Sun Micro shares gain on deal hopes; bid raises for CF, Terra predicted; Hearst-Argyle mulls buyout

By Cristal Cody

Tupelo, Miss., March 26 - Sun Microsystems, Inc. has been on the auction block for months, according to Intel Corp. chief executive officer Paul Otellini.

In other deals, chances are on the rise for sweetened takeout bids for CF Industries Holdings, Inc. and Terra Industries Inc., an analyst said Thursday.

Also Thursday, Hearst-Argyle Television, Inc. said it is reviewing the $4.00-a-share buyout offer from Hearst Corp.

The new offer is far below the $23.50 Hearst offered in 2007, but Hearst-Argyle Television shareholders are expected to bite this time, an analyst told Prospect News.

Moving to Wall Street, the Dow Jones Industrial Average rallied to close up 174.75 points, or 2.25%, at 7,924.56.

The Standard & Poor's 500 index gained 18.98 points, or 2.33%, to finish at 832.86, while the Nasdaq Composite index jumped 58.05 points, or 3.80%, to 1,587.00 on Thursday.

Sun on the cheap

Rumors of a deal valued at more than $6.5 billion from Sun Microsystems and International Business Machines Corp. has everyone rattled.

Several analysts reached Thursday declined to comment. "We're not allowed to comment on this one with all the speculation out there," one explained.

Lots of people are thinking about a buyout, which apparently has been under consideration for several months.

Otellini said Monday in a presentation to Intel employees that the "cheap Sun price" spurred a lot of interest.

"I can tell you that Sun was shopped around the valley and around the world in the last few months," Otellini said, according to a transcript of the presentation included in a regulatory filing Wednesday with the Securities and Exchange Commission.

"A lot of companies got calls or visits on buying some or all the assets of the company," he said. "It looks like IBM is in the hunt now. And at a hundred-and-some-odd-percent premium, I suspect they'll get it."

One analyst previously estimated a buyout offer from Armonk, N.Y.-based IBM for at least $10.30 a share.

Santa Clara, Calif.-based Sun Microsystems and IBM representatives have declined to comment on the speculation.

Shares of Sun Microsystems gained 35 cents, or 4.46%, to close Thursday at $8.20, up from the $4.97 closing price on March 17 when rumors began to surface.

IBM's stock rose 83 cents, or 0.85%, to close at $98.78.

Santa Clara, Calif.-based Intel's stock added 88 cents, or 5.89%, to close at $15.82.

Higher CF, Terra bids?

Terra's stock gained $1.41, or 4.92%, to close at $30.07, near CF Industries' all-stock offer valued at $30.50 a share.

"If CF's bid is not successful, we would expect Terra's shares to fall," an analyst said Thursday. "If CF's bid is successful, CF shares, and hence Terra shares, should fall as Agrium would be likely to drop its bid for CF."

Shares of CF Industries added 78 cents, or 1.07%, to end Thursday at $74.00 as confidence grows in an increased takeover bid from Agrium Inc.

Agrium, a Calgary, Alta., fertilizer company, has offered shareholders of CF Industries $72.00 a share in cash and stock.

"We believe that Agrium is likely to increase its offer in an attempt to gain CF management approval," the analyst said. "We estimate that Agrium cannot increase its offer more than 11% more than its current offer on the basis of EPS accretion."

An additional increase in CF Industries' offer for Terra also should not be ruled out, though "we continue to believe that Agrium is more likely to be successful," the analyst said.

Agrium shares closed up 66 cents, or 1.68%, at $39.90 on Thursday.

Terra is a Sioux City, Iowa, nitrogen products company, and Deerfield, Ill.-based CF Industries produces and distributes nitrogen and phosphate fertilizer products.

Hearst, take two

Hearst-Argyle Television's board of directors said in a statement Thursday that the company has postponed the annual shareholders meeting scheduled for May 6 because of the buyout offer from Hearst.

Hearst-Argyle Television spokesman Tom Campo told Prospect News that the New York-based owner of 29 television stations is reviewing the offer.

The tender offer is expected to start in mid-April.

Shares of Hearst-Argyle traded above the bid terms and closed up 15 cents, or 3.72%, at $4.18 on Thursday.

However, shareholders are less likely to snub this offer "though the market is trading like it expects a higher offer," James Goss, an analyst with Barrington Research Associates, Inc., said in an interview.

The $4.00-a-share offer is a 91% premium over the stock's closing price on Tuesday.

"The stock has been decimated," Goss said. "In addition to the market going down, they are dealing with a very challenging revenue environment for traditional media and in an off year in terms of political and Olympic advertising."

Hearst owns 67% of the company's class A shares and all of its class B shares.

"I don't think there are any large holders aside from the Hearst Corp. that would stand in the way of their getting up to the 90% ownership, which would be the level they need to get in order to achieve the short-form merger," Goss said.

In a similar situation, shareholders of Cox Radio, Inc., are expected to take a buyout deal announced on Monday, though shares continue to trade above the offer.

Cox Enterprises, Inc. offered a cash bid of $3.80 a share, or about $69.1 million, to take Cox Radio private. Cox Enterprises already owns a 78% interest in Cox Radio and holds a 97% voting interest.

Shares closed at $4.08 on Thursday, down 8 cents, or 1.92%.

The buyout offer represents a 15.2% premium over the stock's closing price on Friday, though shares have traded as high as $13.09 in the past year.

"It's very parallel situations," Goss said. "Fundamentals are certainly working against them at the moment."

Mentioned in this article:

Agrium Inc. NYSE: AGU

CF Industries Holdings, Inc. NYSE: CF

Cox Radio, Inc. NYSE: CXR

Hearst-Argyle Television, Inc. NYSE: HTV

Intel Corp. Nasdaq: INTC

International Business Machines Corp. NYSE: IBM

Sun Microsystems, Inc. Nasdaq: JAVA

Terra Industries Inc. NYSE: TRA

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