Morning Commentary: Planned Quidel convertibles look cheap; Spansion jumps on merger news

By Rebecca Melvin

New York, Dec. 2 – The planned $150 million offering of six-year convertibles being brought by San Diego, Calif.-based Quidel Corp. looked positive to market players early Tuesday ahead of pricing expected after the market close.

Using a credit spread of 500 basis points over Libor and 30% vol., the deal was seen worth 103.4 at the midpoint of talk, a Connecticut-based trader said.

Another trader said the deal looked cheap using a credit spread of 500 bps and 30% vol. and that stock borrow looked good.

Quidel, a provider of diagnostic testing solutions, launched the offering after the market close Monday with talk for a 2.75% to 3.25% yield and a 32.5% to 37.5% initial conversion premium.

Quidel shares were down $1.84, or 7%, at $25.55 at mid-morning.

Back in established issues, Spansion Inc.’s 2% convertibles due 2020 jumped to more than 200 from about 170 after news that the Sunnyvale, Calif.-based semiconductor device company is merging with fellow memory chip maker Cypress Semiconductor Corp. in a $4 billion all-stock deal.

Spansion shares were up $4.95, or 22%, at $27.80.

The deal is expected to close in the first half of next year, and if either company backs out, it will have to pay the other a termination fee of $60 million and/or reimburse the other company as much as $5 million in expenses.

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