DaimlerChrysler up; Magna off; Ford flies; Cleveland-Cliffs up; Mosaic higher; Teva advances

By Ronda Fears

Memphis, May 14 - Private equity firm Cerberus Capital Management's deal to buy an 80.1% stake in DaimlerChrysler AG's Chrysler Group for $7.4 billion sent DaimlerChrysler shares surging, but Canadian auto parts supplier Magna International Inc. took a hit, as it had been considered a leading bidder for Chrysler with support from Canadian acquisition firm Onex Corp.

Elsewhere in the automotive sector, Ford Motor Co. soared on a report that members of the founding family are discussing the sale of part of their controlling stake. General Motors Corp. went along for the ride, sans any similar news or speculation, with the stock (NYSE: GM) advancing $1.16, or 3.94%, to close at $30.62.

EGL Inc. soared as the weekend brought another round to the bidding war for the Houston-based shipping company. On Saturday, CEVA Group plc, an affiliate of Apollo Management LP, upped its bid to $46 per share, besting a boosted bid of $45 from EGL chief executive James Crane and Centerbridge Partners and The Woodbridge Co. Ltd. CEVA started the bidding war in mid-March; Crane had planned a management-led leveraged buyout at $36 per share in January with General Atlantic LLC. General Atlantic bowed out in February and Crane brought Centerbridge and Woodbridge on with a $38 bid. EGL shares on Monday gained $3.08, or 7.21%, to $45.79.

The bidding war for Merck KGaA's generic drug unit came to an end with the announcement Monday that Pittsburgh-based generic drug manufacturer Mylan Laboratories Inc. would buy it for roughly $6.7 billion, as Israeli generic drugmaker Teva Pharmaceutical Industries Ltd. pulled out of the race.

In another situation where the market anticipates a bidding war to ensue, Cardinal Health Inc. announced it is buying Viasys Healthcare Inc. for $1.42 billion, or $42.75 per share - a premium of 35% over Friday's market. Cardinal, the second- largest U.S. drug distributor, is expected to face a rival bid for Viasys, which supplies respiratory-care products to hospitals, a market source said. Viasys shares (NYSE: VAS) gained $11.63, or 36.86%, to settle at $43.18.

Riviera Holdings Corp. holders are fully expecting a bidding war, as well. With the company officially on the auction block and a rival bid already on the table, dissident shareholders in the bidding announced Monday that they will drop the proxy battle that had been staged for the annual meeting Tuesday.

In recurring takeover chatter, but with a little more substance Monday, Cleveland-Cliffs Inc. and Mosaic Co. were both higher on decent volume, traders said.

Magna role in Chrysler

Magna's role in Chrysler ownership could still become significant, one trader said, particularly after it announced last week a cash infusion of $1.54 billion from Russian billionaire Oleg Deripaskatook, owner of Russia's No. 2 automaker Gaz, maker of the Volga luxury sedan and the Gazelle minivan.

Meanwhile, on the news Magna shares (NYSE: MGA) fell $2.22, or 2.65%, to $81.70.

"Chrysler is an iconic company, which means every move Cerberus makes will be dissected and used to paint the overall LBO market as either good or evil," the trader said.

"For at least a while, Cerberus has become more consequential than Blackstone. This is a real old-fashioned buyout - a single sponsor buying a troubled industrial company, with most of its investment going toward working capital. But, I think Magna still has its hands in the Chrysler pot; they want a major stake in Chrysler, and so does Gaz."

Cerberus will invest $7.4 billion, with most going to Chrysler, while DaimlerChrysler will pay a net $650 million, the Stuttgart, Germany-based company said Monday. Cerberus gets 80.1% of Chrysler, while Daimler, which paid $36 billion for the automaker in 1998, will retain 19.9%.

Ford faith failing

Members of the Ford family may be discussing the sale of part of their controlling stake in the flagging automaker, as reports suggested, but a buyside market source said he did not think they would entirely relinquish their positions. He said any sale by the Ford family would be viewed positively by the market, but he was a seller into the rally.

"My hunch is that there is no split in the Ford family regarding selling a controlling interest. The Ford family simply recognizes that its time to part with a portion of the class B shares," the fund manager said.

"My guess is that half of the class B shares will be bought by Ford Motor and converted to regular common shares say for a premium. In effect, Ford Motor will buy out half of the Ford family interest. What ever happens, Wall Street will like it because it will lessen the control of the Ford family."

However, he said he saw the bounce as an opportunity to pocket some profits.

"Nothing has changed in the Ford business, remember," he said. "And, this is all conjecture at this point, anyway.

Ford shares (NYSE: F) shot up 34 cents on the day, or 4.06%, to $8.71.

Teva flirts with new high

The end to the four-month bidding battle for Merck KGaA's generic drug unit was bittersweet for Mylan as well as Teva, but traders said the market was siding with Teva.

Mylan was punished as the market thought it overpaid. Mylan (NYSE: MYL) fell $2.70, or 12.05%, to $19.70.

Teva, meanwhile, spent much of Monday underwater, but one trader noted buying late in the session. Teva (Nasdaq: TEVA) closed up by 3 cents at $39.98, but the trader noted the stock hit an intraday high of $40.58, which would bust through the 52-week high of $40.01.

"It was a double-edged sword for Teva," the trader said.

"On one hand, they lost out. On the other, they didn't overpay for it, either. A lot of folks think it will be a huge challenge for Mylan to integrate this Merck unit and come out ahead in the generic game, especially after paying that much."

Cleveland-Cliffs climbs

Buyout chatter about Cleveland-Cliffs, a Cleveland-based producer of iron ore pellets, started Monday in the options market with aggressive buying and heavy volume in the $75 and $80 May calls, a stock trader said. The same action spilled over into the stock and he said that while the noise is nothing new, there was a stronger conviction this time around.

The stock (NYSE: CLF) traded in a wide range of $74.33 to $76.21 before easing back to settle at $74.53 for a gain of 93 cents on the session, or 1.26%.

Amid widespread consolidation in the steel industry, the trader said talk of a buyout targeting Cleveland-Cliffs first surfaced in September, triggering a steady rise in the stock from around the $35 area at that time.

"We saw two institutional buyers active both ways. I'm better to buy," said the trader.

"There has been one of these guys accumulating big over several sessions and today we saw a seller come around to accommodate. It's not the first time we've heard this takeover rumor and a lot of people think the stock has gotten ahead of itself. But I'd still be a buyer right now, probably up to $75, but not $80."

The company announced Monday that it expects to file its first-quarter form 10-Q in early June and its 2007 annual 10-K report by the end of May.

Mosaic moves up on buzz

Mosaic, the Plymouth, Minn., fertilizer company spun out of Cargill Inc. in 2004, has been frequently mentioned as a takeover target of Potash Corp. of Saskatchewan Inc., another trader said. He said the buzz has recently included another Canadian fertilizer concern, Agrium Inc., as a potential suitor.

A trader said there was a research note from one of the bulge bracket firms rumored to be in circulation Monday saying that Mosiac was being pursued by Potash but there was doubt a deal could pass regulatory scrutiny.

"I think there would be regulatory issues for either buyer, but nothing insurmountable," the trader said.

Mosaic (NYSE: MOS) gained 64 cents, or 2.17%, to $30.11.

Potash (NYSE: POT) lost $2.28, or 1.16%, to $193.86.

Agrium (NYSE: AGU) added 20 cents, or 0.54%, to $37.55.

What makes sense about a Mosaic buyout, the trader said, is that rising farm production means rising profits for fertilizer makers and the addition could boost performance for Potash or Agrium. He noted a recent report from the U.S. Department of Agriculture that domestic farmers are trying to increase corn production to meet growing demand for ethanol.

"When the farmers grow more, they need more fertilizer," the trader said.

The USDA reported that rising demand for ethanol has led to a 15% rise in planned U.S. corn plantings, which have hit their highest levels in 60 years.

Riviera ante seen rising

The Riviera bidding could go substantially higher, maybe to around $40, according to a trader, who noted Monday the stock was pushed well ahead of the $30 rival bid that emerged Friday.

The stock (Amex: RIV) soared $1.70, or 5.15%, to $34.70.

On Friday, a group led by prominent Las Vegas real estate developer Ian Bruce Eichner and Dune Capital Management LP threw in a $30-per share offer, topping a bid of $27 from a dissident investor group led by Riv Acquisition Holdings, which failed in a $17-per-share offer last year.

The Riv group said Monday it is evaluating all of its options, which may include making a higher offer. It also withdrew its proxy battle to gain control of the board and steer the company to a sale, saying it seemed unnecessary now that Riviera has hired Jefferies & Co. to help explore strategic and financial alternatives, including a sale of the company.

Riviera's annual stockholder meeting is scheduled for Tuesday, but onlookers say it may be adjourned to continue at a later date when the bidding is better sorted out.

Riviera owns the Riviera Hotel on the Las Vegas Strip, and the trader said an analyst at his firm estimated that the Eichner bid pegged the Strip land value at $18 million an acre, but it could go for far more than that.

"At $20 million an acre for the Strip property, the stock is worth $37.40 by our calculations. Add in a bidding war and it could go to $40-plus, easily," the trader said.

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