Sun jumps on Oracle offer; PepsiCo makes bottler bids; Gabelli against Florida Utilities deal

By Cristal Cody

Tupelo, Miss., April 20 - Shares of Sun Microsystems, Inc. leaped $2.46, or 36.77%, to close Monday at $9.15 after it agreed to be acquired by Oracle Corp. for $9.50 a share in cash. Investors should accept the deal if they face the facts, an analyst told Prospect News.

In other deals, PepsiCo, Inc. offered $6 billion in cash and stock to acquire its two largest bottlers, Pepsi Bottling Group Inc. and PepsiAmericas Inc., but the company may need to offer more, an analyst said Monday.

Also on Monday, West Palm Beach, Fla.-based Florida Public Utilities Co. agreed to merge with Dover, Del.-based Chesapeake Utilities Corp. in a stock deal valued at $12.20 a share, but one major institutional shareholder promised to vote against the deal.

Meanwhile, Revlon, Inc. majority shareholder MacAndrews & Forbes Holdings Inc. made an offer on Monday that would effectively take the company private, an analyst told Prospect News.

Also on Monday, Cox Enterprises, Inc. extended its tender offer to acquire the remaining outstanding shares of Cox Radio, Inc., but investors expect a higher offer in the works.

Moving to Wall Street, the markets took a nosedive on Monday.

The Dow Jones Industrial Average fell 289.60 points, or 3.56%, to close at 7,841.73.

The Standard & Poor's 500 index dropped 37.21 points, or 4.28%, to 832.39, while the Nasdaq Composite index lost 64.86 points, or 3.88%, to end at 1,608.21.

Sun joins Oracle

Sun's Java and Solaris software were "instrumental in Oracle's decision to acquire Sun," Oracle chief executive officer Larry Ellison said on a conference call with analysts on Monday. Santa Clara, Calif.-based Sun makes networking computing technologies.

The board of directors of Sun has unanimously approved the transaction.

The deal is valued at about $7.4 billion, including Sun's debt.

Oracle's offer represents a 42% premium to Sun's closing stock price of $6.69 on Friday.

Shares had steadily gained from the $4.97 closing price on March 17, a day before Sun and International Business Machines Corp. were said to be in talks, but a deal fell through.

Shares of Armonk, N.Y.-based IBM lost 84 cents, or 0.83%, to close at $100.43 on Monday.

Shares of Redwood Shores, Calif.-based Oracle, the world's largest enterprise software company, fell 24 cents, or 1.26%, to close at $18.82.

Oracle said the deal is expected to close this summer, pending regulatory clearances and Sun stockholder approval.

Company representatives did not immediately return calls for additional regulatory clearance information.

Brent Bracelin, an analyst with Pacific Crest Securities, Inc. told Prospect News that the merger with Oracle has few regulatory concerns.

"Clearly there is much less overlap between Oracle, which doesn't have much hardware solutions," he said. "Given Sun's poor performance from an operations standpoint over the last 10 years, we do think investors and shareholders will, or should, I should say, approve the deal. Clearly, Sun, on a standalone basis, would face a very different future than it faces being part of a large Oracle franchise."

PepsiCo wants it all

Somers, N.Y.-based Pepsi Bottling Group and Minneapolis-based PepsiAmericas said in statements Monday that the boards are evaluating the offer from PepsiCo.

The cash-and-stock deals are valued at $29.50 per for share for Pepsi Bottling Group and $23.27 per share for PepsiAmericas and represent a 17.1% premium to both bottlers' stock closing price on Friday.

The deals include $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.

PepsiCo currently owns 33% of Pepsi Bottling group and 43% of PepsiAmericas.

An analyst told Prospect News that PepsiCo might have to offer more money.

"I certainly feel Pepsi Bottling is probably going to want a higher price than that," he said.

Shares of Pepsi Bottling jumped $5.53, or 21.94%, to close at $30.73, while PepsiAmericas' stock closed up $5.16, or 25.96%, at $25.04.

PepsiCo shares lost $2.27, or 4.35%, to close Monday at $49.86.

The company said it does not foresee any hurdles to regulatory approvals.

PepsiCo spokesman Jenny Schiavone told Prospect News that the offer must be considered by the bottlers' boards "before we would move forward on any due diligence or any regulatory approvals. Nothing's been filed yet."

Purchase, N.Y.-based PepsiCo, one of the world's largest food and beverage companies, produces 18 brands that include Frito-Lay snacks, Gatorade sports drinks and Tropicana juices.

Gabelli: No deal

Under the deal terms announced on Monday, shareholders of Florida Public Utilities will receive 0.405 of a share of Chesapeake Utilities for each share of Florida Public Utilities.

Both companies' boards of directors unanimously approved the merger on Friday.

During a telephone conference with analysts on Monday, shareholder Mario Gabelli of Gabelli & Co., Inc. didn't hold back on his reaction to the deal.

Gabelli Funds, LLC holds more than 8.24% of outstanding shares of Florida Public Utilities and more than 1.39% of outstanding shares of Chesapeake Utilities as of Dec. 31.

"My clients are probably not going to vote for this deal," Gabelli said on the call. "I don't want to be the skunk at your cocktail party. You laid it out well, but I think you need to revisit whether you're going to put a collar around this or not."

In an interview with Prospect News, Beth Cooper, Chesapeake Utilities' chief financial officer, said that the company negotiated the pricing terms.

"Mr. Gabelli is certainly entitled to his opinion," she said. "We believe the transaction, as does Florida Public Utilities, has been fairly priced. We all feel like it's a good transaction. It's a 25% premium based on the pricing if you look at 15 days prior to when we signed the agreement, though the final agreement is based on closing."

Florida Public Utilities' stock gained $1.00, or 9.62%, to close at $11.40 on Monday.

Shares of Chesapeake Utilities fell $1.34, or 4.52%, to close at $28.31.

The merger is expected to close during the fourth quarter of 2009.

The merger would create an energy company with 200,000 customers in the Mid-Atlantic and Florida markets.

The deal is subject to federal and state regulatory approvals, including from the Delaware Public Service Commission and the Maryland Public Service Commission, as well as by shareholders of both companies.

Revlon considers proposal

Revlon chairman and majority shareholder Ronald Perelman's MacAndrews & Forbes firm, which holds about 75% of the voting power of New York-based Revlon, proposed a transaction that would take the company private, an analyst said Monday.

Under the proposal, outstanding shares of Revlon's class A common stock that MacAndrews & Forbes does not currently hold would be converted into shares of a newly issued series of voting preferred stock of Revlon. The stock would have a liquidation preference of $75 million, or $3.74 a share, based upon 20.04 million shares not currently held by Perelman.

MacAndrews & Forbes said that it has no present intention to dispose of the equity stake in Revlon. But under the proposal's terms, in the event of a sale of the company within two years of issuance of the preferred stock, the preferreds would be entitled to participate with the common stock.

Revlon's board said it will review the proposal.

An analyst said Monday that although the offer would exchange common stock for preferreds, the preferreds probably would continue to be publicly traded.

"This effectively is taking the company private. That's the bottom line," the analyst said. "We imagine the preferred shares will be publicly traded, but we don't know for sure. There's no documents, no further information yet."

Revlon makes cosmetics and other personal care products. Its shares closed up 16 cents, or 4.07%, at $4.09 on Monday but had fallen more than 11% in after-hours trading.

Cox Enterprises buys time

Cox Enterprises offered $3.80 a share in cash on March 23 for the remaining shares of Cox Radio it does not own.

On Monday, Cox Enterprises extended the offer to May 1. As of Friday, only 457,000 shares had been tendered, according to Cox Enterprises.

Also on Monday, Cox Radio's special committee withdrew its recommendation for the tender offer.

In a statement, Cox Radio said it is now neutral on the bid because the offer was extended without a bid increase and because it believed Cox Enterprises was "giving serious consideration to increasing the offer price to $4.20 per share and that the increased price may not be their best and final offer."

Cox Radio shares rose 9 cents, or 2.11%, to close at $4.35 on Monday. The stock has traded from $2.90 to $13.09 over the past year.

"One always hopes for more," James Goss, an analyst with Barrington Research Associates, Inc., said in an interview on Monday. "If they do raise it once, I don't know if that means an infinite progression [of bids]. The fact is [Cox Enterprises] owns a huge majority of the company."

Cox Enterprises already controls a 78% interest and holds a 97% voting interest in Atlanta-based Cox Radio, which owns, operates and services 86 FM and AM stations.

Mentioned in this article:

Chesapeake Utilities Corp. NYSE: CPK

Cox Radio, Inc. NSYE: CXR

Florida Public Utilities Co. NYSE: FPU

International Business Machines Corp. NYSE: IBM

Oracle Corp. Nasdaq: ORCL

PepsiAmericas Inc. NYSE: PAS

Pepsi Bottling Group Inc. NYSE: PBG

PepsiCo, Inc. NYSE: PEP

Revlon, Inc. NYSE: REV

Sun Microsystems, Inc. Nasdaq: JAVA

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