Accredited sues to complete Lone Star merger; Mission West may lose buyer; HomeBanc plummets

By Sheri Kasprzak

New York, Aug. 13 - Mortgage company Accredited Home Lenders Holding Co.'s stock plummeted Monday after it said it is taking Lone Star Fund V and two affiliates to court to in order to require Lone Star to complete its tender offer for Accredited's outstanding stock and settle their merger.

Lone Star, according to a statement released by the private equity firm Monday, contends that because of deterioration in San Diego-based Accredited's financials, it is not obligated to close the offer for Accredited's stock.

One sellside trader Monday said it may be too early to tell if the stock still has value or if the news alone is what sparked the substantial drop in the stock on Monday.

"A lot of times, just news like this will send the stock down," said the trader Monday morning. "It may take a little while to really determine how bad they've been hit."

Meanwhile, mortgage lender HomeBanc Corp.'s stock continued to take knocks on Monday after the company announced it was filing for bankruptcy protection late last week.

The stock lost more than half of its value on Monday, diving by 58.33%, or 3 cents, to end the session at $0.02 (Pink Sheets: HMBN).

In other mortgage-lending news, REIT Mission West Properties, Inc. said its potential buyer may be backing out because its primary and secondary lenders have withdrawn.

The two companies had been in talks since July for the estimated $1.8 billion acquisition.

Accredited's suit

In the suit, Accredited is seeking performance of Lone Star's obligations to close the tender offer of Accredited's stock and complete the merger.

By 1 p.m., Accredited Home Lenders' stock had already slipped by more than 30%. At the end of the day, the stock had sunk by 34.64%, or $3.08, to close at $5.82 (Nasdaq: LEND). In after-hours trading, the stock gained 33 cents.

Lone Star, in a Friday filing with the Securities and Exchange Commission, alleged that Accredited would fail to satisfy the conditions of closing the tender offer. In the filing that it did not plan to accept Accredited shares tendered by Aug. 14.

"The agreement and plan of merger between Accredited and Lone Star expressly provides that changes generally affecting the non-prime industry in which the company operates which have not disproportionately affected the company do not provide a basis for Lone Star to fail to honor its obligations," said a statement from Accredited on Monday.

"Further, the agreement expressly provides that Lone Star may not refuse to honor its obligations based on any deterioration in the business, results of operations, financial condition, liquidity, stockholders' equity and/or prospects of the company substantially resulting from circumstances or conditions existing as of the date that the agreement was signed that were generally publicly known as of such date or that had been previously disclosed by the company to Lone Star."

"As stated on Aug. 10, 2007, Lone Star informed the chairman of the special committee of the board of directors of Accredited Home Lenders that, in light of the drastic deterioration in the financial and operational condition of the company, among other things, the conditions to the closing of the tender offer for shares of Accredited would not be satisfied," said a statement released Monday by Lone Star.

"Accordingly, Lone Star does not expect to be accepting shares tendered as of the end of the current offer period, currently scheduled to close at 12 midnight, New York City time, on Aug. 14, 2007. Lone Star looks forward to presenting these facts in Delaware Court of Chancery."

Accredited, in its statement, said it disagrees with Lone Star's assertion and "believes all conditions to the closing of the pending tender offer for Accredited's common stock will be satisfied by the expiration of the current tender offer period."

Mission West seeks out buyers

Continued strife in the mortgage-lending market may be at the root of Mission West Properties, Inc. possibly losing its potential buyer.

The talks with the potential buyer began back in July when Mission West said it would sell all of its stock in a deal valued at $1.8 billion.

Now Mission West said its potential buyer may be backing out because its primary and secondary lenders have withdrawn.

Even so, Mission West is looking for other potential buyers. It is in talks with three potential companies to acquire its stock.

"Mission West is continuing to have ongoing discussion with these companies and they are in the process of doing financial due diligence to determine if they can meet the pricing conditions set forth by Mission West," said a statement released Monday morning by Mission West.

The potential buyer, Mission West said in its statement, completed all of its due diligence and had agreed to the terms of the merger when the primary and secondary lenders withdrew from the market.

Even as there is uncertainty with its acquisition plans, Mission West said it will continue to lease buildings and conduct business as usual.

"The company continues to believe based on new lease and higher rents that revenues and earnings will continue to increase for the remainder of this year and 2008," said the Mission West news release.

Mission West's stock fell by 25 cents to close at $11.75 Monday (Amex: MSW).

Mission West is a Cupertino, Calif.-based real estate investment trust.

RF to merge with Sirenza

Elsewhere, there was a little of the traditional merger and acquisition news on Monday.

RF Micro Devices, Inc. said it plans to acquire Sirenza Microdevices.

An analyst said Monday that the move is a good one for RF.

"It's a pricey move for them but we feel it is a smart one at the end of the day," he said.

RF will buy Sirenza's stock at a premium to its market value.

Even so, the stock ended the day down 14 cents, or 2.25%, to close at $6.07, but gained 4.35 cents in after-hours trading (Nasdaq: RFMD).

The boards of directors of both companies approved the merger, under which each outstanding share of Sirenza's stock will be exchange for a combination of 1.7848 shares of RF Micro Device's stock and $5.56 in cash. The merger is valued at $900 million and the terms allow all or a portion of the consideration to be receivable in RF Micro Devices stock to be tax-free to Sirenza's stockholders.

Current RF stockholders and Sirenza's stockholder will own 67% and 33%, respectively, of RF Micro Device's stock on a fully diluted basis.

The merger is set to wrap up by the third fiscal quarter ending Dec. 29, 2007.

"This strategic acquisition brings together two companies with leadership positions and considerable expertise in RF systems and solutions," said Bob Bruggeworth, RF Micro Device's chief executive officer, in a statement.

"It creates the world's largest, most diversified and best-positioned RF company, with a broad set of customers and a diversified product portfolio of high-performance components and systems-level solutions. The transaction will allow RFMD to capitalize on the RF integration and systems-level design expertise we continue to pioneer in the cellular world and apply those capabilities across Sirenza's broad footprint in multiple high-growth RF markets, including broadband/CATV, wireless infrastructure, WiMAX and aerospace and defense."

RF Micro Devices is a Greensboro, N.C.-based manufacturer of high-performance radio systems, including power amplifiers, transmit modules, cellular transceivers and system-on-chip solutions.

TPG may acquire Midwest

In other merger news, Midwest Airlines said Monday it is pursuing an all-cash offer made by private equity firm TPG Capital, LP at $16.00 per share, dodging a hostile takeover bid from AirTran Holdings, Inc.

The decision came after the board of directors of Midwest received a stock and cash offer of $15.75 per share from AirTran Holdings, Inc.

"In reaching that determination, the board concluded that the TPG offer presented greater value and certainty for Midwest shareholders than the AirTran offer," said a Midwest news release.

"It's a no-brainer," said one sell-side trader on Monday morning. "Beside the fact that they're avoiding the takeover by AirTran, they're getting more money so naturally they're going to take the TPG deal."

The acquisition, according to a Midwest statement would "permit the company to continue its rich legacy as a leading provider of customer-oriented quality air service."

Even though the stock dropped on Monday after the news, the trader said he feels the acquisition will ultimately be a good thing for the stock.

Milwaukee-based Midwest's stock fell by 23 cents, or 1.62%, to close at $14.00 (Amex: MEH).

A definitive agreement is expected to be reached by Aug. 15.

After having its bid rejected, AirTran released a statement Monday claiming that "we are disappointed that the Midwest board has rejected our enhanced offer. We believe the merger of AirTran and Midwest was a compelling strategic combination with similar fleets, complementary route networks, growth and advancement opportunities for employees and economic benefits to the communities we serve," said AirTran CEO Joe Leonard.

Related to the news, Northwest Airlines said Monday it is a "passive investor" in the acquisition of Midwest by TPG.

"NWA, which is providing financing to facilitate the transaction, will not participate in the management or control of Midwest should TPG acquire Midwest," the Eagan, Minn.-based airline said in a statement.

"The previously announced code-share agreement between NWA and Midwest Airlines will remain in place and the two airlines will explore cost-reduction activities such as joint fuel purchasing."

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