Diebold fends off United Technologies; Clear Channel's big court day; Microsoft looks for open windows

By Aaron Hochman-Zimmerman

New York, Mar. 3 - Stocks thrashed around on manufacturing and construction data, but ended flat to begin the week.

Older deals involving Microsoft Inc. and Yahoo! Inc. as well as the airlines continued to hold their stalemate, but new deals were seen creeping into the spotlight.

On Sunday, United Technologies Corp., which reportedly has long had its sights on Diebold Inc., finally stepped out of the shadows by announcing it had sent a letter to Diebold offering $40 per share.

Clear Channel Communications Inc. had another win in Delaware Chancery Court in its bid to force the sale of 56 television stations to Providence Equity Partners' Newport Television.

Microsoft Inc. again insisted its original $44.6 billion is as high as it is willing to go in its bid for Yahoo! Inc.

However, Microsoft made it clear that it still has other tricks in mind. Microsoft is expected to try for a boardroom takeover by submitting nominees for Yahoo!'s board within 10 days.

Many market watchers feel as though E*Trade Financial Corp. is preparing itself for a sale by promoting chairman Donald Layton to chief executive officer.

Delta Air Lines made it known that its advisors' services will not be needed if the pilot's union cannot agree to blend their seniority ladder with the pilots of Northwest Airlines.

The Dow Jones Industrial Average ended lower by 7.49 or 0.06% at 12,258.90, while the Nasdaq Composite Index lost 12.88 or 0.57% to finish at 2,258.60.

The S&P 500 was able to add 0.71 or 0.05%to close at 1,331.34.

United Technologies moves on Diebold

Shares of United Technologies Corp. (NYSE: UTX) stepped back by $1.11 or 1.57% ending up at $69.40 as it made a $40 per share offer for the outstanding shares of Diebold Inc. (NYSE: DBD).

Diebold stock soared $14.72, or 61.03%, to close at $38.84.

The unsolicited bid came in the form of a Feb. 19 letter from United Technologies' chairman and chief executive officer, George David.

"UTC would finance the share acquisitions with current cash balances and other readily available sources of funds. A UTC shareholder vote is not required, and we and our counsel do not see regulatory impediments," David wrote to Diebold chairman John Lauer.

"The facts are that UTC has an exceptional global footprint, deep technical resources, and an outstanding operating record. An incidental but important fact is that UTC ranks number one on total shareholder return among the Dow Jones Industrials over the last 10 years," the letter continued.

Lauer responded by making clear Diebold's disinterest in United Technologies and asked David not to make any other attempts to contact Diebold.

Morgan Stanley is the financial advisor for United Technologies.

United Technologies believes an agreement can be reached within 30 days, a market source said.

Another court win for Clear Channel

Clear Channel Communications (NYSE: CCU) stock was lower by $0.35 or 1.09% to close at $31.65 as it was given a victory against Providence Equity Partners' Newport Television.

Newport was officially barred from "taking any action to prejudice, modify or in any way interfere with the existing financing commitments evidenced in the May 4, 2007 commitment letter," according to a Delaware Chancery Court filing.

Clear Channel hopes to force Providence's Newport Television to complete the purchase of 56 television stations in order for Clear Channel to be acquired by Thomas H. Lee Partners and Bain Capital for $19.5 billion.

However, as reported earlier, Wachovia has shown hesitancy to finance the deal for the 56 stations and it may be just as hesitant towards the buyout, a market source said.

Microsoft tries boardroom intrigue

Microsoft Corp. (Nasdaq: MSFT) stock was off by $0.21, or 0.77%, to $26.99 after it was learned that it will nominate new board members for Yahoo! Inc. (Nasdaq: YHOO) ahead of the March 14 deadline, reports The Times of the United Kingdom.

Yahoo! stock was lower by just $0.01, or 0.04%, to finish the session at $27.77.

As a shareholder, Microsoft has the option to nominate board members, but it does not have the right to negotiate separate deals with board members.

Microsoft is standing firm with its $44.6 billion offer, as Yahoo! is firm in its refusal.

Microsoft continues to review its options regarding Yahoo! on a weekly basis, a market source said.

EA sticks to its guns

Shares of Electronic Arts (Nasdaq: ERTS) added $0.43, or 0.91%, to $47.72 as it insisted its offer for Take-Two Interactive Software (Nasdaq: TTWO) would go no higher than the current $26 per share, a market source said.

Take-Two stock slipped by $0.30, or 1.13%, to end the day at $26.20.

E*Trade gets ready for dance

Shares of E*Trade Financial (Nasdaq: ETFC) added $0.07, or 1.64%, to finish at $4.34 as many in the market speculated that the promotion of Donald Layton to chief executive officer from chairman may signal an upcoming sale of the company.

Buyers have stared through E*Trade's windows at the brokerage operation, but there is likely little interest in the market for its banking activities, a market source said.

"In accepting the chief executive officer position, and as a clear vote of confidence in the company, Mr. Layton requested that all of his 2008 and 2009 incentive compensation be in the form of equity," said an E*Trade press release.

Delta warns hired help

Delta Air Lines (NYSE: DAL) stock ended down by $0.37, or 2.77%, at $12.98 as its planned merger with Northwest Airlines (NYSE: NWA) continues to drag on with little progress.

Northwest shares fell $0.61, or 4.54%, to $12.82.

Delta told many of its advisors that their services will no longer be required if the pilot's union cannot find a way to intermingle the pilot seniority list.

Unions and consumer advocates have been hurling proverbial rotten vegetables at the deal, which would create the largest passenger carrier in the United States.

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