GMAC, CIT look for TARP funds; Hexion sues banks; Adrenalina ups offer; Northwest, Delta deal OK'd

By Aaron Hochman-Zimmerman

New York, Oct. 29 - Stocks whipped around throughout the session as investors waited for the eventual 50 basis point cut from the Federal Reserve.

Stocks ended generally lower, but some of the financials were able to cling to their gains.

Talk of Federal assistance for GMAC LLC and CIT Group Inc. sent both stocks soaring, while talk of another possible deal focused on BB&T Corp. and Colonial BancGroup, Inc.

Apollo Management, LP, by way of Hexion Specialty Chemicals, Inc., showed its commitment to the merger with Huntsman Corp. by filing a lawsuit to keep financing banks, Credit Suisse and Deutsche Bank, tied to the deal.

In technology, Epicor Software Corp. brushed away a tender offer from Elliott Associates, LP ahead of the major product release of Epicor 9.

In retail, surf and beachwear shop Adrenalina looked for daylight by increasing its offer for Pacific Sunwear of California Inc. to $5.00 per share from $4.50.

Also, Northwest Airlines Corp. and Delta Air Lines, Inc. were given clearance to fly as a formation by the Department of Justice, the last regulatory hurdle the pair faced, and closed their merger.

Meanwhile, after a wild day, the Dow Jones Industrial Average ended lower by 74.16, or 0.82%, at 8,990.96, while the Nasdaq Composite Index added 7.74, or 0.47%, to finish at 1,657.21.

The S&P 500 dropped by 10.42, or 1.11%, to close at 930.09.

Banks shuffle, make gains

In finance, the Keystone Cops routine continued as the Wall Street Journal reported that GMAC may, by selling certificates of deposit online, become a bank and eligible for Troubled Asset Relief Program funds.

"That would help them very much," a trader said while GMAC was busy posting big gains.

Meanwhile, GMAC's majority stakeholder, Cerberus Capital LP, the parent of Chrysler, is in talks with the government as well as General Motors Corp. to tie up the struggling automakers.

Cerberus holds 51% of GMAC.

Shares of GMAC jumped by $2.30, or 28.75%, to $10.30.

CIT Group may attempt to take the same route as GMAC to Federal funds, the trader said.

CIT shares also launched in late afternoon trading to end up by $0.61, or 19.68%, at $3.71.

In financial merger news, "I think some bank, likely BB&T Corp., will buy Colonial BancGroup, which does not look like it will be getting TARP preferreds from the Feds," the trader said.

Shares of BB&T slipped by $2.03, or 5.64%, to close at $33.96.

Shares of Colonial BancGroup took on $0.21, or 6.40%, to finish at $3.49.

Hexion sues financing banks

Hexion, now desperately in favor of the merger with Huntsman, dragged its reluctant financing banks, Credit Suisse and Deutsche Bank, before the Supreme Court of the State of New York.

The lawsuit alleges that "the banks breached their obligations under the financing commitment letter to fund the closing of the Hexion-Huntsman merger, and seeks specific performance of the banks' obligations on an expedited basis," a company press release said.

"Both Hexion and Huntsman are ready, willing and able to complete the merger immediately, but have been prevented from doing so by the banks' breach," Craig Morrison, chairman and chief executive officer of Hexion, said in the release.

The two companies will "pursue this action vigorously," he continued.

Shares of Huntsman tacked on $0.58, or 4.72%, to close at $12.86.

Epicor kicks back Elliott's offer

Epicor Software's board unanimously rejected the unsolicited $9.50-per-share tender offer from Elliott Associates on Wednesday.

"The board believes the offer made by Elliott Associates is highly conditional, opportunistic and would deprive stockholders from benefiting from the value associated with Epicor's current and planned retail and ERP business software solutions," Tom Kelly, president and CEO of Epicor, said in a press release.

Epicor anticipates the fourth-quarter launch of its new software, Epicor 9, to "further establish Epicor as a clear leader in the midmarket," the release said.

Epicor re-emphasized the timing of the offer in the release.

The offer was "timed on the verge of a new Epicor product release (Epicor 9) and at a time when Epicor has not yet fully achieved the expected market opportunities from its acquisition of NSB Retail Systems," the release said.

Of course, the equity market has seen historic turmoil, but Epicor still felt the offer undervalued its shares.

The stock's one-year average closing price is $9.61.

On Wednesday, shares of Epicor improved by $0.19, or 3.09%, to end at $6.34.

Adrenalina flexes offer for PacSun

Adrenalina pumped up its offer for Pacific Sunwear to $5.00 per share, or $329 million, from $4.50 per share.

The new offer represents a 67% premium over PacSun's Tuesday closing price.

In a press release, Adrenalina highlighted its partners, "wealthy individuals and institutional investors who have expressed a strong interest as well as commitments in providing the requisite financial support to finalize the transaction."

"I call on the PacSun board of directors to act in the best interests of their shareholders by engaging in discussions with Adrenalina to implement our proposal," Ilia Lekach, chairman and CEO of Adrenalina, said about PacSun in the release.

"We believe their board acted hastily. ... Instead of enhancing shareholder value, PacSun's share price has declined 20% since Oct. 17, the day prior to our original offer," he continued.

Shares of Pacific Sunwear added $0.18, or 6.00%, to close at $3.18.

Shares of Adrenalina were unchanged at $1.09.

Delta, Northwest merger earns its wings

Northwest Airlines and Delta Air Lines flew over the last obstacle ahead of their merger.

After a six-month investigation, the Justice Department cleared the two airlines past the anti-trust hold short line and onto the runway.

The Justice Department's anti-trust division "has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition," according to a statement.

Northwest became a wholly owned Delta subsidiary with the completion of the merger.

Shares of Northwest Airlines inched up by $0.13, or 1.33%, to $9.90.

Shares of Delta Air Lines fell by $0.17, or 2.08%, to $7.99.

Mentioned in this article:

Adrenalina OTCBB: AENA

BB&T Corp. NYSE: BBT

CIT Group Inc. NYSE: CIT

Delta Air Lines, Inc. NYSE: DAL

Colonial BancGroup, Inc. NYSE: CNB

Epicor Software Corp. Nasdaq: EPIC

GMAC LLC NYSE: GMA

Huntsman Corp. NYSE: HUN

Northwest Airlines Corp. NYSE: NWA

Pacific Sunwear of California Inc. Nasdaq: PSUN

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