Atmel wants more; big haul for trash haulers; Foundry Networks flies on lower Brocade offer

By Aaron Hochman-Zimmerman

New York, Oct. 30 - Shares continued their push past 9,000 on the Dow Jones Industrial Average even as financing questions lingered.

Brocade Communications Systems Inc. was able to put questions to bed about financing for its deal with Foundry Networks Inc.

Foundry shares soared after Brocade announced it would lower its bid and, therefore, its need for financing.

Shares of Allied Waste Industries, Inc. and Republic Services, Inc. took in a big haul on Thursday after Allied said it was near the end of its negotiations with the Department of Justice.

Republic also agreed to settle a lawsuit surrounding the merger and its rejection of Waste Management Inc.'s offer.

Another merger stuck in neutral is the takeover of Atmel Corp. by Microchip Technology Inc. and ON Semiconductor Corp.

Atmel rejected the offer from its two competitors without any further negotiations, but many analysts feel like the story for the three is not yet over.

Elsewhere in finance, Merrill Lynch & Co., Inc. said it will hold off from issuing securities under the government's Troubled Asset Relief Program in order to avoid tax implications in connection with its merger with Bank of America Corp.

Meanwhile, the Dow ended better by 189.73, or 2.11%, at 9,180.69, and the Nasdaq Composite Index added 41.31, or 2.49%, to finish at 1,698.52.

The S&P 500 improved by 24.00, or 2.58%, to close at 954.09.

Atmel expecting too much?

In technology, Atmel rejected the $5.00-per-share, or $2.3 billion, unsolicited bid from Microchip Technology and ON Semiconductor.

"Atmel's board has determined that Microchip and ON's highly conditional proposal significantly undervalues Atmel and would deprive Atmel stockholders of the greater value that can be achieved through the continued execution of the company's transformation plan," David Sugishita, Atmel's chairman, said in a statement.

Except, "Atmel's board's comments do not really make any sense," said ICAP Equities analyst Sachin Shah.

Atmel walked away "without any discussions," he said.

"Why are they not taking the stock component?" he asked about a proposed sweetener for the deal.

"It is in their best interest, not necessarily to take any offer, but to work with the parties," he said as third-quarter GDP numbers painted the picture of what may be a bleak economic New Year.

Right now, "competitors need to consolidate," he said, and "they can't expect a higher offer from these entities."

"It seems that there has been some speculation that [ON Semiconductor] is going to, with private equity help, bid for some of the Atmel assets that they were going to get anyway," he said.

Atmel is being too optimistic to think that it can surpass $5.00 per share on its own, Shah said.

With the offer on the table, it traded up $0.47, or 13.31%, to $4.00, while it hit its all-time high exactly one year ago at $4.92.

"How much more from the $5.00 could there be?" he asked.

Shares of ON Semiconductor slipped by $0.07, or 1.40%, to finish at $4.94.

Shares of Microchip Technology were better by $0.27, or 1.09%, to end at $25.00.

Foundry finds another $400 million

Shares of both Foundry Networks and Brocade Communications were better on Thursday after Brocade renegotiated its offer price down to $16.50 per share from $18.50 in cash and 0.0907 shares of Brocade.

The new price represents a 27% premium above Wednesday's close.

The new price also cuts $400 million from the former total offer price of $3 billion, which relieves Brocade from the responsibility of securing that same $400 million in financing.

Foundry also adjourned its shareholder meeting until Nov. 7 to allow sufficient time to finalize the deal.

Whether or not the lower price will help seal the deal, "we will know in a week," said Pacific Crest Securities analyst Brent Bracelin.

What is clear is that "the deal is now fully funded from a Brocade standpoint," he said.

"At the higher offer it didn't have the capital," he said.

Shares of Foundry Networks jumped up by $1.93, or 14.85%, to $14.93.

Shares of Brocade Communications added $0.24, or 6.80%, to $3.77.

Haulers' shares soar as closing nears

After posting third-quarter gains of 5 cents on the dollar during its earnings call, Allied Waste said that it is in end-stage negotiations with the Department of Justice to be acquired by Republic Services, a market source said.

Elsewhere, Republic Services agreed to settle a lawsuit brought against the trash haulers in connection with the planned merger.

The plaintiffs in both Florida and Delaware alleged that Allied Waste improperly rejected, what are claimed to be, superior bids from competitor Waste Management.

The nature of the settlement has yet to be determined.

Republic Services maintains a line of credit for $2.75 billion in financing for the $3.8 billion all-stock deal, which is still expected to close in mid-December.

Shares of Allied Waste tacked on $1.48, or 16.99%, to finish at $10.19.

Shares of Republic Services launched up by $3.38, or 16.66%, to close at $23.67.

Merrill holds off on TARP

Merrill Lynch will not issue securities under the TARP plan in order to preserve the tax-exempt status of its merger with Bank of America, a market source said.

Still, Merrill Lynch has not ruled out the use of the TARP plan under other circumstances.

Merrill Lynch also arranged for a delayed settlement to sell $10 billion new preferred shares and warrants at an exercise price of $23.08 per share, the source said.

Shares of Merrill Lynch were better by $0.23, or 1.31%, to close at $17.78.

Mentioned in this article:

Allied Waste Industries, Inc. NYSE: AW

Atmel Corp. Nasdaq: ATML

Bank of America Corp. NYSE: BAC

Brocade Communications Systems Inc. Nasdaq: BRCD

Merrill Lynch & Co., Inc. NYSE: MER

Microchip Technology Inc. Nasdaq: MCHP

ON Semiconductor Corp. Nasdaq: ONNN

Republic Services, Inc. NYSE: RSG

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.