Fed pushes Wachovia, Wells Fargo deal; more bank deal speculation; Buckeye jumps on tender offer

By Aaron Hochman-Zimmerman

New York, Oct. 22 - The Federal Reserve was keen to push banking consolidation as shares took another lashing during Wednesday's session.

The Fed declared an "emergency" in order to push through the deal for Wells Fargo & Co. to buy Wachovia Corp.

All the while, investors wondered which banks would be the next to buy and the next to die.

KeyCorp looked strong throughout much of the day, and some expected it to make overtures toward struggling National City Corp.

Talk also surrounded a possible buy of New York Community Bancorp, Inc. by Goldman Sachs Group, Inc.

Buckeye GP Holdings, LP set itself apart as an outperformer with a 16.52% gain after its parent company made a tender offer for Buckeye's units in order to consolidate the company.

HLTH Corp. also increased the overall size of its tender offer for its outstanding shares but cut the offer price to $8.80 per share.

Elsewhere, SanDisk Corp. was punished by the market after South Korea's Samsung Electronics Co., Ltd. walked away from their abortive deal.

Meanwhile, the investors limped out of their offices on Wednesday after the Dow Jones Industrial Average was pounded for a loss of 514.45, or 5.69%, to end at 8,519.21, while the Nasdaq Composite Index lost 80.93, or 4.77%, to finish at 1,615.75.

The S&P 500 gave back 58.27, or 6.10%, to close at 896.78.

Emergency actions

The Fed jammed the Wells Fargo-Wachovia deal through the approval process "in light of the unusual and exigent circumstances affecting the financial markets," the Fed said in a statement.

"The board determined in its order that emergency conditions existed that justified expeditious action on this proposal," the release continued.

Still, a Wachovia shareholder filed a lawsuit in North Carolina Business Court in order to stop the merger on the grounds that Wachovia did not seek the best price from Wells Fargo.

"The Wachovia-Wells Fargo deal is rock solid," a trader said.

The shareholders "asking for more, they are lucky they aren't stuck with Citibank stock ... morons," he said.

Shares of Wachovia (NYSE: WB) lost $0.38, or 6.24%, to close at $5.71.

Shares of Wells Fargo (NYSE: WFC) gave up $1.34, or 4.11%, to end at $31.30.

Further consolidation

Also in finance, market watchers are expecting banks to start pairing off again under the supervision and encouragement of the Fed.

KeyCorp has traded ahead of the market in recent sessions as it finished "a decent quarter, all in all," the trader said.

"They are going to get TARP preferred money and probably buy someone," he said, speculating that "maybe National City" will be the target.

A deal between the two would bring "huge merger-of-equals cost savings," he said.

Shares of KeyCorp (NYSE: KEY) eventually fell by $0.20, or 1.83%, to $10.75.

Shares of National City (NYSE: NCC) dropped by $0.18, or 6.02%, to $2.81.

Not to be outdone, there is "speculation that Goldman Sachs may buy New York Community Bancorp," the trader said.

The move would secure the deposit base in New York, which seems to be what Goldman Sachs wants, he said.

Shares of Goldman Sachs (NYSE: GS) gave up $6.29, or 5.18%, to end at $115.06.

Shares of New York Community Bancorp (NYSE: NYB) slid by $0.45, or 3.24%, to close the session at $13.42.

Samsung skips on SanDisk

SanDisk dug lower after Samsung pulled its $5.9 billion, or $26.00-per-share, offer for the California-based chipmaker.

Samsung cited "the growing uncertainties in SanDisk's business, its stand alone value, and the current difficult economic environment" for the withdrawal.

Still, only Tuesday, SanDisk reached a $1 billion deal to sell 30% of its current manufacturing capacity to Japan's Toshiba Corp.

"This is expected to reduce our capital spending, strengthen our financial position and increase our business flexibility while maintaining the economies of scale of Fabs 3 and 4," Eli Harari, chairman and chief executive officer of SanDisk, said in a statement released Tuesday.

On Wednesday, SanDisk reminded Samsung that it is and has always been open to negotiations.

"We repeatedly outlined a clear path to hold further discussions, including most recently in our letter on Sept. 15, and Samsung consistently chose to ignore that path," the Wednesday statement said.

"We believe this raises questions about the real motivations behind Samsung's offer," the release continued.

SanDisk added that it feels it is in good health to persevere through the current downturn.

Shares of SanDisk (Nasdaq: SNDK) sank $4.67, or 31.64%, to finish at $10.09.

Bid for Buckeye

BGH GP Holdings, LLC, along with affiliates ArcLight Capital Partners LLC and Kelso & Co., intends to clean up ownership of Buckeye.

BGH already owns 62% of Buckeye and has announced a $180 million, or $17.00-per-unit, tender offer for the remainder of the company.

The offer represents a 19% premium over Tuesday's closing price.

The tender is also contingent upon BGH capturing another 28% of Buckeye's units in order to give it a 90% stake, a press release said.

A 90% stake would give BGH the right to purchase all outstanding units at the tender-offer rate.

The tender offer is expected to begin in approximately two weeks.

Shares of Buckeye (NYSE: BGH) jumped by $2.36, or 16.52%, to close at $16.65.

HLTH drops tender price

HLTH lowered the value of its tender offer for its stock to $8.80 per share from $9.20 per share.

The company also announced that it will purchase up to 80 million shares, or 43%, of its stock rather than the original offer for 50 million shares.

The offer is contingent upon the successful tender of at least 40 million shares.

Shares of HLTH (Nasdaq: HLTH) added $0.26, or 3.34%, to finish at $8.05.

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