Attention grows as Cadbury bid deadline nears; iPCS deal gains favor; CIT not out of woods yet

By Cristal Cody

Tupelo, Miss., Oct. 28 -Trading in Cadbury plc shares is becoming riskier as the deadline nears for Kraft Foods Inc. to "put up or shut up" in its quest to take over the British confectionary company, a market analyst said Wednesday.

Meanwhile, some initial opposition may have appeared at the start of Sprint Nextel Corp.'s plans to buy out iPCS, Inc. for $24.00 a share in cash, but the deal likely will push through, an analyst told Prospect News on Wednesday.

In other situations, CIT Group, Inc. snubbed investor Carl Icahn while it also secured $4.5 billion more in financing, which will improve liquidity but does not lessen the substantial risk of bankruptcy, an analyst said Wednesday.

On Wall Street, equities slid and left the Dow Jones Industrial Average off 119.48 points, or 1.21%, at 9,762.69 on Wednesday.

The Standard & Poor's 500 index fell 20.78 points, or 1.95%, to 1,042.63.

The Nasdaq Composite index dropped 56.48 points, or 2.67%, to end at 2,059.61.

Waiting on Kraft

The Panel on Takeovers and Mergers in London gave Northfield, Ill.-based Kraft six weeks to make a formal offer for Cadbury or abandon any bids for six months.

Kraft must announce whether it will or will not make an offer by Nov. 9.

Cadbury rejected Kraft's proposal in August of £10 billion in cash and stock, or 300p and 0.2589 of a share of Kraft for each Cadbury share.

"We believe that there is still a material chance that Kraft will bump the terms of its initial approach ahead of the PUSU [put up or shut up deadline], with a view of obtaining a recommendation by Cadbury," one analyst said Wednesday. "The most likely scenario is still Kraft putting up, and we would regard a U-turn in Kraft's approach as surprising at this stage.

"The quiet response from Kraft's shareholders and the lack of public dissent to Kraft's approach from Cadbury's shareholders bodes well for Kraft proceeding with an offer."

Cadbury shares lost 2p, or 0.26%, to close at 773p.

Kraft's stock moved up 22 cents, or 0.82%, to $26.95.

iPCS tender offer opens

Sprint Nextel said Wednesday that it started the tender offer to acquire wireless network service provider iPCS for $831 million, which includes the assumption of $405 million of net debt.

The iPCS board has unanimously recommended that the iPCS stockholders accept the tender offer, which is scheduled to expire on Nov. 25.

"I wouldn't bet the farm on the fact that Sprint may have to raise its price," Leah S. Pilla, an analyst with CFA Knight Libertas LLC, told Prospect News on Wednesday.

When Sprint Nextel announced the offer on Oct. 19, only 9.5% of iPCS shares had been committed to tender in the deal. Major shareholder Greywolf Capital Management LP also has been reported to be in opposition to the deal.

Although there could be potentially more shareholder holdouts, the deal likely will go through, Pilla said.

Schaumburg, Ill.-based iPCS' mobile products and services are sold under Sprint's brand name and in Sprint stores in 81 markets.

Also as part of the deal, the companies have agreed to stay all pending litigation between them that stemmed from Sprint's 2005 acquisition of Nextel Communications Inc. and affiliates.

"The multiple they're offering looks to be fair. Admittedly, it's below what a lot of other [Nextel] affiliates were taken out at, but those were taken out a couple of years ago," Pilla said. "So I would expect a lower multiple to be offered. The fact that it's trading so close to the offer price, I think people expect the deal to close pretty quickly."

Overland Park, Kan.-based Sprint Nextel said the deal should close late in the fourth quarter or early next year.

Shares of iPCS rose 1 cent, or 0.04%, to $23.87. The stock has traded from $3.27 to $25.78 over the past year.

Sprint Nextel's stock rose 7 cents, or 2.21%, to $3.24.

CIT maneuvers another round

CIT said in a statement on Wednesday that it secured an additional $4.5 billion from lenders that include some of the company's bondholders. The tranche matures in January 2012 with could be extended to January 2013.

The new loan is in addition to the $3 billion credit facility CIT received in July.

"The size of the company's secured facility is now $7.5 billion," Sameer Gokhale, an analyst with Keefe, Bruyette & Woods, Inc., said Wednesday in a research note released to Prospect News.

The New York-based lender said it chose the credit facility over a loan offered by Icahn because he lacked proof of sufficient funding.

"Despite several requests from the company for information and multiple deadline extensions, the company has yet to receive a signed credit agreement and evidence of Mr. Icahn's ability to fund the commitment," CIT said in the statement.

CIT also said that Icahn only gave the company less than an hour to review and accept his commitment letter for a $4.5 billion term loan.

The 101-year-old lender to small and middle market businesses across the country has said it will enter a prepackaged bankruptcy if a debt exchange to reduce $5.7 billion of debt does not work.

The new loan "should help near-term funding needs," said Gokhale, who has a $1.00 price target on CIT shares.

"As many of the current bondholders seem to be part of the new facility, we believe the odds of the restructuring plan going through appear to have modestly improved," Gokhale said. "However, until the company's restructuring is completed, we believe there is still substantial risk of a bankruptcy. Even in a scenario in which the company is successful in its restructuring efforts, common shareholders will get substantially diluted."

CIT also released a potential plan for its board under reorganization that includes a 13-member board with 12 independent directors.

Shares of CIT gained 10 cents, or 10.42%, to close at $1.06 on Wednesday.

Mentioned in this article:

Cadbury plc London: CBRY

CIT Group, Inc. NYSE: CIT

iPCS, Inc. Nasdaq: IPCS

Kraft Foods Inc. NYSE: KFT

Sprint Nextel Corp. NYSE: S

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.