Verizon Wireless goes country; Ingersoll-Rand sells Bobcat to Korean firm; Foot Locker, CV need help

By Evan Weinberger

New York, July 30 - Rising stock markets gave market observers a chance to catch their collective breath Monday, but traders and analysts were bracing themselves for the week ahead.

"It's a relief," a market source said. "It's one day, and you can't extrapolate too much from one day. We'll see what happens."

The trading week began with a spot of uncomfortable news reported by London's Financial Times. According to the newspaper, investment banks are now tightening up terms on loans to hedge funds to protect themselves from further collapses, like the two Bear Stearns funds linked to subprime mortgages that collapsed earlier this month.

Investment banks have now raised the margin requirements for hedge funds heavily invested in the American mortgage market, the newspaper reported one investment banker saying.

"Financing terms for hedge funds are being tightened and this is forcing a further deleveraging of risk across global markets," Gerald Lucas, senior investment adviser at Deutsche Bank, told the FT.

The newspaper added that fixed income-focused hedge funds were the worst performing hedge funds in June, returning an average of 0.2%. Overall, hedge funds produced an average return of 0.8% in June, down from 2.3% in May, the FT reported.

"I think it will be a problem, and I think people think it will still be a problem [in the future]," another market source said.

A second market source thought that banks' caution on margins wouldn't necessarily spill over into the private equity realm. "I they're investing like hedge funds, they'll be treated the same," he said.

But coming on the heals of delays in financing for Cerberus Capital Management's takeover of DaimlerChrysler AG's Chrysler division last week, the FT article made for some discomfiting reading Monday.

However, there were deals consummated on Monday, including Verizon Wireless picking up new customers in the countryside and Ingersoll-Rand Co. Ltd. losing its Bobcat arm.

And two troubled firms, Foot Locker, Inc and CV Therapeutics, Inc., began the search for potential private equity firms or other partners to take them over and lead them out of danger.

Verizon Wireless goes to the country

One relatively major new deal was announced Monday, with Verizon Wireless, a joint venture of Verizon Communications Inc. and British wireless provider Vodafone Group plc, announcing a deal to buy Rural Cellular Corp. for approximately $2.67 billion, including debt. Rural Cellular stockholders will receive $45 per share, a 41% premium on the Alexandria, Minn.-based wireless communications provider's closing stock price of $31.88 Friday, July 27. The deal is expected to close in the first half of 2008.

Verizon Wireless will add around 716,000 customers in rural areas of Maine, Vermont, New Hampshire, New York, Massachusetts, Alabama, Mississippi, Minnesota, North and South Dakota, Wisconsin, Idaho, Washington, Kansas and Oregon to its existing customer base of 62.1 million. Verizon is the largest wireless telecommunications network in the United States.

"The addition of Rural Cellular's markets will enable us to expand our services into areas where previously we had little or no presence, and will give Rural Cellular's Unicel customers access to the nation's most reliable network and a broader range of voice and data services," said Verizon Wireless president and chief executive officer Lowell McAdam in a statement released by the companies.

Rural Cellular stock (Nasdaq: RCCC) soared on the news, gaining $10.95, or 34.42%, to close at $42.76. Shares in New York-based Verizon (NYSE: VZ) slipped 49 cents, or 1.17%, closing at $41.51. Shares in Newbury, United Kingdom-based Vodafone (NYSE: VOD) slipped to $30.43, a loss of 21 cents, or 0.69%.

Overall, equity markets halted their downward trend, with the Dow Jones Industrial Average recovered some of last week's loses, gaining 92.84 points, or 0.7%, to close at 13,358.31. The Nasdaq followed suit, closing at 2,583.28, a gain of 21.04 points, or 0.82%.

Ingersoll-Rand sells its Bobcat

Ingersoll-Rand Co. Ltd. announced the sale of its Bobcat, utility equipment and attachments division to South Korea's Doosan Infracore Monday for $4.9 billion Monday. The deal is expected to close in the fourth quarter of 2007.

Bobcat makes light construction equipment, including small vehicles seen on construction sites and in parks. Doosan Infracore is an Inchon, South Korea-based global machinery manufacturer.

The Bobcat sale follows Hamilton, Bermuda-based Ingersoll-Rand's April 2007 sale of its road development business as part of a corporate restructuring. "The sale of Bobcat, utility equipment and attachments represents the last major action to transform our business portfolio to reposition Ingersoll Rand as a diversified industrial company," said Herbert L. Henkel, chairman, president and CEO of Ingersoll-Rand, in a news release.

Stock in the climate control, construction and security products producer (NYSE: IR) moved up $3.63, or 7.54%, on the news Monday, closing at $51.77.

Firms still dream of private equity

Despite fears that private equity firms may have trouble securing the financing they need to complete corporate takeovers, some firms are keeping the dream of a private buyout alive.

Foot Locker, Inc., the New York-based athletic apparel and footwear retailer, announced Monday that it had retained Lehman Brothers to search for strategic alternatives, opening up the possibility of a private equity takeover, the frequent outcome of this kind of move in the recent past.

The retailer also announced that it expected to close around 250 underperforming outlets in the United States in 2007, more than it had originally anticipated. And after drastic inventory liquidation, Foot Locker announced that it expects to announce a second quarter loss of 17 cents to 20 cents per share on Aug. 22.

But, Foot Locker said, the outlook for Foot Locker Europe looks brighter, and the company will be opening approximately 20 new outlets on the old continent and the surrounding area. Foot Locker also announced a corporate restructuring on Monday, with the head of Foot Locker Europe taking over Foot Locker USA and two other management changes.

Wall Street reacted with disapproval to the series of announcements, with Foot Locker stock (NYSE: FL) closing down 25 cents, or 1.31%, at $18.80.

CV also looking

Palo Alto, Calif.-based CV Therapeutics, Inc. announced Monday that it had retained Lehman Brothers vice chairman Frederick Frank to help the company search for its own strategic options.

"CV Therapeutics is in a unique position with a deep R&D pipeline, global rights to a growing, first-in-class product in Ranexa, and the potential 2008 approval of a second unique compound in regadenoson. I am looking forward to helping the company build value for these assets," Frank said in a statement released by the company.

The troubled biotech company announced in May that it was looking for a partner, while at the same time cutting jobs and decreasing its sales area. Much of CV Therapeutics' trouble is linked to Ranexa, the company's signature angina drug. Approval of the drug was delayed several years because of safety concerns, including that it might lengthen the amount of time it takes the heart to electrically recharge, called the "QT interval."

Ranexa was approved in 2006, and a study earlier this year gave the drug a positive safety profile. However, the study also showed that it wasn't effective against a type of heart disease called acute coronary syndrome. The drug was proved to be safe by the study.

CV Therapeutics stock (Nasdaq: CVTX) sunk, closing at $10.86 a drop of 43 cents, or 3.81%.

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