SumTotal stock up on expectations; PepsiAmericas reviews bid; analyst: Agrium offer fizzles

By Cristal Cody

Tupelo, Miss., April 24 - While the board of directors of SumTotal Systems, Inc. on Friday accepted a $3.80-per-share cash buyout from private equity firm Accel-KKR LLC, there's still room for a higher bid, an analyst told Prospect News.

In other action on Friday, Minneapolis-based PepsiAmericas Inc. said its board has formed a special committee of independent directors to review the offer from PepsiCo, Inc. - a process that could take more than a month, a market source said.

Also on Friday, fertilizer maker CF Industries Holdings, Inc. said it has extended its hostile takeover offer for Terra Industries Inc.

Meanwhile, CF Industries seems to be gaining ground against Agrium Inc.'s hostile takeover attempt, an analyst said Friday.

On Wall Street, stocks rallied to close up Friday on better earnings news and housing data.

"Equities managed to hold gains into the close, although the major indices did close off their best levels of the day," Bill O'Grady, chief market strategist with Confluence Investment Management LLC, said Friday.

The Dow Jones Industrial Average closed up 119.23 points, or 1.50%, at 8,076.29.

The Standard & Poor's 500 index added 14.31 points, or 1.68%, to close at 866.23, and the Nasdaq Composite index rose by 42.08 points, or 2.55%, to 1,694.29.

SumTotal investors expect more

Earlier this month, SumTotal's largest shareholder, private equity firm Vista Equity Partners Fund III, LP, made an offer of $3.25 a share for the company.

Vista owns about 13% of SumTotal's outstanding shares.

Analysts predicted SumTotal would reject the bid but said the company is destined for a sale.

The Mountain View, Calif.-based software solutions company has been unable to provide fiscal 2009 guidance.

The offer from Menlo Park, Calif.-based Accel-KKR is valued at $124 million and represents a premium of 89% over SumTotal's closing share price on April 3, the last day of trading before Vista Equity Partners made the unsolicited offer.

"We've got two legitimate players involved now," Eric Martinuzzi, a senior research analyst with Craig-Hallum Capital Group LLC, told Prospect News on Friday.

"Still, I don't think it's game over," he said. "But we're definitely closer to the end."

Already, he said, the market anticipates a superior bid to the $3.80 offer.

"When it comes down, this thing probably goes for $4.00 or better," Martinuzzi said. "There's a 10-cent-a-share breakup fee [with Accel-KKR], so whoever comes in with a superior offer has got to make it worth the effort."

SumTotal said the offer from Accel-KKR allows the company to solicit other proposals for the next 30 calendar days.

The buyout must be approved by SumTotal stockholders.

SumTotal representatives did not return a message for additional regulatory clearance details.

Shares of SumTotal closed up 70 cents, or 22.36%, at $3.83 on Friday. The stock has traded from $1.24 to $5.15 over the past year.

PepsiAmericas reviews offer

Purchase, N.Y.-based PepsiCo, which currently owns 33% of Pepsi Bottling Group Inc. and 43% of PepsiAmericas, made the $6 billion cash-and-stock offer on April 20 for its two largest bottlers.

PepsiAmericas said in a statement Friday that it hired Goldman, Sachs & Co., Briggs and Morgan, and Sullivan & Cromwell LLP as advisers.

Somers, N.Y.-based Pepsi Bottling Group has said it is reviewing the offer.

A response from both bottlers could take several weeks, or "typically six to eight weeks on average as each company evaluates its respective offer," a market source said. "We believe that the consolidation of PepsiCo's North American beverage business makes sense for all parties involved and will likely take place, although terms of the deal may be negotiated."

The offer from PepsiCo includes $14.75 in cash plus 0.283 of a share of PepsiCo for each share of Pepsi Bottling Group and $11.64 in cash plus 0.223 of a share of PepsiCo for each share of PepsiAmericas.

PepsiAmericas shares rose 12 cents, or 0.49%, to $24.48 on Friday. Shares have traded from $14.51 to $26.15 over the past year.

Pepsi Bottling shares gained 30 cents, or 0.99%, to close at $30.75. The stock has traded from $15.78 to $34.74 over the past year.

PepsiCo stock added 63 cents, or 1.32%, to close at $48.52.

Agrium bid falters

On Friday, Deerfield, Ill.-based CF Industries extended the exchange offer for Terra's outstanding shares to June 12.

CF Industries said in a statement that 19,370 shares of Terra stock had been tendered as of Thursday.

Sioux City, Iowa-based Terra, a nitrogen provider, has rejected the all-stock deal valued at $30.50 per share.

On Thursday, CF Industries voluntarily withdrew its notification with the Federal Trade Commission and the Department of Justice for its acquisition of Terra to allow time for the review in an attempt to ward of a second request for information.

A day earlier, Agrium withdrew its notification under the Hart-Scott-Rodino Act for its acquisition attempt of CF Industries and said it will refile shortly.

The Calgary, Alta.-based agricultural producer has offered $35.00 in cash and one share of Agrium for each CF share.

"With respect to Agrium's offer for CF, we believe the FTC has narrowed the focus of its investigation and we remain confident that the HSR waiting period will ultimately expire without any material effect to the transaction," Agrium said in a statement.

However, an analyst said Friday "our analysis of HSR filings suggests that in half the cases that were subsequently refiled, the parties either received a second request or had to submit remedies."

Recent developments, including a report from proxy advisory firm RiskMetrics Group, Inc. that recommended CF shareholders support the company's board nominees, have decreased the "likelihood of success for Agrium's offer," the analyst said.

Agrium shares rose $2.30, or 5.96%, to close at $40.90 on Friday.

Shares of CF Industries jumped $4.18, or 6.25%, to close at $71.09, while Terra's stock fell a cent, or 0.04%, to $27.90.

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

PepsiAmericas Inc. NYSE: PAS

Pepsi Bottling Group Inc. NYSE: PBG

PepsiCo, Inc. NYSE: PEP

SumTotal Systems, Inc. Nasdaq: SUMT

Terra Industries Inc. NYSE: TRA

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