Verizon heard to be in talks with Alltel; Icahn plans Microsoft's return; Lehman fights sale rumors

By Aaron Hochman-Zimmerman

New York, June 4 - A hectic day for deals was capped off by word of a possible $27 billion acquisition of Alltel Communications LLC by Verizon Communications Inc.

The news reports - which came with scant detail - did not come before Carl Icahn hinted at one way he may be able to draw Microsoft Corp. back to the table for a deal with Yahoo! Inc.

The very severance plan which was designed to keep Yahoo!'s employees on staff is too burdensome for Microsoft's deal budget, Icahn said in an open letter to chairman Roy Bostock and must be cut.

Lehman Brothers Holdings Inc. was busy answering concerns about its own budget on Wednesday.

At least some investors were satisfied as the investment bank's shares were up over 2.5%.

Shares of Nymex Holdings Inc. did not fare as well as investor Cataldo Capozza predicted a victory in the legal block the merger with CME Group Inc. in a press release of his own.

A proxy fight to replace Nymex's board would follow the presumed victory in court, Capozza said.

Shares of J.M. Smucker Co. got a little coffee pick-me-up from purchase of Folgers from Proctor & Gamble Co.

Also, UAL Corp. shares were higher even as United clipped the wings of 100 jets and cut the jobs of approximately 1,500 people.

Elsewhere, in pharmaceuticals Datascope Corp. announced it will be scanning for strategic alternatives.

Meanwhile, across the greater market-scape, a source pointed out some big names that have been in big trouble in recent sessions.

In trading Wednesday, Wachovia Corp. (NYSE: WB) closed at 52-week low by shedding $0.34, 1.55%, to end at $21.58 as the loss of chief executive officer Ken Thompson has left a void for investors.

A snapshot of Eastman Kodak Co. showed it closing at $14.56, very close to a 52-week low, but off from a 52-week high at $30.20.

Drugmaker Pfizer Inc. crashed off of its 52-week high at $27.73 as questions arose over its ability to sustain its dividend. Shares gave up $0.21, or 1.10%, to finish at $18.80.

The Dow Jones Industrial Average ended slightly lower by 12.37, or 0.10% at 12,390.48, while the Nasdaq Composite Index added 22.66, or 0.91%, to finish at 2,503.14.

The S&P 500 slipped by 0.45, or 0.03%, to close at 1,377.20.

Yahoo! must ditch severance plan, Icahn says

Investor Carl Icahn criticized Yahoo!'s severance plan in an open letter to chairman Bostock.

Icahn said that the only way to bring Microsoft back to the table with a better offer is to cut the severance package, although president Susan Decker pointed out that "the severance plan was intended to keep employees from bolting against the takeover by guaranteeing them a cut on the deal," Paul Martin of Martin Capital Management said.

"The value of Yahoo! is the employees ... it's not a bunch of widgets or coal in the ground," he said.

"I can see Yahoo!'s argument that it makes sense to provide incentives for your employees to stick around," he said.

Now, "with Icahn in the deal putting pressure on Yahoo!'s board" Yahoo! has internal issues to deal with for the next few months "so it takes some of the pressure off Microsoft," he said.

"Time is really on their side," he said about Microsoft.

Shares of Yahoo! (Nasdaq: YHOO) was better by $0.70, or 2.68%, to finish at $26.85.

Shares of Microsoft (Nasdaq: MSFT) picked up $0.23, or 0.84%, to close at $24.57.

Verizon deal hits the wires

The market went scrambling for details after CNBC reported that Verizon has been talking to Alltel about a possible $27 billion acquisition.

Alltel was taken private by Texas Pacific Group and Goldman Sachs for nearly $25 billion in November 2007.

Shares of Verizon (NYSE: VZ) fell $0.38, or 1.02%, to $36.98.

Capozza to begin proxy fight after court

Assuming an upcoming victory in a class action lawsuit challenging the merger between Nymex and CME, shareholder Cataldo Capozza expects to launch a fight to oust Nymex's chairman Richard Schaeffer and chief executive officer James Newsome.

"If CME walks away from the deal or if the members and shareholders vote it down, I believe Nymex shares will once again trade above $120 per share" Capozza said in his own press release.

"With new management in place and if the Dow increases as some investors expect, Nymex could approach $140 to $150 per share by mid-2009 and the seats, which the members do not have to sell, could be valued at $1 million each with electronic trading income."

Capozza accused Schaeffer and Newsome of proposing the sale solely for the $60 million windfall payout they would receive, he said.

Shares of Nymex (NYSE: NMX) dropped $2.71, or 3.23%, to $81.20.

Shares of CME (NYSE: CME) slid by $22.30, or 5.57%, to $378.00.

Lehman fights off rumors

Even the Wall Street Journal was feeling bearish on Lehman Brothers, suggesting it sell either part of all of itself, an analyst said.

However, "Lehman is in far better shape and managed better than Bear Stearns," he said.

Lehman denied speculation over its supposed severe financial trouble, but word traveled about its need of a possible $4 billion of an additional capital.

"You think Lehman's not going to need money in the next couple weeks? You bet your ass they need money," another market source said.

The rumors are "just shorts knocking it down," the analyst said.

"There was a rumor that they tried to access the discount window and they said they hadn't," Paul Martin said.

"I just find it interesting that they can access the discount window and that makes it virtually impossible for there to be a run on Lehman because they can keep on accessing the discount window," he said.

"With the discount window open the odds are virtually nil" that there could be a run. "There would have to be a massive implosion of our financial system for that to happen," he said.

However, "it's a perfect environment for the short-sellers to play their games," he said.

"The notion that Lehman is going out of business is pretty ridiculous," he added.

Shares of Lehman (NYSE: LEH) traded up by $0.79, or 2.58%, to $31.40.

United grounds jets, cuts staff

United stock gained altitude as the company said expects to sit down 100 jets and pink-slip 1,400 to 1,600 workers.

"Today we are taking additional, aggressive steps that demonstrate our commitment to size our business appropriately to reflect the current market reality, leverage capacity discipline to pass commodity costs on to customers, develop new revenue streams and continue to reduce non-fuel costs and capital expenditures," said Glenn Tilton, United's chairman, president and chief executive officer in a press release.

"This environment demands that we and the industry act decisively and responsibly. At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment," he said.

"I see the United move being very painful to the aircraft leasing firms," an analyst said.

"They will be stuck with these used older planes that suck fuel and will have hard times releasing at any rate near where they wish," he said.

Shares of United (Nasdaq: UAUA) took on $0.61, or 7.15%, to close at $9.14.

This balanced breakfast

J.M. Smucker announced that it has brewed a deal with Proctor & Gamble to buy Folgers coffee for an all-stock deal valued near $3.3 billion, according to a press release.

The terms include the assumption of $350 million of Folgers' debt and a $5 per share one-time special dividend to Smucker's shareholders.

After the dividend, Proctor & Gamble shareholders will get about 53.5% of Smucker's shares in a stock-for-stock merger.

"Folgers will become our tenth number one brand in North America and will further enhance the high quality, great tasting, diverse product offerings that consumers expect from Smucker," said Tim Smucker, chairman and co-chief executive officer of Smucker, in the release.

The deal is expected to close in the fourth quarter.

Shares of Smucker (NYSE: SJM) added $0.12, or 0.22%, to end at $53.87.

Shares of Proctor & Gamble (NYSE: PG) was also better by $1.04, or 1.59%, to close at $66.45.

Datascope takes interest seriously

After hearing interest for the whole company on the heels of selling its patient monitoring business, Datascope announced it will offer financial guidance to potential buyers, according to a statement.

Datascope's board ordered the company's advisor Lehman Brothers to make a report of the interest in the company.

The Montvale, N.J.-based company tallied growth of 6% in the third quarter of the fiscal year and expects its fourth quarter performance to beat the fourth quarter of fiscal year 2007 by 6% to 7%, the release said.

Shares of Datascope (Nasdaq: DSCP) tacked on $4.80, or 11.48%, to close the day at $46.60.

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