSE: KCI) picked up $2.55, or 5.42%, to close at $49.57.

"[Kinetic Concepts'] global infrastructure will accelerate the penetration of LifeCell products into international markets. We also believe [Kinetic Concepts'] experience and leadership position in advanced wound care will facilitate the adoption of LifeCell's innovative products into this market," said Paul Thomas, chairman, president and chief executive officer of LifeCell.

Microsoft threatens Yahoo! with proxy fight

Shares of Yahoo! (Nasdaq: YHOO) dropped $0.66, or 2.33%, to $27.70 while shares of Microsoft (Nasdaq: MSFT) managed to hold unchanged at $29.16.

In a letter to the Yahoo! board of directors dated April 5, Microsoft chief executive officer Steve Ballmer called Yahoo!'s response to its Feb. 1, $44.6 billion offer "anything but speedy."

"During these two months of inactivity, the internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other internet-focused companies in particular," the letter continued.

Without increasing the size of its offer, as many had expected, Ballmer said: "If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board."

In his casual response to "Steve" on Monday, Yahoo! chief executive officer Jerry Yang continued to hold the line of the past two months.

"We have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!," he said.

A market source added that according to the New York Post, Time Warner Inc. (NYSE: TWX) has asked JPMorgan Chase & Co. (NYSE: JPM) to create a deal which merges AOL and Yahoo!

The Wall Street Journal also reported that Yahoo!'s talks with News Corp. (NYSE: NWS) have cooled.

Shares of Time Warner added $0.09, or 0.62%, to end the day at $14.69.

Shares of News Corp. took on $0.32, or 1.62%, to close at $20.10.

Airline talks take second pass

Shares of Delta (NYSE: DAL) gained $0.54, or 6.17%, $9.29 while shares of Northwest (NYSE: NWA) added $0.38, or 4.02%, to end at $9.83 as the airline merger talks took off for another lap around the flagpole.

Delta's board meeting last Friday translated into a renewal of talks and interest in a deal, but this time without the approval of the pilots, the Associated Press reported.

Take-Two waiting on Grand Theft Auto 4

Shares of Take-Two Interactive (Nasdaq: TTWO) slipped $0.18, or 0.70%, to close at $25.43 as reports came out that Take-Two will only entertain buyout offers until after the April 29 release of Grand Theft Auto 4.

The New York Post reported that the release may precipitate a higher bid than $26 per share from Electronic Arts (Nasdaq: ERTS).

Electronic Arts shares added $0.36, or 0.69%, to finish the session at $52.30.

Also, Take-Two announced a lawsuit was filed against it by a shareholder in Delaware Chancery Court.

The lawsuit accuses Take-Two of breaching its fiduciary duty by refusing the offer from Electronic Arts, a market source said.

National City up on possible WaMu cash injection

Shares of Washington Mutual (NYSE: WM) soared $2.98, or 29.30%, to $13.15 as the Wall Street Journal reported that private equity firm Texas Pacific Group may inject $5 billion into the bank.

The $5 billion investment would make TPG a 25% stakeholder.

Meanwhile, National City (NYSE: NCC) added $0.25, or 2.78%, to finish the day at $9.24 on the news.

There is still speculation that either KeyCorp. (NYSE: KEY), Wells Fargo & Co. (NYSE: WFC) or Fifth Third Bancorp. (Nasdaq: FITB) may make an offer for National City, "but seeing Washington Mutual move on just an equity investment, National City may opt for same," a market source said.

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