E.U. could pause Wind River buyout; EMC holds rep as deal champ; Axsys bid on 'lower end'

By Cristal Cody

Tupelo, Miss., June 4 - European Union regulators could provide a hurdle for Intel Corp.'s $884 million buyout of Wind River Systems, Inc., an analyst told Prospect News on Thursday.

In other situations, an analyst said Thursday that EMC Corp. bids to win and is expected to prevail in a tug-of-war against NetApp, Inc. for Data Domain, Inc.

Also on Thursday, the $643 million acquisition of Axsys Technologies, Inc. by a General Dynamics Corp. unit should gain regulatory and shareholder approvals, an analyst said in an interview.

Moving on, Cablevision Systems Corp. executives should run, not walk, to spin off the company's Madison Square Garden division, a market source said Thursday.

Meanwhile on Thursday, stocks picked up to end a slump from a day earlier. The Dow Jones Industrial Average rose 74.96 points, or 0.86%, to close Thursday at 8,750.24.

The Standard & Poor's 500 index added 10.70 points, or 1.15%, to 942.46, and the Nasdaq Composite index gained 24.10 points, or 1.32%, to close at 1,850.02.

Silicon Valley bid

Wind River Systems' shares jumped $3.76, or 47.00%, to close at $11.76 on Thursday after Intel offered to buy the software vendor for $11.50 a share in cash.

Wind River's board has unanimously approved Intel's acquisition.

The deal is expected to close this summer and is subject to antitrust clearances.

Intel spokesman Nick Knupffer told Prospect News the acquisition will require Hart-Scott-Rodino antitrust approval, but he declined to elaborate on additional applications.

Brent Williams, an analyst with the Benchmark Co. in New York, told Prospect News that the deal likely will get a hard look from regulators overseas but should ultimately close.

"I don't think the U.S. antitrust is going to do much here," he said. "However, Intel has a really bad relationship with the European Union, and we may see some saber rattling. It's not clear they would ultimately nuke the deal, but ... it's reasonable they might take a look at that."

The European Competition Commission handed Santa Clara, Calif.-based Intel, the world's largest chipmaker, a $1.5 billion fine in May over anti-competitive practices.

Alameda, Calif.-based Wind River produces software for smart phones, mobile internet devices and other electronics and operates in more than 15 countries. The company's stock has traded from $5.61 to $12.99 over the past year.

"Obviously the price reflected a pretty healthy premium to yesterday's close," Williams said. "The valuation from Intel's standpoint doesn't matter because it's so small [compared] to their relative overall world and this [acquisition] is strategically important to them."

Intel shares added 19 cents, or 1.19%, to close at $16.13 on Thursday.

Bidding war for Data Domain

Data Domain's board said Thursday it will make a recommendation on EMC's $30.00-a-share cash offer by June 16, but it reaffirmed its deal with NetApp for $30.00 a share in cash and stock.

EMC said its offer is superior because NetApp's proposal is not a true matching bid.

"EMC's bidding history suggests that it is unlikely to let NetApp win in a bidding war," an analyst said Thursday. "EMC has made over 30 acquisitions in the past 10 years and has been accused of overpaying in precedent acquisitions."

NetApp and Data Domain agreed on May 20 to a $25.00-a-share buyout. EMC made the surprise bid on Monday, which NetApp matched.

"NetApp has room to further increase its offer but could be nearing its pain threshold, as it would need to assume aggressive synergies to justify a higher bid," the analyst said.

Data Domain shares added 24 cents, or 0.74%, to close at $32.78 on Thursday. The stock has traded from $10.25 to $33.09 a share over the past year.

NetApp's stock rose 29 cents, or 1.56%, to $18.86.

EMC shares gained 36 cents, or 2.88%, to $12.84.

Defenses unite

Shares of Axsys Technologies closed up $3.51, or 7.02%, at $53.51 on Thursday after defense contractor General Dynamics said it will acquire the company for $54.00 a share.

Some lag in the stock price is attributed to the third-quarter closing of the deal, Kevin Ciabattoni, an analyst with Boenning & Scattergood, Inc., told Prospect News.

The offer is "on the lower end of what we would've expected given their growth prospects and possible profit margin," he said. "They've been out there since March looking to sell the company. I think the bidding process has been fairly extensive."

The transaction has been approved by the boards of both companies.

The buyout is easily expected to receive Axsys shareholder approval and antitrust clearance, he said.

Rocky Hill, Conn.-based Axsys Technologies produces surveillance and imaging systems for high-tech weapon systems and cameras for the U.S. military and security agencies.

Shares of Falls Church, Va.-based General Dynamics rose 51 cents, or 0.87%, to close at $59.10 on Thursday.

Madison Square Garden split?

Cablevision's Madison Square Garden division includes the New York Knicks basketball team, Radio City, Beacon Theater and Chicago Theater.

"We and every investor that we have spoken to on the subject believe there is sound logic to creating an independent Madison Square Garden," a market source said Thursday. "We believe CVC management and the board must approve a formal separation as soon as possible."

The Madison Square Garden arena is undergoing an expensive renovation that will pressure Cablevision's stock, the source said.

"We believe MSG is worth at least $1 billion, or $3.00 per CVC share, even with the $600-$700 million of debt it will need to take on to support the rebuild of the garden," the source said.

Bethpage, N.Y.-based Cablevision, which also owns the AMC, IFC and Sundance cable networks, should generate $700 million in fresh cash flow in 2009, the source said.

The Madison Square Garden division "is likely to generate essentially no free cash flow in 2009, falling to a $200 million-plus free cash flow loss in 2010," the source said.

Cablevision shares dropped 61 cents, or 3.19%, to close Thursday at $18.52. Shares have traded from $9.34 to $33.00 over the past year.

Mentioned in this article:

Axsys Technologies, Inc. Nasdaq: AXYS

Cablevision Systems Corp. NYSE: CVC

Data Domain, Inc. Nasdaq: DDUP

EMC Corp. NYSE: EMC

General Dynamics Corp. NYSE: GD

Intel Corp. Nasdaq: INTC

NetApp, Inc. Nasdaq: NTAP

Wind River Systems, Inc. Nasdaq: WIND

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