Reckson Rejects Icahn's Solo Buyout Bid
Real estate investment trust Reckson declined a takeover proposal from Carl Icahn's American Real Estate Partners LP -- the company's independent directors indicated that Icahn's offer "did not meet the standard" outlined in Reckson's merger agreement with SL Green and the bid "raised significant financial and legal issues." Harry Macklowe and Mack-Cali backed out of a proposed partnership with Icahn, prompting him to go solo on his proposed buyout of Reckson at $49 a share with $1 billion in cash and $3.3 billion American Real Estate preferred stock. This offer is an attempt to compete with S.L Green's proposal, which is currently valued at $45.60 a share. A vote on the merger with S.L Green is expected to take place on December 6.
• Sources: Marketwatch, Reuters, Wall Street Journal, TheStreet.com, Reckson SEC Filings
• Related commentary: Reckson Realty: The Real Story, Reckson Drama Grows: Icahn Loses Partners Macklowe, Mack-Cali, Icahn, Macklowe Already Hold 8% Of Takeover Target Reckson
• Potentially impacted stocks and ETFs: Reckson Associates Realty Corp. (RA), SL Green Realty Corp. (SLG), American Real Estate Partners L.P. (ACP), Mack -Cali (CLI)
TECHNOLOGY AND INTERNET
Much Ado About Baidu Entering Japan
An announcement yesterday by Baidu that it plans to enter the Japanese Internet search market next year helped send its shares higher by 3.3%. Also moving the stock was Bear Stearns' $600 price target on Google and the Shanghai Composite's 3% gain. Japanese analysts were unmoved by the Baidu news, primarily because Japanese Internet users have embraced portals, which explains Yahoo!'s entrenchment. Google has struggled to establish itself in Japan, while MSN has had more success since it is a portal and has been in the country for years. Meanwhile, Baidu's CEO Robin Li said, "We believe that our proven strength in non-English language search, the high internet penetration in Japan, as well as similarities between the Chinese and Japanese languages make this market an ideal next step for Baidu." A Goldman Sachs analyst told clients: "If China still represents a significant growth opportunity, why would Baidu want to divert resources and focus to enter the Japanese market, which is clearly bigger, but also much more competitive with several large scale incumbent companies."
• Sources: Press release, Bloomberg
• Related commentary: Baidu.com to Maintain, or Even Extend, Its Market-Leading Position in China, Baidu: Raising Questions on Valuation and Search Ads. Conference call transcripts: Baidu Q3'06
• Potentially impacted stocks and ETFs: Baidu (BIDU). Competitors: Yahoo! (YHOO), Google (GOOG), Microsoft (MSFT)
CNBC unveiled its new website, CNBC.com, which will combine live and on-demand video with news and analysis for the financial-news audience. The project has been in production for nearly a year, and coincides with the expiration of CNBC's five year licensing agreement with MSN. CNBC.com will have three kinds of video and will feature 75 clips every day; some will be taken from the cable channel, and some will be unique CNBC.com content. Live streamed events will also be shown daily.
• Sources: Techcrunch, Reuters, Marketwatch
• Related commentary: Jim Cramer Headed To CNBC 's New Website?, Are Podcasting's 15 Minutes Up?
• Potentially impacted stocks and ETFs: General Electric Co. (GE), Microsoft Corp. (MSFT)
Fertitta Brothers to Take Station Casinos Private
Station Casinos announced that its management and Colony Capital LLC have proposed a $4.7 billion offer to take the company private, the second largest takeover bid in the casino industry this year. Chairman Frank Fertitta III and his brother, President Lorenzo Fertitta, propose to pay $82/share (a 19% premium) for the company, which owns 12 Las Vegas casinos. Station shares have fallen recently over concern that the number of local casinos exceeds demand, a matter Frank Frantini, publisher of the Gaming Morning Report, downplays as a "short-term Wall Street reaction." Shares of Station rose $15.80, or 23 percent, to $84.90 on the news. Other stocks in the sector rose in anticipation of further takeovers: Boyd shares jumped 11% to $46.70, and Pinnacle Entertainment Inc. increased 6.2 percent to $34.15.
• Sources: Bloomberg, BusinessWeek, Wall Street Journal
• Related commentary: Boyd Gaming Remains Strong Despite Soft Quarterly Results, Valuing the Casino Industry, Wall Street Firms Bet on Casinos
• Potentially impacted stocks and ETFs: Station Casinos (STN). Competitors: Harrah's Entertainment (HET), Pinnacle (PNK), Boyd's Gaming (BYD), Wynn Resorts (WYNN), Trump Entertainment Resorts (TRMP)
Gold Kist Accepts Pilgrim's Pride's Sweetened Tender Offer (Finally)
After four months of rejecting ongoing takeover efforts by its rival Pilgrim's Pride Corp., Gold Kist's board on Sunday gave its shareholders the go ahead to accept an improved tender offer. The original offer was increased by $100 million - from $20 to $21 a share - to allay Gold Kist's concerns that Pilgrim's offer didn't reflect a "fair value" for the company. Another major factor in Gold Kist's board accepting the buyout was Pilgrim's announcement three days ago that 67% of Gold Kist's shareholders had already sold their shares under the original tender offer. The new merged company will be expected to makes sales of more than $7.5 billion a year making it the largest chicken producer in the U.S. with a 27% market share. Tyson's, the former leader, will still be the larger company since it also produces ham and beef. Due to the current glut in chicken production as well as increases in the price of grains for feeding such as corn, both Pilgrim's and Gold Kist had reported net losses during their recently ended fiscal years. In good news for Gold Kist employees, the Wall street Journal quotes Pilgrim's Pride CEO O.B. Goolsby as saying his company had "absolutely no intention of any plant closings" from the pending combination. Shares of Pilgrim's Pride gained $2.52, or 9.9% to $27.90 as of 4 p.m. yesterday before 39 cents in after hours trading. Gold Kist stock was up 90 cents, or 4.5%, to $20.87 on the Nasdaq.
• Sources: Press Release, Wall Street Journal, Business Week, Reuters, Bloomberg
• Related commentary: Pilgrim's Pride Tries To Gobble Up Competitor Gold Kist With Hostile Bid, Pilgrim's Pride Trying to Pull a Fast One With Proposed Gold Kist Acquisition, Gold Kist Rejects "Inadequate" Buyout Offer From Pilgrim's Pride
• Potentially impacted stocks and ETFs: Pilgrim's Pride (PPC), Gold Kist (GKIS). Competitors: Tyson Foods (TSN), Sanderson Farms (SAFM)
Bank of NY-Mellon: Historic Merger, Poised for Future Growth
Both Bank of New York and Mellon Financial's shares surged yesterday (12% and 7% respectively) on news two of the oldest U.S. financial institutions will merge. The combined entity will have $16.6 trillion in institutional investor assets under custody (to become the world's largest) and $1.1 trillion in assets under management (5th U.S. largest). The Wall Street Journal published a summary of analysts' reactions, which were overwhelmingly positive -- most rating Bank of NY a "buy" or "outperform," with price targets ranging between $36-$42. The Bank of NY-Mellon merger is valued at $16.5b with the WSJ reporting Mellon shareholders will receive one share in the company for each Mellon share and Bank of NY shareholders to receive a 0.9434 share per each share. Fitch affirmed all ratings of both firms and assigned a "positive outlook." A Bank of NY press release said the merger is expected to be 1.0% dilutive to its '07 operating earnings, but accretive from '08, and will be 1.0% accretive to Mellon's '07 earnings." The merger is expected to close by Q3'07, with cost savings estimated at $700m annually, or 8.5% of combined expenses. Mellon's CEO Robert Kelly will lead the merged entity, although Bank of NY will have 10 of 18 board seats and 63% ownership.
• Sources: Press release [pdf], Business Wire, The Wall Street Journal [I, II]
• Potentially impacted stocks and ETFs: Bank of New York (BK), Mellon Financial (MEL). Competitors: Northern Trust (NTRS), State Street (STT), Investors Financial Services (IFIN). ETFs: streetTRACKS KBW Bank (KBE), streetTRACKS KBW Capital Markets (KCE), iShares Dow Jones US Regional Banks (IAT), Regional Bank HOLDRs (RKH)
In Search of Higher Growth, Medtronic Will Spin Off Defibrillator Unit
Medical device company Medtronic announced yesterday plans to spin off its defibrillator unit, Physio-Control, to focus on higher growth opportunities. Physio-Control is expected to grow just 8-12% a year over the next five years - well below Medtronic's overall goal of +14% annual growth. This will be the third time in its 51 year history Physio is going public (Medtronic bought the company in 1998). Medtronic expects to spin off all the shares of the re-formed company to current MDT shareholders. However, the NY Times is reporting that Medtronic’s CEO, Art Collins, said he would consider a sale instead of a spinoff if a buyer came forward. Shares of Medtronic rose $1.19, to $53.35, on the news before giving almost all of that back in after hours trading.
• Sources: Press Release, Webcast discussing spinoff, Reuters, NY Times, Seattle PI
• Related commentary: Heartening Test Results May Pump ICD Makers, Medtronic Shares Up After Mixed Q2 Report
• Potentially impacted stocks and ETFs: Medtronic (MDT). Competitors: Boston Scientific (BSX), St. Jude Medical (STJ). ETFs: iShares Dow Jones US Medical Devices (IHI), Vanguard Health Care ETF (VHT)
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