Calpine shares gain 12%; Yahoo off on restructuring; Novell dives on warning; International Coal up

By Ronda Fears

Memphis, Dec. 6 - Calpine Corp. shares zoomed Wednesday on news of an asset sale fetching more than anticipated and an extension to its exclusive period to file a bankruptcy reorganization plan. Moreover, though, a buyside equity analyst said there is increasing appeal to the stock as the company pares down debt in the bankruptcy.

The San Jose, Calif.-based independent power producer announced Wednesday that the bankruptcy court approved the sale of its 590-megawatt Aries Power Plant for $233.6 million to Kelson Holdings LLC, which beat Aquila Inc.'s bid of $158.5 million for the five-year-old facility. Also, Calpine got a six-month extension to its exclusivity period to July 2007 from Dec. 31, which had been extended in April.

Calpine shares (Pink Sheets: CPNLQ) shot up 11 cents on the day, or 12.09%, to $1.02. Volume was 8.44 million shares versus the norm of 5.45 million shares.

While there is considerable participation in the stock by hedge funds with a position in Calpine bonds, an analyst at an equity focused buyside shop said there is mounting interest in the stock. Calpine shares, and the bonds, had been bolstered last week by speculation that the company might be the target of a private equity buyout, but the buysider agreed with others last week that it was too early in the bankruptcy process for a buyer of the company to step in.

Still, through the debt reduction, he estimates that post-bankruptcy shares could be worth as much as $17.50 a share by several calculations.

"After selling off 20% of the [power plant] fleet, debt gets down and approximately $7 billion worth of debt gets converted into shares of new Calpine. I think its possible that current equity holders get one share of new Calpine stock for every 10 shares of old Calpine stock," the buyside analyst said.

International Coal up 5.5%

Elsewhere, International Coal Group, Inc. shares pulled back sharply but still ended with a big gain Wednesday even though the company denied rumors of a management-led leveraged buyout.

The Scott Depot, W.Va.-based coal mining concern owns the Sago mine in West Virginia where 12 miners died last January.

International Coal shares (NYSE: ICO) were up by as much as 12% on Wednesday on the noise before easing back to settle with a gain of 28 cents, or 5.58%, to $5.30. Volume was heavy with 7.12 million shares traded versus the norm of 1.3 million shares.

In another industrial name, Reliance Steel & Aluminum Co. gained on news that the Los Angeles metals company is buying Industrial Metals and Surplus Inc. and Athens Steel Inc. for an undisclosed amount. Atlanta-based Industrial Metals and Surplus processes and distributes carbon steel structural products and flat-rolled and ornamental iron products. It had $72 million in sales in fiscal 2005. Athens, Ga.-based Athens Steel is a related company.

Reliance Steel shares (NYSE: RS) added 56 cents, or $1.44%, to $39.51.

In a merger deal for certain, Docucorp International Inc. shares rocketed higher by more than 30% on its $127 million buyout by privately held Skywire Software, or $10 a share, in cash. Docucorp shares (Nasdaq: DOCC) rose by $2.26, or 30.13%, to $9.76. Docucorp is a Dallas-based business software firm.

Novell off 5% on warning

Back to the technology group, Novell Inc. shares fell 9% in premarket action on news from late the night before that the business software maker would report weaker-than-expected 2007 net revenue. The stock recouped about half the day's losses, however.

Novell shares (Nasdaq: NOVL) settled with a decline of 34 cents, or 5.37%, to $5.99.

"There was not a huge amount of selling in Novell early but once it started it steamrolled," said a buyside analyst, noting volume of 23.8 million shares versus the norm of 5.94 million shares.

"Actually Novell is making some good long term choices but Wall Street wants numbers today. I've talked with employees and they confirm rank-and-file confidence in the new management team. I would like to see a buyback at these prices and they mentioned they were looking at this option for their cash. The $1.5 million in cash doesn't include monies coming from Microsoft."

Icahn bows out of Reckson

Billionaire financier Carl Icahn abandoned his bid for Reckson Associates Realty Corp., leaving a clear path for the Reckson-supported takeover bid from SL Green Realty Corp. at roughly $4 billion in stock and cash. The news sparked a big unwinding in American Real Estate Partners LP - Icahn's latest venue for the Reckson bid.

Reckson has supported SL Green's roughly $4 billion cash-and-stock offer since it emerged in August and said the company would proceed with a Dec. 6 shareholder vote on that offer, which stands at roughly $44.76 per share and includes the assumption of $2 billion in Reckson debt.

Reckson shares (NYSE: RA) ended higher by 13 cents, or 0.29%, at $45.70.

SL Green shares (NYSE: SLG) lost $1.09, or 0.82%, to $132.57.

Icahn had entered the fray almost three weeks ago, with off-and-on partners developer Harry Macklowe and Mack-Cali Realty Corp., which both dropped out of the partnership with Icahn over the weekend. Reckson's board voted against a $4.3 billon bid from Icahn, saying the bid of $1 billion in cash and $3.3 billion of preferred stock in Icahn's American Real Estate Partners wasn't better than SL Green's offer.

On the news, American Real Estate Partners shares (NYSE: ACP) fell $4.28 on the session, or 5.23%, to $77.60.

In late November, Icahn declared a stake of 3.5 million shares, or 4.16% stake, in Reckson.

Related to the merger, Reckson and SL Green said Wednesday that they have agreed to settle pending shareholder lawsuits related to the merger providing profit-sharing participation for Reckson shareholders and to pay the full fourth-quarter dividend if the acquisition closes by Dec. 31. Reckson currently pays a quarterly dividend of 42.46 cents per share.

Yahoo cheers turn ugly

Yahoo Inc. was in the limelight Wednesday after announcing a restructuring move that players panned because of overshadowing uncertainty about its future. The stock (Nasdaq: YHOO) dropped 57 cents on the day, or 2.08%, to $26.86.

"Reorganizing leads to uncertainty, which leads to low moral, which leads to low productivity," the trader said. "We were seeing people reduce positions, saying they would wait until the smoke clears to analyze a new direction. I think the stock could go back to $23 from here, and maybe that is a more attractive entry, or re-entry, point."

The restructuring means the exit of chief operating officer Dan Rosensweig and Lloyd Braun, who heads the media group. It was also announced that chief financial officer Susan Decker would be given new responsibilities, suggesting she may be in line to replace Yahoo chief executive Terry Semel as Yahoo strives to compete with Google, Inc., which gained smartly at Yahoo's expense.

Yahoo's reorganization follows recent calls for change, highlighted by the airing of "The Peanut Butter Manifesto" internal communication last month that suggested that the company lacked a cohesive vision and decisiveness.

Traders said that, while the news was a positive signal from the internet giant, it created some angst.

Yahoo has been criticized lately as allowing competition to pass them by as the likes of Google - which also has seen a big influx of competing online search engines - develop more effective search technologies and swoop up rapidly growing niche web sites like MySpace and YouTube. Isolating the technology function into a separate structure is aimed at addressing some of these issues.

Google shares (Nasdaq: GOOG) added $1.71 on the session, or 0.35%, to $488.71.

The reorganization also comes at a critical time, with Yahoo's impending launch of a new advertising search platform, Panama, slated for first-quarter 2007.

"We see these changes as a positive for YHOO shares. While moving around the pieces doesn't necessarily increase the value of the pie, the fact that the company is addressing the issue and making a change will be well viewed in our opinion," said Bear, Stearns & Co. analyst Alexia Quadrani.

"Furthermore, management changes address the concern of unrest among several senior executives which we believe weighed on the stock price."

Bear, Stearns reiterated an outperform rating on Yahoo shares, with a price target of $32.

JetBlue up on growth hopes

JetBlue Airways Corp. got a nice bounce Wednesday, traders said, after a lackluster reaction to comments the day before from chief executive David Neeleman that the New York-based regional carrier would be interested in taking over some U.S. Airways Group Inc. and Delta Air Lines Inc. gates at LaGuardia Airport in New York and Reagan National Airport in Washington if they become available on a merger of the two larger carriers.

"We may have seen an end to the recent retracement of the October run," said one trader. "We need to see some nice upside action today. Shorts who have hung on may reconsider and we could see some strong short covering. I'd say positioning for an acquisition is a small part of it [the stock's rise Wednesday], if any."

JetBlue shares (Nasdaq: JBLU) gained 35 cents, or $2.58%, to $13.94.

"Those are things we would jump on and be in the mix," Neeleman said in the investor presentation on Tuesday, referring to the New York and Washington gates. Low-cost carriers AirTran Holdings Inc. and Southwest Airlines Co. have also said they would be interested in acquiring selected shuttle assets if put on the sale block in a US Airways/Delta deal.

"If we could justify it, we could get the money to do it," Neeleman said. "If it made sense, there are avenues that we could go to get it. We would certainly entertain anything that came up."

Meanwhile, JetBlue said it plans to refinance variable-rate debt to fixed rates soon with a target split of 50/50, down from 70% variable and 30% fixed. And, sans any acquisitions, the company said there is no need to fund capital expenditures with new equity, which was a big relief to many players. JetBlue plans to spend $800 million annually over the next two years.

"As it stands, JBLU remains expensive, yet we are encouraged by the momentum shift and the rising probability of favorable competitive capacity with M&A," said Bear, Stearns analyst David Strine in a report Wednesday.

Equinix gains over 3%

Equinix Inc. gained Wednesday after reporting formal notification that an investigation of its stock option granting practices by the Securities and Exchange Commission has been terminated without any action against the Foster City, Calif., provider of data centers and internet exchange services.

The stock (Nasdaq: EQIX) added $2.50 on the day, or 3.28%, to $78.72.

"I am willing to bet everyone has taken quite a bit of profit out of Equinix and I'm also willing to bet everyone still has quite a nice size chunk left with Equinix," said a buyside trader. "Are we upset about options? Yeah. I've been bitching for month, er, years now. But in the long run, we have all made a nice chunk of money, and 10% in either direction is not going to faze us."

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