Two roads for Ambac, MBIA; 3Com under Federal review; Gemstar-TV Guide to sell

By Aaron Hochman-Zimmerman

New York, Jan. 24 - Markets were smiling again as investors were in more of a buying mood on Thursday.

Stocks bounced higher throughout the day as Congress and president George Bush announced a tax rebate package.

The Dow Jones Industrial Average was better by $108.44 or 0.88% and finished the day at 12,378.61.

The Nasdaq and S&P 500 also moved to the upside to finish higher by 1.92% and 1.01% respectively.

Two stocks which were not invited to the party were Ambac Financial Group, Inc. and MBIA Inc. The bond insurers were left in limbo for another day as bailout packages for both are still pending.

3Com Corp. stock was also headed lower as its deal to be bought by China's Huawei Technologies Co. Ltd. was under review by CFIUS (Committee on Foreign Investment in the United States).

Roads diverge for bond insurers

Market watchers spent the day listening to differing opinions about the outcomes of potential bailouts for embattled bond insurers Ambac (NYSE: ABK) which fell $2.37, or 17.3%, to $11.33 and MBIA (NYSE: MBI) which lost $2.21, or 13.31%, to $14.40.

Wisconsin's insurance regulator Sean Dilweg was heard expressing "confidence" that Ambac will be able to raise money in the near future, a market source said.

Another market source indicated that there are two possible scenarios for each insurer.

Ambac shares will be worth $15 in a run-off scenario, but up to $35 if a bailout goes through, he said.

If MBIA goes into a run-off, its shares drop to $6, but would jump to $48 if it gets a bailout, he said.

Security Capital Assurance Ltd. (NYSE: SCA), which lost $1.16 or 30.61% to close at $2.63 on Thursday, would be like sand in the desert under a run-off scenario, but a bailout would set its stock price near $13, he said.

With so many potential outcomes, "who knows?" asked a portfolio manager.

3Com under review

Chinese Huawei Technology's potential $2.2 billion buyout of 3Com (Nasdaq: COMS) is still under review by the Committee on Foreign Investment. 3Com's stock was lower by $0.10, or 2.39%, to $4.08.

Some members of Congress are cautious over the deal which would give Huawei, with its reported ties to the Chinese government, a 16% stake in 3Com, which provides data and security systems to the U.S. government.

"I want to make sure... that we recognize the potential pitfalls associated with it. So we'll take a look at how CFIUS is implemented...," said senator Chris Dodd, according to a market source.

CFIUS reviews foreign firms which intend to buy interests in U.S. companies.

Allis-Chalmers targets Bronco

Allis-Chalmers Energy, Inc. (NYSE: ALY) was better by $0.52, or 4.81%, to close at $11.32 as it entered into a definitive merger agreement with Bronco Drilling Co. (Nasdaq: BRNC), according to a press release.

Bronco stock jumped at the news to the tune of $2.23, or 16.63%, to $15.64.

The deal hit pay dirt at a price of $280 million in cash and $158 million in stock.

Micki Hidayatallah will remain as chairman and chief executive officer of Allis-Chalmers following the merger, according to a Bronco Drilling press release.

"We are very excited about this pending acquisition that is in conformity with our strategic criteria," Hidayatallah said in a news release. "We expect the combined company to enhance our product offering and expand our geographic footprint in the domestic and international markets.

"Internationally, Allis-Chalmers will increase its presence in the North African and Latin American markets."

Clear Channel buyout gets 'all-clear'

Clear Channel Communications Inc. stock bounced by $1.51, or 4.69%, to $33.72 as it was given approval by the Federal Communications Commission to sell to private equity firms Bain Capital Partners and Thomas H. Lee Partners for about $20 billion, according to a market source.

Quebecor gets initial DIP approval

Quebecor World (NYSE: IQW) was seen up by $0.2500 or 217.39% to $0.365 as its $1 billion financing package was approved by U.S. Bankruptcy Court.

Quebecor was authorized to borrow up to $750 million on the planned $1 billion debtor-in-possession facility from Credit Suisse and Morgan Stanley.

Jackals out for Yahoo!

Yahoo! (Nasdaq: YHOO) stock picked up $1.68, or 8.40%, to end at $21.69 as the jackals continued to peer out of the woods looking to carry off Yahoo!, a market source said.

Yahoo! claims it is not on the market, the source said, but companies such as AT&T, CBS and Microsoft have shown interest.

Post waiting on watch

Post Properties Inc. (NYSE:PPS) stock was up $0.23, or 0.55%, to $41.68 after it received an unsolicited offer of $44 to $47 per share in cash from Cadim and Williams Realty Advisors, LLC for its common stock.

While Post considers the takeover, Standard & Poor's put the BBB rated land developer on credit watch.

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