Markets at 2003 lows; Elliot extends Epicor tender; Pershing pushes Target to spin off land, sell stake

By Cristal Cody

New York, Nov. 19 - Investors pulled out in a frenzy Wednesday, sending the markets down to their lowest levels in five years on economic fears.

The fate of U.S. auto manufacturers, a dismal economic outlook and little chance of completing deals tapped out any gains made Tuesday and sent some stocks to new lows Wednesday.

The Dow Jones Industrial Average fell 5.07%, or 427.47, to 7,997.28, and the S&P 500 fell 52.52 or 6.12% to 806.58.

The Nasdaq also dropped 6.53%, or 96.85, to close at 1,386.42.

But some investors are still hoping to cut a deal despite the downturn.

Elliott Associates LP extended its tender offer for Epicor Software Corp. to Dec. 3.

And Pershing Square Capital Management unveiled its revised proposal Wednesday to lift Target Corp.'s stock price through the creation of a real estate investment trust.

Stock lows

Huntsman Corp. shares lost 16.63% to close at $7.17, well off the 52-week high of $25.89 a share.

Shares of chemical companies fell after BASF SE, which makes fertilizers, glues and cosmetic ingredients, said it would temporarily close 80 plants worldwide and cut production at its major U.S. facilities because of a fall in demand.

Huntsman held its shareholder meeting on Wednesday, but the company did not release any additional information about its sale to Hexion Specialty Chemicals.

Yahoo! Inc. shares set a new low of $9.14 after plunging 20.87% on comments Microsoft Corp. Chief Executive Steve Ballmer made at the company's annual shareholders meeting Wednesday.

Ballmer said Microsoft is no longer interested in busying all of Yahoo but would be open to a search collaboration.

Yahoo's stock is well below the $33 per share offer Microsoft made in May to buy the whole company.

Microsoft shares fell 6.78% to close at $18.29, well off the yearly high of $36.72 a share.

Atmel Corp. shares fell 9.14% to close Wednesday at $3.48, a day after ON Semiconductor Corp. and Microchip Technology Inc. withdrew a $2.3 billion joint buyout offer.

ON shares set a new 52-week low of $2.90 after a 13.17% drop on Wednesday. Shares regained 4.73% in after-hours trading,

Microchip Technology had said it may try to acquire Atmel without ON, but Microchip chief executive Gordon Parnell said Wednesday at the UBS Global Communications and Technology Conference that it may not work out.

Microchip shares fell 8.04% to close at $17.51, well off the yearly high of $38.37. Shares were up 2.36% in after-hours trading.

Elliot extends Epicor bid

Epicor Software's stock also set a new yearly low Wednesday after Elliott Associates extended its $7.50 a share buyout offer.

Shares fell 12.2% to close at $3.96, down from the previous low of $4.23.

As of Tuesday, 24% of the shares have been tendered, up from 0.14% on Nov 3, according to the New York hedge fund.

Elliot, which owns 12.5% of Epicor's common stock separately from the tender, had previously offered $9.50 a share. The offer was scheduled to expire Tuesday.

Epicor's board of directors has rejected both of Elliot's offers. Company representatives did not return phone calls for comment.

Spin off Target land

Pershing Square Capital Management wants Target to create a real estate investment trust for the land under the retailer's stores and sell off a 20% stake through an initial public offering that could raise $5 billion, hedge fund firm manager William Ackman said in a conference call with analysts.

Target shares dropped 10.31% to close Wednesday at $26.96, well off a 52-week high of $61.

Under the proposal, Target would retain an 80% controlling stake in the trust and use the proceeds from the IPO to pay down debt, Ackman said.

Pershing's first proposal released last month wanted Target to sell off the entire trust, but the company said it was concerned its credit would be downgraded.

Ackman is pushing the transaction to boost Target's stock price and said the latest proposal should not affect the company's rating.

Under the plan, Target would retain control of the brand and its buildings, but a spin-off would increase earnings per share and the sagging stock price, he said.

"In a year out, we believe the company will be trading at $80 a share," Ackman said. "We think there is a market for this transaction when the company is ready to issue shares, which will take six to nine months."

Target spokesman Lena Michaud said the company's analysis of Pershing's new proposal is still underway and no decision has been made.

Analysts don't give the deal much hope.

"No matter how you slice the pie, you almost never end up with more than one pie," said Edward Weller, an analyst with Thinkequity LLC.

Wayne Hood, an analyst with BMO Capital Markets, said after Ackman's first proposal that the transaction was unlikely and his firm's position hasn't changed under the second edition.

"The complexity and magnitude of the proposed transaction is such that it could take management at least 12 months to execute," he said in a research note to investors.

"This would take considerable time, resources and focus from running the business in one of the most difficult operating environments in history," he said. "In our opinion, Target's valuation is presently being compressed due to the macro environment and the value [Pershing] wants to create will be recognized over time with less risk."

Mentioned in this article:

Atmel Corp. Nasdaq: ATML

Epicor Software Corp. Nasdaq: EPIC

Huntsman Corp. NYSE: HUN

Microchip Technology Inc. Nasdaq: MCHP

Microsoft Corp. Nasdaq: MSFT

ON Semiconductor Corp. Nasdaq: ONNN

Target Corp. NYSE: TGT

Yahoo Inc. Nasdaq: YHOO

© 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.