Citigroup spikes 2%, give back half after-hours; Sabre up on buyout buzz; Phelps Dodge eases

By Ronda Fears

Memphis, Dec. 11 - Banking giant Citigroup Corp. continued to rock Wall Street on Monday as speculation of an imminent departure of its chief financial officer swirled. While Citigroup continued to say that Sallie Krawcheck would be remaining with the firm, there was a solid conviction that something dramatic would take place at the bank, such as a break-up of business lines.

Citigroup shares (NYSE: C) hit a second straight 52-week high Monday, adding $1.03, or 1.99%, to close at $52.88, following a 2.25% rise on Friday.

In a press conference Monday, Citigroup chief executive Charles Prince said that the bank had named investment banking head Robert Druskin as chief operating officer, but there would not be any further executive changes.

"Wrong!," said a market source with ties to a hedge fund, inferring he still believes there will be a shake-up among the top ranks of Citigroup, namely Krawcheck's position, whether by her choice or Citigroup's board of directors.

Another market source said, "Druskin is a non entity - part of the old regime and was in charge during the questionable times. This BOD should expect to be flogged tomorrow. There is more to come."

He noted that in after-hours activity, Citigroup shares gave back more than half the day's gain, and was last seen at $52.35.

Expedia, TRX join Sabre party

Reports that travel reservation company Sabre Holdings Corp., owner of the Travelocity web site, is in advanced talks to be sold to a consortium of private equity firms for more than $4 billion sent the stock up by more than 7% with heavy buying Monday.

Multiple firms including Silver Lake Partners and Texas Pacific Group have bid for Southlake, Texas-based Sabre Holdings, according to reports.

Sabre shares (NYSE: TSG) shot up $2.11, or 7.45%, to $30.43 on Monday and in after-hours action were seen higher by another 31 cents at $30.74. Some 4.1 million shares traded, six times the norm.

Expedia, Inc. and TRX, Inc. were both joining the Travelocity party on speculation of consolidation in the travel industry extending to those names, according to traders.

"With Worldspan bought last week and now Sabre, there is an obvious consolidation going on in the travel industry," said one trader.

"Check out the profile of TRX, their main customer is Expedia. I bet they [TRX] get acquired within a week. I think a buyout price will be between $9 and $10 and probably they would try to do a deal in the next few weeks."

TRX shares (Nasdaq: TRXI) gained 7 cents on the day, or 1.04%, to $6.83.

Atlanta-based TRX provides transaction processing such as booking and ticketing to the travel industry worldwide.

The trader said Expedia would be the most likely buyer for TRX, but Expedia is certainly a target itself.

"It's only a matter of time before the cash cow Expedia gets taken private," he said.

Expedia shares (Nasdaq: EXPE) gained 5 cents on the day, or 0.24%, to $20.51 with 4 million shares traded, twice the norm.

Bellevue, Wash.-based Expedia is an online travel agency that competes head-to-head with Travelocity.

Phelps Dodge eases on dispute

Phelps Dodge Corp. shares eased and traders said they were frantic to take cover as it came to light Monday that a major stockholder - the hedge fund SAC Capital Partners - would oppose its acquisition by Freeport-McMoRan Copper & Gold Inc.

"It's very frustrating. I don't think SAC has enough leverage, as it could pass with a 66% vote," said one trader.

"I hope I am wrong, though. If there are other major unhappy shareholders, they should be talking now. Or, if there are other bidders, they should come forward."

Phelps Dodge shares (NYSE: PD) dropped 80 cents on Monday, or 0.65%, to settle at $122.87.

SAC is asserting that the Freeport-McMoRan offer - $88 per share in cash, plus 0.67 shares of Freeport-McMoRan common stock for a total value of roughly $25.9 billion - undervalues Phelps Dodge. SAC has a 5.1% stake in Phoenix-based Phelps Dodge, a copper mining concern.

New Orleans-based Freeport-McMoRan mines and produces gold, copper and silver.

In another metals deal, Brazilian steelmaker Companhia Siderurgica Nacional raised its bid to buy Anglo-Dutch rival Corus Group plc to $11.6 billion, topping a bid of $9.4 billion agreed to only hours earlier by India's Tata Steel.

Corus shares (NYSE: CGA) added $1.16 on the day, or 5.99%, to $20.53.

CSN's offer for Corus is $9.6 billion in cash plus assumed debt. Tata had boosted its bid previously from $8.04 billion and said it had not ruled out a counter offer.

Biomet bid a bigger kettle

Weekend reports that London-based medical device maker Smith & Nephew plc is close to buying U.S. rival Biomet Inc. sent both companies' shares higher. While there was considerable selling into the rally of Biomet, one trader said the Smith & Nephew move was a smokescreen for bids toward it.

"The anticipated bid by Smith & Nephew for Biomet is an attempt to keep from being gobbled by a bigger fish," the trader said.

"This is one big chess match being played out. Johnson & Johnson and Medtronic want Smith & Nephew, not Biomet. J&J is attracted to Smith & Nephew by the trauma and endoscopy lines; Medtronic for everything. Smith & Nephew would not be as enticing with the addition of Biomet. There are very little benefits, synergies between J&J and Biomet. Medtronic could benefit from Biomet, but would need to spin off the spine line."

The medical device maker rose on speculation that U.K.-based Smith & Nephew might bid $11 billion to buy the company.

Biomet shares (Nasdaq: BMET) gained $1.64 on the day, or 4.11%, to $41.54.

Smith & Nephew shares (NYSE: SNN) added 75 cents, or 1.58%, to $48.32.

However, a skeptic buysider who was a seller into the rally said, "I don't see anyone getting involved here, not at the right price anyway. There are a lot of regulatory issues and I'm not sure there is enough complimentary product. Maybe, but don't think so. If there is, I think they should take the buyout and be done. I know I'm out today."

Warsaw, Ind.-based Biomet makes a range of reconstructive products, which include knee, hip, and extremity joint replacement systems, as well as dental reconstructive implants, bone cements and accessories.

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