United Air pushes Delta higher; Alcan, Alcoa rise; Freeport up; Omniture surges; Finisar flies

By Ronda Fears

Memphis, June 13 - UAL Corp.'s United Airlines chief financial officer's mention at an industry conference Wednesday that the carrier is looking for a merger with an airline with a connection to the Northeast and a hub in the South caused many to see Delta Air Lines Inc. as the most likely candidate, although Delta has snubbed mergers before, including an approach from United in 2005.

Canadian aluminum concern Alcan Inc. said Wednesday it is considering its alternatives to the $28.4 billion hostile takeover offer from Alcoa Inc. but declined to say if a counter bid for the domestic aluminum rival was one of them. Both marked strong advances.

Freeport-McMoRan Copper & Gold Inc. also was sharply higher. It has been rumored to be a takeover target, but the company said Wednesday it will be considering asset sales to help pay for its $26 billion acquisition of Phelps Dodge Corp. last year. Freeport-McMoRan (NYSE: FCX) climbed $2.78, or 3.52%, to $81.75.

WCI Communities Inc.'s announcement late Tuesday that it would delay shareholder votes on directors at its annual meeting Friday promoted the view that the upscale Florida homebuilder will sell out to activist investor Carl Icahn, "or some of his cronies," as one trader put it. Icahn's tender offer at $22 per share failed last month. The stock (NYSE: WCI) was lifted Wednesday by 38 cents, or 1.87%, to $20.65.

Amid a wild session for Treasuries, in which buyers returned to ease the 10-year yield to Wednesday's close of 5.2% from overnight highs of 5.323%, traders said it was more comfortable to pick up some stocks on speculation.

Online business software provider Omniture Inc. was sharply higher on speculation it could be the next aQuantive Inc. type deal in the online business services area; it also priced an upsized follow-on offering of stock at $18.15. "We were surprised with a very strong offering," one trader remarked. The stock (Nasdaq: OMTR) advanced $1.36, or 7.49%, to $19.51.

On the other hand, the market seems to have gone off the idea of online advertising concern ValueClick Inc. getting a deal anytime soon, one trader said. ValueClick (Nasdaq: VCLK) lost 24 cents, or 0.83%, to $28.74.

Elsewhere in technology related names, Finisar Corp. jumped Wednesday after the networking equipment company maintained guidance for the current quarter. One trader said there has been renewed chatter that Finisar was a takeover candidate, which he said first pushed the company three or four years ago. The stock (Nasdaq: FNSR) advanced 27 cents, or 7.38%, to $3.93.

Another notable was Liberty Media Corp. trading sharply higher Wednesday after pricing its Dutch auction self-tender offer to purchase up to 19,417,476 shares of its Liberty Interactive series A common stock. On a preliminary basis, the company said the offer was oversubscribed and the purchase price came in at $25.05. Because the offer was oversubscribed, the number of shares that Liberty will purchase will be pro-rated. Shares of the online marketing and sales company (Nasdaq: LINTA) shot up 66 cents, or 2.73%, to $24.81.

Ceridian confidence climbing

Ceridian Corp., which agreed to a $5.3 billion buyout offer in May, said Wednesday that it will review alternative proposals after activist shareholder Pershing Square Capital Management LP intimated in a Securities and Exchange Commission filing that it might join a rival offer.

"If Ackman [William Ackman, CEO of Pershing] puts his money where his mouth is, the confidence level of a better deal for Ceridian will escalate significantly," said one trader.

"For now, it's drifting higher but there is still a lot of risk priced in."

Ceridian (NYSE: CEN) edged up 13 cents to $35.34.

Thomas H. Lee Partners and Fidelity National Financial Inc.'s $5.3 billion buyout offer is at $36 per share for the human-resources outsourcing company.

Pershing, however, has been a proponent for many months of splitting the company with the sale of Ceridian's credit card payment processing unit, Comdata, and has hired bankers Lazard Ltd. and law firm Sullivan & Cromwell to solicit a better bid. Pershing holds a 14.1% stake in Ceridian.

"Since the announcement of the current deal, we have received expressions of interests from both strategic buyers and financial sponsors who are interested in pursuing a variety of possible transactions," Pershing said in a letter to other shareholders filed at the SEC, adding it may participate in sponsoring an alternative transaction itself.

Ceridian responded in a statement, saying, "The board welcomes involvement by shareholders and is prepared to review any proposals that might result in a superior proposal per the merger agreement."

However, Ceridian contended that the current deal "provided the greatest and most certain value of the available alternatives." The company in February hired investment bank Greenhill & Co. to explore strategic alternatives.

The company also did not reschedule the stockholder meeting set for Sept. 21 to vote on the $36 buyout offer.

Delta likely United target

Comments from United's Brace rekindled speculation in the airline sector about consolidation, and the group was widely mixed, but Delta was higher on thinking that it was ripe for a linkup, although the company adamantly rejected a merger proposal last year from US Airways Group Inc. when Delta was still in bankruptcy.

"It's pretty obvious that he is thinking about Delta," said one trader, noting that Delta eliminated a good chunk of debt when it emerged Chapter 11 reorganization on May 30.

Delta shares (NYSE: DAL) on Wednesday were lifted by 24 cents, or 1.3%, to $18.64.

Brace spoke at the Merrill Lynch Global Transportation Conference in New York on Wednesday, and his remarks pushed UAL shares (Nasdaq: UAUA) higher by 43 cents, or 1.24%, to close at $35.03.

Delta, US Airways and Continental Airlines Inc. all have been mentioned as possible merger partners for United, but the trader said Brace apparently did not name any specific target. But he did say United would not attempt a hostile takeover, citing the bitter battle between US Airways and Delta.

US Airways (NYSE: LCC) lost 47 cents in trade Wednesday, or 1.61%, to end at $28.72.

Continental (NYSE: CAL) dropped 62 cents, or 1.82%, to $33.48.

Delta and Northwest Airlines Corp. completed bankruptcy restructurings this year, and both were rumored to be involved in possible mergers; at one point the two were rumored to be considering a linkup, but that noise was quieted by both companies. Northwest shares (NYSE: NWA) on Wednesday dropped 67 cents, or 2.94%, to $22.13.

Delta chief executive Gerald Grinstein disclosed last October that United had contacted it about a possible merger in 2005, which Delta rejected. United also hired Goldman Sachs & Co. last year to explore strategic options.

Alcoa, Alcan advance

The notion that Alcan might make a counter attempt to buy its suitor, Alcoa, sent the latter's shares sharply higher, which a trader attributed to a Bear Stearns report in circulation Wednesday.

"The upshot is that Alcan could pay $50 [per share] for Alcoa," the trader said.

"The market likes this idea but you didn't see Alcoa getting bid all the way up there. It's too murky right now, what will come of this."

Alcan has rejected Alcoa's May 7 cash and stock offer, which was worth an equivalent of $75.02 per share based on Wednesday's market. Alcan says the bid does not reflect the value of its assets, technology and growth prospects.

The offer expires July 10.

Alcan shares (NYSE: AL) rose $1.06, or $1.29%, to $83.49.

Alcoa shares (NYSE: AA) advanced $1.14, or 2.9%, to $40.48.

"We cannot rule out the possibility of a third party emerging as a White Knight to Alcan. However, we don't believe other potential acquirers could generate the same level of synergy opportunities," said Bear Stearns metals analyst Anthony B. Rizzuto in a report.

"Alternatively, we can also not rule out Alcan making a counteroffer for Alcoa. While we suspect the offer would likely have a greater mix of stock versus cash, we believe Alcan could make a $50 per share offer for Alcoa and still have the potential transaction be accretive in 2008."

Finisar flies too fast: trader

Finisar's leap Wednesday was premature by one trader's thinking as its performance still is "nothing to jump for joy about." Rather, he suggested a small addition in the name on the concept that it could once again be ripe as a takeover target.

The stock (Nasdaq: FNSR) gained 27 cents, or 7.38%, to $3.93 on volume of 17.7 million shares, versus the norm of 6.3 million shares.

"It was too much, too fast, but I like the gain," the trader said.

"Finisar has managed the expectations game very well - they are positioned to beat estimates over [the] next several quarters. So I think we were seeing a lot of short covering. Long-term, however, I think they could see pressure soon to look for a deal."

He said the company was a hot takeover target in the rumor mill back in 2003 and 2004 but instead went on its own acquisition spree.

Finisar reported after the close Tuesday partial results for the quarter ended April 30 and also said that an investigation found stock options accounting discrepancies that will require restatements. Thus, the company did not report earnings but said quarterly revenue came to $97.2 million - slightly below analysts' projections for $99.2 million.

For the current quarter, the company said it expects revenue between $105 million and $112 million - slightly above Wall Street's $108.8 million consensus estimate.

On2 surges as takeover target

On2 Technologies Inc., a New York-based video compression software developer, took off Wednesday on speculation it is a potential takeout target for larger software companies or that a deal could be in the works.

"I heard they have been approached and then I heard it was just that the company could be a target," a trader on the West Coast said.

"We've heard some of this before."

Software company Adobe Systems Inc., Time Warner Inc.'s AOL and eBay Inc.'s Skype Technologies were all mentioned as potential suitors for On2, the trader said, with the most chatter surrounding Adobe.

On2 shares (Amex: ONT) added 16 cents, or 5.9%, to 2.87.

Adobe (Nasdaq: ADBE) shot up $1.38, or 3.23%, to $44.11. The company is scheduled to report earnings Thursday.

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