Clear Channel court fight gets heated; ING looking for big buy; banks size up National City

By Aaron Hochman-Zimmerman

New York, April 2 - Rumors were running as stocks had trouble finding direction after Tuesday's rally.

According to the water-cooler fodder, National City Corp. attracted attention from KeyCorp as well as Wells Fargo & Co. and Fifth Third Bancorp, even as its stock was slipping.

Also in finance, ING Group stock gained as it is reportedly on the prowl for a big acquisition.

CIT Group, Inc. also looked better to investors amid its own buyout rumors.

Elsewhere, as both stocks were sliding, the word "stalemate" was used to describe the stalled Yahoo! Inc. and Microsoft Corp. deal.

Also in technology, Expedia Inc.'s stock took a trip upward as Google Inc. was rumored to be showing interest in buying the internet vacation planner.

Meanwhile, the airlines were losing as Delta Air Lines Inc. prepared for a Friday meeting to consider how to proceed with the stumbling Northwest Airlines Corp. merger.

Shares of Clear Channel Communications Corp. did not react well to the harsh words which were heard from the lenders in the company's court fight as Clear Channel tries to complete its deal with Thomas H. Lee Partners and Bain Capital Partners.

"I think that the prices for a lot of these stocks are starting to be where buyers are going to have to be looking at them pretty seriously," Paul Martin of Martin Capital Advisors.

"Things will have to start to come together," he said about the market in general.

"Yesterday's action was especially interesting," he said on Wednesday.

The rally was based on a catalyst which recently would have sent stocks lower, he said, referring to the mortgage-related writedowns from UBS and Deutsche Bank.

Martin called the Federal Reserve's move to open lending to soothe liquidity concerns "a good thing."

Investors should worry less about moral hazard, he said. If the Fed does not react to crises it has no reason to exist, he added.

The Dow Jones Industrial Average ended lower by 48.53, or 0.38%, at 12,605.83, while the Nasdaq Composite Index gave up 1.35, or 0.06% to finish at 2,361.40.

The S&P 500 slid 2.65, or 0.19%, to close at 1,367.53.

Banks look over National City

Shares of National City (NYSE: NCC) sank $0.77, or 7.71%, to $9.22 as the possibility of a sale to KeyCorp (NYSE: KEY) hit the rumor mill.

Shares of KeyCorp added $0.85, or 3.62%, to finish at $24.34.

A transaction with KeyCorp is only one of the options National City is examining, a market source said.

The source also mentioned that private equity firms have been "sniffing around" local banks.

Another market source has heard Wells Fargo & Co. and Fifth Third Bancorp may also be involved as buyers.

If the deal was successful, a cash infusion would be forthcoming from Kohlberg Kravis Roberts, the Wall Street Journal reported.

ING hunting big game

While National City was ready to sell, ING (NYSE: ING) was looking to buy as its shares tacked on $0.41, or 1.04%, to $39.77.

A market source noted that ING has been shopping for a "large" acquisition.

The new addition would have to come at the right price, the source said, and ING is still weighing its options.

Strong words in Clear Channel case

Meanwhile, shares of Clear Channel (NYSE: CCU) dropped $0.26, or 0.91%, to $28.24 as angry words heated up the airways over the court battle between Clear Channel and its private equity buyers and the lenders.

The Deal reported that the banks referred to "sham" plaintiffs in the lawsuit.

The major issue which remains unresolved between the sides is over the duration of a bridge loan.

As previously reported, the lenders are willing to honor their commitment letter as long as what had been a 7.5-year bridge loan, is now repaid in three years.

Microsoft, Yahoo! dig in

In technology, shares of Yahoo! (Nasdaq: YHOO) fell $0.68, or 2.39%, to $27.82 while shares of Microsoft (Nasdaq: MSFT) also slipped $0.34, or 1.15%, to $29.16 as the two continued with what the Financial Times called a "stalemate" over Microsoft's buyout offer.

The deal, originally worth $46 billion has fallen with Microsoft's share price to $42.2 billion.

"It's an interesting game that Microsoft is playing," Martin said.

"They wouldn't have to offer a whole lot more to get the deal done," he said, adding: "Merging Yahoo into Microsoft would be a big coup for Microsoft."

"So I don't quite understand why they can't offer a couple bucks more a share and leave it at that," he said.

"It's kind of like what happened with Bear [Stearns & Co.]," he said.

If the offer had not been increased five-fold, "I think this thing would still be way up in the air," he said, "By making that kind of a move it just causes everyone to back off again and think."

"The bottom line is the leadership at Yahoo! can't look like they're kowtowing and rolling over at the first offer."

Martin said a deal is likely to work itself out "in the next month or so, just because it doesn't make sense otherwise."

Expedia plans trip to Google's camp

Also, shares of Expedia (Nasdaq: EXPE) gained $1.04, or 4.32%, to finish the session at $25.13 as the market talked of a buyout by Google (Nasdaq: GOOG).

Google shares gave back just $0.01, or 0.00%, to end at $465.70.

Delta to meet Friday

Elsewhere, shares of Delta (NYSE: DAL) descended $0.34, or 3.72%, to close at $8.80 as the Atlanta Journal-Constitution reported that Friday's board meeting will likely have industry consolidation on the agenda.

Northwest (NYSE: NWA) shares also lost $0.29, or 2.99%, to end at $9.40 as the airline still waits to hear an answer from Delta about continuing merger talks without the approval of the pilots.

CIT turns rumor mill

Whispers also hit the wires about CIT Group (NYSE: CIT) as its shares of jumped by $1.18, or 9.10%, to $14.15 on the possibility of a buyout.

A market source mentioned "buyout rumors regarding CIT today," he said on Wednesday.

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