Huntsman investors bail; Fed clears PNC, NatCity transaction; Rodman & Renshaw press merger plans

By Cristal Cody

New York, Dec. 15 - Huntsman Corp.'s stock plunged Monday as expected after the company walked away from its proposed $6.5 billion merger with Hexion Specialty Chemicals Inc., though Huntsman investors may have bailed out too quickly, a market observer said.

Other activity also added to a busy start to the week.

The Federal Reserve Board late Monday approved PNC Financial Services Group Inc.'s acquisition of National City Corp.

In other news, Rodman & Renshaw Capital Group Inc. plans to keep up its takeover talk of Cowen Group Inc. into the new year.

Moving to Wall Street, market fears grew regarding the identity of the firms that have losses linked to investment manager Bernard Madoff, who is alleged to have defrauded investors of as much as $50 billion.

On Monday, the Dow Jones Industrial Average fell 65.15, or 0.75%, to 8,564.53.

The Standard & Poor's 500 index dropped 11.16, or 1.27%, to 868.57, and the Nasdaq Composite index fell 32.38, or 2.1%, to 1,508.34.

Huntsman stock plunges

Huntsman walked away from the $6.5 billion acquisition by Hexion Specialty Chemicals with a $1 billion legal settlement from Hexion owner Apollo Management.

But investors didn't care and sent the stock down nearly 50% to $2.98, down from the previous 52-week low of $5.18 on a volume of more than 14 times the average.

William Lefkowitz, an options strategist at brokerage firm vFinance Investments in New York, said investors bailed out too fast Monday.

"Sometimes when a company gets bad news, everybody just sells without doing any real analysis," he said.

The stock fall also is due to "arbitrage funds and people looking for some quick money bailing out right now," Lefkowitz said. "It doesn't mean the company's worth only $3 a share if they're really receiving $1 billion in cash. It could end up being a great buying opportunity right now."

The $1 billion settlement includes a $325 million breakup fee funded by Credit Suisse and Deutsche Bank, $425 million cash payments from Apollo affiliates and $250 million for 10-year convertible notes.

Huntsman said it expects to receive at least $500 million before the end of the year, with the rest paid by March 31, 2009.

Kurt Ogden, director of investor relations for Huntsman, said Monday the company does not comment on share prices but added "we feel long-term shareholders will be rewarded over time."

Jeffery J. Zekauskas, an analyst with JPMorgan Chase & Co., said he expected the stock to trade lower Monday and rates the shares neutral.

"We believe that Huntsman currently trades at a premium to its chemical peers following the settlement of the Hexion suit," he said in a research note.

The companies agreed to end the deal after a round of weekend talks.

Hexion had agreed to buy Huntsman in July 2007 for $6.5 billion but tried to back out and was ordered by a Delaware judge to honor the deal.

Credit Suisse Group and Deutsche Bank AG, which agreed to fund the deal, said in October they wanted out as the financial and credit markets fell apart.

Huntsman filed lawsuits against the banks and the company said the suits will continue. The trial is scheduled for May 11, 2009.

"This is a significant settlement for our company and its shareholders, but we must continue to pursue our multibillion-dollar Texas case against Credit Suisse and Deutsche Bank AG for the harm they have caused," company founder Jon Huntsman said in a statement.

Credit Suisse stock fell $1.16, or 4.56%, to $24.28 Monday.

Deutsche Bank shares rose 79 cents, or 2.18%, to close at $37.00.

Fed approves PNC, NatCity deal

The Federal Reserve Board said after the markets closed Monday that it approved PNC Financial Services Group's acquisition of National City.

The Federal Reserve's approval was the only remaining regulatory clearance needed for the deal.

Now it goes to shareholders, who will vote Dec. 23.

Analysts have regarded the "government-mandated deal" as done since it was announced.

Pittsburgh-based PNC is the first U.S. bank to use money from the government's $700 billion bailout program to make an acquisition.

PNC said in October it would buy National City for about $5.6 billion in stock, a deal which values the company at $2.23 a share. The acquisition is expected to close by Dec. 31.

PNC stock fell $3.16, or 6.43%, to close at $46.00 on Monday.

National City Corp. shares fell 13 cents, or 6.99%, to close at $1.73.

Rodman & Renshaw presses Cowen deal

Rodman & Renshaw Capital Group took its unsolicited takeover pitch for Cowen Group to analysts Monday with an investors' presentation.

Cowen Group has rejected the $7-a-share offer.

A Cowen spokesman said Monday the company has no comment on the nearly $100 million cash and stock deal.

Cowen shares fell 3 cents, or 0.43%, to close at $6.89.

Shares of Rodman & Renshaw rose 6 cents, or 5.5%, to close at $1.15 Monday.

Ada Lee, an analyst with Sterne, Agee & Leach, said the deal seems reasonable and doable.

"They're a little optimistic but they're within the realm of reality," she said of Rodman & Renshaw's revenue and synergy projections. "They don't usually waste their time and effort pursuing things that wouldn't pay off."

Rodman & Renshaw, which went public last year, said the combination would give an annual cost savings of $36.5 million in 2009.

The firm expects the deal could close by Feb. 28.

The merger would require approvals from shareholders and the U.S. Justice Department.

Rodman & Renshaw plans to continue its outreach to Cowen stockholders in January, Michael Lacovara, Rodman & Renshaw's chief executive officer, said on the conference call.

The proposed merger would create the leading investment bank for growth companies, he said.

Currently, Cowen's revenues are "dominated by low-margin lines of business" and the firm's take of private investment in public equities has fallen significantly since 2006, Lacovara said.

A market analyst said Monday the main reason for Cowen's decline in private investment in public equities is because key players defected to Lazard Ltd. when Cowen went public in 2006.

"Since 2006, they've fallen off the league tables," the analyst said. "If Rodman & Renshaw were to acquire Cowen, they maybe could leverage existing relationships at Cowen to do larger PIPEs or more PIPEs geographically."

Mentioned in this article:

Cowen Group Inc. Nasdaq: COWN

Credit Suisse Group NYSE: CS

Deutsche Bank AG NYSE: DB

Huntsman Corp. NYSE: HUN

National City Corp. NYSE: NCC

PNC Financial Services Group Inc. NYSE: PNC

Rodman & Renshaw Capital Group Inc. Nasdaq: RODM

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