Epicor ignores Elliot offer; Pandit buys sliver of Citi; Constellation finds financing; Freddie falls

By Aaron Hochman-Zimmerman

New York, Nov. 14 - Equities could not hang on to a midday rally on Friday as confidence was slipping from the grasp of investors.

Epicor Software Corp. shareholders also showed a lack of confidence in the future leadership of Elliot Associates, LP as nearly none of the outstanding shares were tendered under Elliot's $7.50-per-share offer.

Citigroup Inc.'s Vikram Pandit tried to restore confidence in his bank's future with a nominal private share purchase. Although it did little for the long-term view of Citi, shares inched higher in late trading.

Federal lender Freddie Mac had less luck keeping its share prices on the shiny side.

Freddie's shares sank farther into the abyss as it pressed the government for more life support.

Constellation Energy Group, Inc. was strong enough to secure its own private life support for its merger with MidAmerican Energy Holdings Co.

Shares still fell, even as the utility closed on a $1.23 billion line of credit with UBS and RBS.

Also, the shareholders of the second- and third-largest trash haulers in the United States approved their merger.

Allied Waste Industries, Inc. and Republic Services, Inc. are expected to merge by the end of the year.

The Dow Jones Industrial Average ended lower by 337.94, or 3.82%, at 8,497.31, while the Nasdaq Composite Index lost 79.85, or 5.00%, to finish at 1,516.85.

The S&P 500 gave up 38.00, or 4.17%, to close at 873.29.

A new road for Epicor?

By Friday morning, Elliot Associates had mustered only 0.14% of the shares of Epicor Software it offered to buy at $7.50 per share. The tender offer is set to expire on Monday.

On Nov. 3, Elliot made another attempt at Epicor as it extended the tender offer to Monday as well as cut its offer price from $9.50.

Epicor's board has consistently rejected Elliot's offers, calling them "opportunistic."

"I think it goes on from here," Benchmark Capital Advisors analyst Mark Schappel said, but "maybe in a different form."

"Maybe Elliot agitates for a board seat," he said, or "somebody else takes a shot at [Epicor]."

The gang of somebody-elses includes "the usual suspects" from the software and private equity worlds, Schappel said.

One of the other potential buyers may be privately held Alpharetta, Ga.-based software producer, Infor Global Solutions.

An offer price in the $9.50-per-share area "is in the right neighborhood for someone like Infor," Schappel said.

Either way, "[Epicor's] troubles are not going away," he said.

On Thursday, Epicor announced initiatives aimed at cutting $16 million to $20 million in costs including a "reduction in its workforce, stricter controls on discretionary spending and technology initiatives designed to improve efficiencies and reduce operating expenses," Epicor said in a statement.

Shares of Epicor Software gave up $0.45, or 8.93%, to end at $4.59.

Freddie's recurring nightmare

As the government Troubled Asset Relief Program continued to change and debate still raged, Freddie Mac dropped six cents, a major loss in its current state of affairs.

The mortgage behemoth requested $13.8 billion under its slice of the bailout to cover a loss of $25.3 billion during the third quarter.

That $25.3 billion loss compares to a $1.2 billion loss during the third quarter of 2007.

The huge third-quarter setback is the aggregate of a $14.3 billion charge to cut the value of its taxable assets, a $9.1 billion mortgage security writedown and another $6 billion of "credit-related expenses arising from the dramatic deterioration in market conditions during the third quarter," a press release said.

"Freddie Mac and Fannie Mae are toxic," a trader said.

Fannie and Freddie "will just be absorbed by the U.S. government ... no choice," he said about the future of the loan guarantors.

Shares of Freddie Mac sank $0.06, or 8.22%, to close the day at $0.67.

Shares of Fannie Mae dropped $0.08, or 12.90%, to end the session at $0.54.

Suffering Citi

Citigroup continued to scratch for a footing in what is becoming an increasingly steep market downturn.

On Friday, the supposedly too-big-to-fail bank's souring balance sheet compelled CEO Pandit to buy 750,000 shares as a symbolic gesture of his confidence in the bank and in his own stewardship.

Still, in Citi's present state, the not-quite $7 million investment is more "symbolic" than "gesture" for Pandit.

It is also worth little in the way of consolation to the nearly 60,000 people Citi is rumored to be ready to lay off.

The 60,000, which may include chairman Sir Win Bisschoff, represent 25% of the bank's compensation cost.

A trader who personally owns Citi shares said, "I think Citi will work it out over time."

Shares of Citigroup managed to claw higher by $0.07, or 0.74%, to $9.52.

Constellation lines up financing

Even in a market where financing has been scarce, investors still seemed to be uninterested by the news that Constellation Energy closed on its $1.23 billion 364-day credit facility with UBS and RBS.

Share prices hardly moved as the company also announced that it has secured $350 million in financing from MidAmerican, which is targeting Constellation with an offer of $4.7 billion, or $26.50 per share.

"The successful completion of our credit facility marks a significant milestone in Constellation Energy's ongoing initiative to stabilize our business by improving our liquidity position and reducing risk," Mayo Shattuck, chairman, president and CEO of Constellation, said in a statement.

"We believe our progress to date, combined with today's announced facility and the separate investments by our merger partner, MidAmerican Energy Holdings Company, provides sufficient liquidity to manage our business and successfully close our transaction," he added.

Shares of Constellation Energy slipped by $0.21, or 0.85%, to $24.53.

Haulers' holders approve union

Shareholders of Republic Services and Allied Waste approved their all-stock merger which, in light of falling share prices, is now worth less than $5 billion, down from $6.07 billion.

"With today's stockholder approval, we are one step closer to realizing the value of this transaction for employees, customers and investors," Don Slager, president and chief operating officer of Allied, said in a statement.

Investors shrugged off the progress.

Shares of Allied Waste gave back $0.40, or 3.53%, to end at $10.93.

Shares of Republic Services fell by $1.05, or 4.08%, to close at $24.70.

Mentioned in this article:

Allied Waste Industries, Inc. NYSE: AW

Citigroup Inc. NYSE: C

Constellation Energy Group, Inc. NYSE: CEG

Epicor Software Corp. Nasdaq: EPIC

Fannie Mae NYSE: FNM

Freddie Mac NYSE: FRE

Republic Services, Inc. NYSE RSG

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