Paxar lingers below takeout price; Magna better; Openwave drops; Intermec pops; ABN Amro higher

By Ronda Fears

Memphis, March 23 - Label maker and office products supplier Avery Dennison Corp.'s $1.34 billion acquisition of apparel tabs and label maker Paxar Corp. gave rise to both stocks Friday, but traders said Paxar shares closed well under the takeout price on concern that the transaction could face antitrust hurdles.

Internet software firm Openwave Systems Inc. officially went into play as it hired a financial adviser, as had been speculated heavily for several three weeks, but the committee appointed by the company to explore strategic alternatives drew immediate criticism from big stockholder Harbinger Capital Partners.

Intermec Inc., however, got a pop on speculation that the computer peripherals firm will go into play, stemming from an announcement that its chief executive will resign once a replacement is named, according to another trader.

DaimlerChrysler AG shares jumped 6% Friday on a widely circulated broker report that rekindled speculation of Canadian car parts maker Magna International Inc. as a possible participant in a bid to buy Chrysler, but it did little for Magna as traders said no one really sees Magna as a "serious player." Magna shares (NYSE: MGA) gained 41 cents, or 0.55%, to $75.42; it traded in a narrow band of $75.16 to $75.83.

"I would wait for a definitive announcement on DaimlerChrysler, especially the Magna angle; it's way too speculative right now," said a risk arb trader at a hedge fund in New York.

However, he parroted many other sources on the Street that KeyBanc Capital Markets analyst Brett Hoselton said in a report that Magna is teaming up with private equity partners to offer $4.6 billion to $4.7 billion for Chrysler, taking a 25% stake in the deal. He said speculated private equity participants are the usual suspects - Cerberus Capital Management and The Blackstone Group.

Citigroup Inc. was weaker Friday on reports that a faction within the giant bank is urging chief executive Charles Prince to make a rival bid for Dutch bank ABN Amro Holding NV, which is in merger talks with Barclays plc. The Barclays transaction is reportedly for $80 billion, which would make it the biggest banking deal in history.

Another trader said with ABM Amro, Citigroup would gain a presence in continental Europe and enhance its domestic retail franchise with ABN Amro's Chicago-based LaSalle Bank. But he speculated that Citigroup is looking at LaSalle separately, as well. Citigroup (NYSE: C) slipped 12 cents to $51.72. ABN (NYSE: ABN) added $1.09 to $43.24. Barclays (NYSE: BCS) gained $1.42 to $59.43.

Avery/Paxar combo win-win

Avery Dennison inked a deal to acquire Paxar for $30.50 per share - a 27% premium to Thursday's market - which was disappointing to some holders, according to one trader; but, moreover another trader said there was some concern about the deal getting dragged out because of antitrust issues.

Paxar shares (NYSE: PXR) as a result did not reach the takeout price, gaining to $29.13 on the session before pulling back to close at $28.55, an advance of $4.52 on the day, or 18.81%.

Avery Dennison also advanced on the event, as it was viewed positively for that story, the first trader said. The shares (NYSE: AVY) added 88 cents, or 1.34%, to close at $66.43.

The transaction is expected to enhance Avery Dennison's ability to compete and grow in the fragmented, expanding $15 billion-plus global retail information and brand identification market, according to Avery Dennison.

White Plains, N.Y.-based Paxar provides products to the retail and apparel manufacturing industries such as barcodes, label cutters and stackers, as well as information services, and supply chain logistics.

Pasadena, Calif.-based Avery Dennison also has a retail products division, which makes woven and printed labels, graphic tags, barcodes, price tickets, carton labels and molded plastic fastening, application devices, in addition to divisions focused on office and consumer products, and pressure-sensitive materials.

"There was some disappointment among Paxar long-term holders with the deal, but the thought of another bidder coming along is not likely to play out," the first trader said. "The only potential bidder would have to be private equity because Avery Dennison is the most likely bidder; another company could make a better bid, but Avery could beat it and they know that."

Paxar just completed a realignment effort, the trader said, that had boosted the outlook for the company among many long-term players. He said they were anticipating benefits from that effort to start boosting Paxar's performance in 2008 and more so in 2009, so they were thinking it was not the right time to sell the company.

Antitrust issues also threaten the deal, the other trader said, but are not expected to be an impenetrable barrier; it probably will delay closing of the transaction until perhaps the end of the year.

"I think Avery addressed these [antitrust] issues - combined they will just have about 10% of the apparel market - but there is some worry about the antitrust hurdle," the trader said. "Because there is so much uncertainty over the closing, you didn't see Paxar make a run like it should have."

Openwave surges, retreats

Openwave replaced its chief executive Friday and said it has hired Merrill Lynch to explore a possible sale of the company, which has been the aim of activist shareholders for months now, but the makeup of a special committee along these lines was immediately challenged by Harbinger. Meanwhile, the stock was moved about by a buyback transaction with Merrill, according to traders.

Harbinger with 11%, Fidelity Management with 14% and activist investor Carl Icahn have been making overtures that the company should go on the auction block. They also have expressed disappointment with CEO David Peterschmidt because, according to one trader, the company rejected previous offers of up to four times sales from Microsoft Corp. and Nokia Corp.

Peterschmidt resigned Friday but will stay on Openwave's board of directors and be part of the internal committee exploring strategic alternatives. That was the point of contention for Harbinger. Harbinger tried unsuccessfully to replace two board members with its own in January.

Openwave shares (Nasdaq: OPWV) ran up as high as $9.30 on short covering, according to one trader, but selling into the rally took the steam out of it and the stock settled the session with a loss of 19 cents, or 2.13%, at $8.71. He mentioned some 9.35 million shares traded Friday versus the norm of 2.5 million shares.

"It moved sideways for the last 30 minutes or so, then started coming back after-hours," the trader said. "Just something like 11.5% of the float is short, 10-11 million shares, so that probably got taken care of for the most part today, on top of a big block trade yesterday [Thursday] after the close. A lot of swing we saw today was because of the Merrill transaction."

The Redwood City, Calif., company also disclosed that it paid Merrill Lynch $100 million on Jan. 31 as part of a stock buyback agreement and Merrill Lynch returned 4 million shares to the company and will continue to buy shares on the open market and return them to Openwave, which will retire them.

Otherwise, the trader said there was speculation that Openwave could sell for seven times sales, or roughly $12 per share - a nearly 35% premium to Thursday's market and nearly twice the rumored buyout offers from Microsoft and Nokia.

"Sellers think it's too high; buyers think it's too low or right on," the trader said.

Intermec rumored in play

Coupled with the Paxar news, Intermec, which makes devices for tracking inventory, got a big pop Friday because, as another trader put it, news from the previous session that its chief executive Larry Brady will retire once the company's board finds a successor was twisted into a speculation that the company is going into play.

The stock (NYSE: IN) shot up $1.64 on the session, or 7.84%, to settle at $22.57.

"Finally the board has taken some much needed action to put the company on a path to recovery or more likely a sale," the trader said.

"With today's action it looks like someone knows something, anyway. Brandy's retirement doesn't warrant this pop."

Brady, who also serves as chairman, has been CEO of Intermec and its predecessor Unova since 2000. A company representative said it hasn't been decided if Brady will remain as chairman. The company said its board has formed a search committee and hired Egon Zehnder International Inc. to assist in finding a replacement.

The Everett, Wash., company makes computer peripherals such as bar code scanners and systems that include wireless handheld computers and terminals, badge and laser scanners and such gadgets as handheld computers for use in warehouses.

Infonet also provides radio frequency identification products, which the trader said is a hot area right now.

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