AOL to add board within months; Celldex gains CuraGen cash; FiberNet counter bid predicted

By Cristal Cody

Tupelo, Miss., May 29 - AOL LLC should have its own board of directors and management within the next six months as part of its separation, Time Warner Inc. chief executive officer Jeff Bewkes said Friday in an investors' presentation.

In other situations, Celldex Therapeutics, Inc. said Friday it will acquire CuraGen Corp. in an all-stock deal valued at $94.5 million, a move that will net the company plenty of cash, an analyst told Prospect News.

Another deal in the works is FiberNet Telecom Group, Inc.'s plans to be acquired by Zayo Group, LLC for $11.45 a share - a price that could be considered tentative at best, an analyst said in an interview Friday.

Moving to Wall Street, stocks closed up on a late rally. The Dow Jones Industrial Average added 96.53 points, or 1.15%, to end at 8,500.33.

The Standard & Poor's 500 index gained 12.31 points, or 1.36%, to close at 919.14, and the Nasdaq Composite index rose 22.54 points, or 1.29%, to 1,774.33.

AOL leans toward spinoff

Time Warner said Thursday it will separate AOL into an independent publicly traded company by the end of the year.

The structure likely will be a spinoff, Bewkes said Friday at the Sanford C. Bernstein & Co., LLC 25th annual strategic decisions conference.

"We haven't really finished what kind of structure, whether it's a spinoff or a combination of elements including a spinoff," Bewkes said. "I do think everyone should think of it as leaning in that direction."

Time Warner owns 95% of AOL and plans to purchase the remaining 5% stake in AOL from Google Inc. in the third quarter of 2009.

Time Warner, a New York-based media and entertainment company, also plans to start filling positions at AOL.

"AOL doesn't have a treasury department or a compliance-with-government employee, so we [intend] to do that within the next six months to get this out by the end of the year," Bewkes said.

AOL and Time Warner merged in 2001, but AOL's value fell as customers flocked to other internet subscribers.

Time Warner's stock fell 13 cents, or 0.55%, to close at $23.42 on Friday.

CuraGen considers options

The final value of CuraGen's buyout will be based on the closing prices of the stocks when the deal closes in the third quarter.

The companies said the price includes a collar between 32.5% and 58% of Celldex's outstanding common stock.

"CuraGen considered a wide range of options to enhance shareholder value over the last several months," Timothy Shannon, president and CEO of CuraGen, said in a conference call with analysts Friday. "We felt strongly this transaction represented the best opportunity for shareholders."

Anthony Marucci, president and CEO of Celldex, said on the call that the deal creates a combination that "exceeds the sum of its parts. We came up with a list of what the ideal transaction would offer, and CuraGen offered all of them."

The transaction must receive approvals from CuraGen and Celldex stockholders. The boards of both companies have unanimously approved the offer.

Marucci said the transaction includes mutual termination fees for both companies but did not disclose the amounts.

Celldex, a Needham, Mass.-based biopharmaceutical company, will gain CuraGen's drug pipeline as well as $54.5 million in net cash in the takeover.

As part of the deal, Celldex will assume $14.1 million of CuraGen's 4.00% convertible notes due in February 2011.

Branford, Conn.-based CuraGen said its portfolio includes an antibody drug conjugate called CR011 that is in its second phase of clinical studies with the potential to treat cancerous tumors.

Jonathan Aschoff, an analyst with Brean Murray, Carret & Co., LLC, told Prospect News on Friday the deal has no regulatory concerns.

"It's a lot of cash for them and its products fit their pipeline," Aschoff said. "The cash speaks for itself. We just have to see the data to understand how much the price was paid for the products."

CuraGen's stock on Friday rose 9 cents, or 7.20%, to close at $1.34. Shares have traded from 41 cents to $1.35 over the past year.

Celldex shares gained 89 cents, or 10.95%, to close at $9.02. The stock has traded from $4.24 to $19.79.

FiberNet seeks other bids

New York-based network interconnection services provider FiberNet said it will solicit other proposals until June 17.

The offer from Louisville, Colo.-based Zayo, a regional telecom services provider, is valued at $87.82 million based on FiberNet's 7.67 million shares outstanding.

Colby Synesael, an analyst with Kaufman Bros., LP, told Prospect News on Friday that the buyout bid is too low.

"I think there is a chance you could see other offers," he said. "The current valuation supports $12.00 and that includes a 20% discount. If you take that out, the stock's worth $15.50."

Synesael said FiberNet has opportunities in the next few months to reignite its revenue growth once several access projects are completed.

"That too would increase the value of the company," he said. "Whether or not someone comes to the plate and makes another offer is to be determined, but I do think it's low enough you could see that occur."

The buyout by Zayo must be approved by FiberNet shareholders at a special meeting and receive Federal Communications Commission and state regulatory approvals.

The companies expect the acquisition to be completed during the third quarter.

FiberNet shares jumped $1.29, or 13.02%, to close Friday at $11.20. Shares have traded from $5.20 to $12.20 over the past year.

Mentioned in this article:

Celldex Therapeutics, Inc. Nasdaq: CLDX

CuraGen Corp. Nasdaq: CRGN

FiberNet Telecom Group, Inc. Nasdaq: FTGX

Time Warner Inc. NYSE: TWX

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