Elliott goes hostile for Epicor; Wells tries to throw off Citi; EDF leaves Constellation to Buffett

By Aaron Hochman-Zimmerman

New York, Oct. 15 - Investors moped through another painful session on Wednesday, but some dealmakers still found the energy to keep forward pressure on many of the transactions pending in deal-land.

Elliott Associates LP had motivation enough to see through its bid for Epicor Software Corp. as it took its previously rejected offer straight to shareholders, who are likely eager to see any kind of buyer.

In the financials, Wells Fargo & Co. took its case to keep all of Wachovia Corp. from Citigroup Inc. to the courts while some of the regional banks were busy outperforming.

Names such as Fifth Third Bancorp, First Horizon National Corp. and Regions Financial Corp. may be in the nationalization crosshairs of the Federal Reserve and the Treasury Department, a trader said.

Elsewhere, regulatory approval came through for the defense deal between Italy's Finmeccanica SpA and DRS Technologies Inc., and Delta Air Lines, Inc.'s chief executive officer expressed his confidence in the eventual Justice Department approval for his company's merger with Northwest Airlines Corp.

Deals that were going in the opposite direction were InBev NV's relabeling of Anheuser-Busch Cos. Inc., which will try to wait out the stormy seas for its rights offering.

Also, Electricite de France pulled back from an attempt to buy a stake in Constellation Energy Group, Inc. and will leave the utility to Warren Buffett's MidAmerican Energy Holdings Co.

Meanwhile, the Dow Jones Industrial Average was sliced up by or 733.08, or 7.87%, to close at 8,577.91, while the Nasdaq Composite Index was worked over for 150.68, or 8.47%, to finish at 1,628.33.

The S&P 500 was the worst performer and lost 90.17, or 9.03%, to close at 907.84.

Elliott's bid for Epicor goes hostile

Elliott Associates announced that it will take its $9.50-per-share offer directly to shareholders after its bid was rejected by the board of directors on Monday.

The rejection letter cited "a robust roadmap of products planned over the next 18 to 24 months, including the launch of Epicor 9 in the fourth quarter of 2008 and continuing enhancements in support of existing customers," president and CEO Thomas Kelly wrote.

The $529 million offer for the Irvine, Calif.-based software producer represents a 39.7% premium to Tuesday's close.

The offer also represents a 20% premium to the company's close on Sept. 30, which was the last day of trading before the original offer was made.

Elliott claims that its offer is "a fully financed, all-cash transaction and is not subject to any financing condition," a press statement said.

"Elliott does not anticipate any significant regulatory issues that would prevent its completion," the release continued.

"The Elliott guys seem serious," said Needham & Co. analyst Richard Davis, who expects a warm shareholder reception to the hostile offer.

"When the market goes down 5% a day and somebody wants to buy something, that looks pretty compelling," he said.

Potential buyers across the market are more likely the strategic players such as Elliott, which already owns 10.2% of Epicor, he said.

Private equity types have had trouble finding deals because "the banks have stopped picking up the phones," Davis said.

Considering the lack of buyers in the market, he does not expect to see a competing offer.

"You don't want to get greedy," he said.

Barring an extension, Elliott's tender offer will expire on Nov. 12.

Shares of Epicor Software (NYSE: EPIC) crept up by $0.04, or 0.59%, to close the day at $6.84.

Wells tells Citi to walk

Wells Fargo lifted its shares with a report of $1.64 billion net income, compared with $1.75 billion in the second quarter of 2008 and $2.17 billion in the third quarter of 2007.

"Despite the dramatic changes in our industry and economy, the Wells Fargo team rose to the challenge this quarter and achieved solid growth in loans and deposits, a truly remarkable accomplishment," president and CEO John Stumpf said in a statement.

Aside from reporting earnings, Wells Fargo was busy trying to shake Citigroup off of Wachovia. At one point, the two seemed as though they could find an amicable solution by dividing Wachovia. Now, Wells Fargo has filed with the U.S. District Court in Manhattan to withdraw from its previous agreement to buy a portion of Wachovia in favor of buying all of Wachovia.

"I really believe the Fed will coax Citi to drop the Wells Fargo issue," a trader said, adding that the Fed "may give them [Citigroup] some face-saving gift."

In the financial sector, traders are more heavily focused on names like First Horizon, Regions Financial and National City Corp., he said, which have largely outperformed the market on the liquidity injections from the world's central banks.

"Folks are seeing them likely to get the next socialist intrusion," he said.

Shares of Wells Fargo (NYSE: WFC) slid $0.17, or 0.51%, to $33.35.

Shares of Citigroup (NYSE: C) lost $2.39, or 12.84%, to close at $16.23.

Shares of Wachovia (NYSE: WB) gave up $0.25, or 3.96%, to end at $6.06.

Shares of National City (NYSE: NCC) tacked on $0.09, or 2.90%, to finish at $3.19.

EDF can't reach stars

Elsewhere, citing a "difficult credit market," Electricite de France gave up on outbidding Buffett's $26.50-per-share, or $4.7 billion, bid for Constellation Energy.

EDF's previous $6.2 billion bid had already been rejected by Constellation's board of directors in favor of selling to Buffett's MidAmerican Energy Holdings.

Shares of Constellation Energy (NYSE: CEG) fell $1.57, or 6.13%, to $24.05.

Hiccup for Bud deal

InBev, the Belgian brewer that bottled up Anheuser-Busch, announced that it has hit a snag of its own.

The company will postpone its rights offering "until market conditions stabilize," according to a press release.

The board of directors said it will continue to monitor the market for the right time, but the setback will not affect the closing target date at the end of 2008.

InBev also took the opportunity to assure investors that its $45 billion acquisition facility and its $9.8 billion equity bridge facility are firmly in place.

"We are moving forward confidently and expect to complete the combination of these two great companies by the end of the year to create the world's leading brewer," InBev CEO Carlos Brito said.

Shares of Anheuser-Busch (NYSE: BUD) sank $3.27, or 5.19%, to close at $59.75.

Stamp of approval

On a more positive note for investors, Finmeccanica was given approval from the Committee on Foreign Investment in the United States to scoop up Parsippany, N.J.-based DRS Technologies.

According to Finmeccanica, the defense deal will close in "due course," a market source said, at the price of $81.00 per share, or $5.2 billion including $1.2 billion in net debt.

Shares of DRS Technologies (NYSE: DRS) improved by $0.70, or 0.88%, to end at $79.95.

Also, during an earnings call Delta Air Lines CEO Richard Anderson told listeners that he feels "extremely confident" the merger with Northwest Airlines will be given Department of Justice approval before Inauguration Day on Jan. 20.

Shares of Delta (NYSE: DAL) were lifted by $0.09, or 1.22%, to end at $7.44.

Shares of Northwest (NYSE: NWA) added $0.13, or 1.47%, to close at $9.00.

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