Missouri politics brand loyal; Canadian Court holds off ruling; Grey Wolf keeps it Basic

By Aaron Hochman-Zimmerman

New York, June 17 - The state of Missouri was still in a frenzy on Tuesday, looking to tap all the support it could muster to keep its iconic Anheuser-Busch Cos. Inc. away from Belguim's thirsty InBev NV.

While north of the border in Canada, the Supreme Court insisted on taking its time to determine if it will allow BCE Inc. to go private above the objections of its bondholders.

In technology, Mentor Graphics Corp. shares flew just shy of a $16 per share offer by Cadence Design Systems Inc. even as the offer was rejected outright.

The band played on at Yahoo! Inc. where Carl Icahn and investor Eric Jackson fought for influence on the board.

Still, questions remained over where their plans would take the company.

Elsewhere, Grey Wolf Inc. showed canine loyalty by turning up its nose at an increased offer from Precision Drilling Trust preferring to stick with its agreed merger with Basic Energy Services Inc.

Also, some were expecting furniture retailer Pier 1 Imports Inc. to turn hostile against Cost Plus Inc. after its offer was rejected.

Meanwhile, the rest of the market slid. The Dow Jones Industrial Average fell by 108.78, or 0.89%, to 12,160.30, while the Nasdaq Composite Index dropped 17.05, or 0.69% to finish at 2,457.73.

The S&P 500 shed 9.21, or 0.68%, to close at 1,350.93.

Frosty reception for InBev

Missouri politicians and the Busch family were all happy to tell Belgium's InBev to keep its hands off of their beer, but "it's not looking too good," Morningstar analyst Ann Gilpin told Prospect News.

Still, political leaders handcrafted the choicest phases.

"I read the offer with about as much enthusiasm as a bid to relocate the St. Louis Arch to Brussels," said Sen. Claire McCaskill, D-Mo., in a statement. After a meeting with InBev chief executive officer Carlos Brito, she told reporters: "The deal is not going to happen."

A spokesman from the office of Sen. Christopher "Kit" Bond, R-Mo., told Prospect News that the senator said: "This is a bad idea; it is broadly opposed by the community and I look forward to expressing my opposition directly [Wednesday]."

A meeting between Brito and Bond is scheduled for Wednesday.

Despite the meetings and the strong words, opponents have few arrows in the quiver to stop the deal, Gilpin said.

An anti-competition angle would likely be "awfully tricky because [Anheuser-Busch] sells and distributes InBev's products right now," she said.

"Even in the event of a merger, it's going to be status quo," she said in terms of anti-competition issues.

Another equity analyst suggested the best the politicians may be able to do is "ruffle feathers" with local St. Louis shareholders ... "and then they'd vote it down," he said.

Still, "BUD is very vulnerable right now," he said, "InBev doesn't have to raise its offer."

Unbiased drinker

Even well-known Coca-Cola drinker Warren Buffet has shown his support for the deal and "he's a larger shareholder than the whole Busch family combined," Gilpin said.

"He definitely wants $65 [per share]," she said.

"It's a small possibility that he could kind of be a financier to the deal and retain a large equity stake," she said, but "then he'd have to be talking to InBev."

"If I had to guess, he'd be overwhelmingly in support of the deal going through," she said.

The greatest obstacle InBev is likely to face is a grassroots uprising in the company and its union representatives.

"If InBev starts to perceive it will be fraught with complications, they'll think maybe this isn't such a good idea," Gilpin said.

Even so, "it's widely believed they're in talks with SABMiller [plc] about a merger there and I think A-B knows that and wants to avoid it if at all possible," she added.

Shares of Anheuser-Busch (NYSE: BUD) tied on another $0.67, or 1.11%, to finish at $61.20.

Canada Court Quiet

There was no decision after a hearing in the Canadian Supreme Court over BCE's proposed leveraged buyout of nearly $35 billion.

During the initial hearing a judge asked a lawyer for the defense if it is acceptable for an outgoing director to load up a company with as much debt as banks will finance, an equity analyst said.

The lawyer simply answered that the buyout is in the best interest of the shareholders, the analyst said.

The court reserved its decision and did not set a date for when it would announce its conclusion.

"It would've been odd for them to rule this early," the analyst said.

Shares of BCE (NYSE: BCE) improved $1.65, or 5.04%, to close the session at $34.40.

Yahoo! to who?

Microsoft Corp. is gone, a deal with Google Inc. has already been agreed to ... what is Carl Icahn fighting for?

Investor Eric Jackson's proposal of a splitting the board 5-4 in favor of Yahoo! seemed like a good compromise to some, but to what end?

Icahn and Jackson would probably like to send Jerry Yang on his way. "I don't know anyone who is happy with him," an equity analyst said.

Icahn would then probably opt for some sort of share buyback, he said, as well as scrapping the severance plan which may have served to shoo away Microsoft.

When Icahn originally stepped into the crossfire, "I was on his side," the analyst said, "but this could be one of the times where he doesn't get what he wants ... the Yahoo! board is very powerful."

Shares of Yahoo! (Nasdaq: YHOO) slipped $0.29, or 1.23%, to $23.25.

Pier 1, still solo

Pier 1 did not go off the deep end, but was still "surprised that the Cost Plus board determined that our proposal was not in the best interests of the Cost Plus shareholders - given that the Cost Plus board and management have made no effort to discuss with us the potential and benefits of a mutually acceptable transactionm," Pier 1 president and chief executive officer Alex Smith said in a statement.

After Pier 1's $4 per share offer was rejected, market rumors spoiled for a hostile fight.

"That's entirely possible," said Laura Champine, a Morgan Keegan analyst.

"It sounds like they're going to go to the investors and try to get what they've already put out there," she said, referring to the $4 per share offer.

Many Pier 1 investors also hold Cost Plus, she said, "so they've got a pretty good audience to go pitch this," she said.

Still, the furniture of the would-be happy couple may not quite match.

"It's a very tough time for the industry," she said, and the burden of a merger on top of mounting a turnaround of Cost Plus may not be realistic.

Shares of Pier 1 (NYSE: PIR) added $0.11, or 1.84%, to end at $6.08.

Shares of Cost Plus (Nasdaq: CPWM) took on $0.05, or 1.45%, to finish at $3.51.

Mentor out of step with Cadence

Mentor Graphics was not feeling the rhythm of Cadence Design's $16 per share offer.

Even at a premium of 30% over Monday's closing price, the offer was rejected, but perhaps because Mentor does not think the two electronics firms would be given anti-trust approval, an equity analyst said.

Still, the rejection letter did first pay homage to king dollar.

"We concluded that not only was the price insufficient to support a transaction but that the risks of not gaining regulatory approval were sufficiently high that the ability of the parties to consummate the transaction would be in jeopardy," Walden Rhines, chairman and chief executive officer of Mentor Graphics said in a statement.

Cadence still remains interested in working something out, the analyst said, but "[Mentor] really won't talk to them about it," he said after listening in on a Cadence conference call.

Shares of Cadence Design (Nasdaq: CDNS) sank $0.75, or 6.47%, to $10.84.

Shares of Mentor Graphics (Nasdaq: MENT) soared up $2.65, or 21.49%, to $14.98.

Grey Wolf stays with old pact

Precision Drilling was not able to needle between Grey Wolf and Basic Energy Services with its $9.30 per share offer.

Even an extra $0.30 per share would not make the alpha dogs at Grey Wolf think that the new offer would "result in a superior proposal to its pending strategic merger with Basic Energy Services," Grey Wolf said in a statement.

"They seem to really like BAS," an equity analyst said.

The only question remaining is over how high Precision is willing to go, he said, because "as they continue to raise their price, Grey Wolf is going to have to take a look at it."

Shares of Grey Wolf (AMEX: GW) slipped by just $0.02, or 0.21%, to $9.31.

Shares of Precision Drilling (NYSE: PDS) added $0.11, or 0.40%, to $27.54.

Shares of Basic Energy Services (NYSE: BAS) tacked on $0.40, or 1.36%, to end at $29.80.

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