Copps against XM-Sirius merger; Foundry surprises with Brocade deal; Bluegreen up on possible sale

By Aaron Hochman-Zimmerman

New York, July 22 - The broader equity markets opened with a cautious tone, but stocks managed to rally back while some investors were fortunate enough to pick up major gains on a number of deals.

Shares of XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. generally held still, however, as an expected vote against the merger was tallied by Federal Communications Commission member Michael Copps.

On the other hand, shares of Bluegreen Corp. went soaring up the ladder as a mere letter of intent suggesting a $15 per share offer from Diamond Resorts International sent the stock into the clouds to the tune of 86.96%.

Elsewhere in the communications sector, Foundry Networks Inc. shares heated up on Tuesday over the news of a likely deal with Brocade Communication Systems Inc.

Also, Stewart Enterprises Inc. shares were better as Service Corp. International refined its offer from a range of $10.25 to $11.25 per share to an even $11 per share.

Meanwhile, the rest of the market was on the rally pace as the Dow Jones Industrial Average ended better by 135.16, or 1.18%, at 11,602.50, while the Nasdaq Composite Index added 24.43, or 1.07%, to finish at 2,303.96.

The S&P 500 tacked on 17.00, or 1.35%, to close at 1,277.00.

Michael Copps votes against deal

The satellite radio merger saw its first vote against from Democratic FCC commissioner Michael Copps on Tuesday.

The vote from Copps was expected by many in the market and brings the total score to two for and one against.

The stocks sank midday as some were under the impression that the vote against was the swing vote from Deborah Tate, an equity analyst said.

When investors realized it was an expected vote from Copps, the stocks generally returned to their opening levels.

"They are just passing around this sheet and people are signing it," the analyst said about the FCC commissioners' votes on the deal.

"The thing is, is that if Deborah Tate is for the deal, why hasn't she signed the sheet?" he asked.

Shares of XM Satellite Radio (Nasdaq: XMSR) added just $0.03, or 0.33%, to end at $9.10.

Shares of Sirius Satellite Radio (Nasdaq: SIRI) slid by $0.04, or 1.65%, to close at $2.38.

Brocade forges deal with Foundry

Brocade Communications reached an arrangement to buy Foundry Networks for $18.50 per share in cash and 0.097 shares of Brocade.

The offer's total value of $19.25 per share represents a 41% premium to Monday's close.

"We believe the industry is at an inflection point in the way enterprise and service provider networks and data centers are being architected. Customers are demanding networking solutions that meet the needs for today and can address the many advances in network convergence that are still ahead," said Mike Klayko, chief executive officer of Brocade in a statement.

"Brocade has taken an important step through this acquisition in developing a networking infrastructure strategy that will serve as the foundation for capitalizing on these dynamic opportunities," he said.

However, many in the market expected industry consolidation to take a different form.

"I was surprised by the deal as most people, including me, thought it would be Foundry going and buying something, not Foundry being bought," said Kaufmann Brothers analyst Manuel Recarey.

"Foundry has a very large cash position and they have spoken of looking at acquisitions" in the past, he said.

There is a chance another player may enter the arena with a bid, Recarey said, although "I don't put a high probability on it," making it hard to guess who the interloper may be.

"They seem like they have their financing in place, so it seems like it'll go through," he said about the current arrangement.

"It seems like they've got a good price."

Shares of Foundry (Nasdaq: FDRY) bubbled up by $4.42, or 32.36%, to $18.08.

Shares of Brocade (Nasdaq: BRCD) was pulled under by $1.83, or 21.97%, to $6.50.

The deal is expected to close in the fourth quarter.

Stewart gets affirmation of better offer

After the rejection of the original $9.50 per share offer and a statement that it wouldn't pursue the transaction further, Service Corp. International returned and raised its bid for Stewart Enterprises to $11 per share.

Shares of Stewart were better as the new offer was "a little more concrete," a market source said.

"The range they gave before was a little too broad," he added, referring to the memo attached to the $9.50 per share offer which suggested a better offer between $10.25 and $11.25 per share may follow.

Shares of Stewart Enterprises (Nasdaq: STEI) added on $0.64, or 8.00%, to finish the day at $8.64.

Shares of Service Corp. (NYSE: SCI) improved by $0.35, or 3.68%, to close at $9.87.

Bluegreen goes for doubles

Bluegreen announced that it signed a non-binding letter of intent to be acquired by Diamond Resorts International for $15 per share.

The offer, excluding Bluegreen's outstanding debt, values the company at $500 million which is a 133% premium to Monday's close.

"Bluegreen had previously announced that we were positioning the company with a view towards pursuing strategic alternatives at some point in the next three to five years," said Bluegreen chairman Alan Levan in a statement.

"When Diamond presented our board with this unsolicited, attractive offer, we believed that it was in the best interest of our shareholders to pursue this transaction at this time," Levan said.

The letter of intent stipulates that Diamond Resorts will have exclusive negotiation rights until Sept. 15.

Shares of Bluegreen (NYSE: BXG) fell short of doubling the share price, but still ended better by $5.60, or 86.96%, at $12.04.

© 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.