Validus capable of price bump for IPC; Focus Media to eye leftover assets; CombiMatrix bid likely

By Cristal Cody

Tupelo, Miss., April 2 - Validus Holdings, Ltd. may increase its bid for IPC Holdings, Ltd., but not by much, an analyst said Thursday.

In other action, an analyst told Prospect News that Focus Media Holding Ltd., which operates outdoor audiovisual advertising networks in China, could seek a buyer for its remaining business segments once its main assets are sold to Sina Corp.

Also on Thursday, an analyst predicted that CombiMatrix Corp. is headed toward a major transformation that includes a sale this year.

Meanwhile, stocks continued to climb Thursday and sent the Dow Jones Industrial Average to near 8,000.

The Dow closed at 7,978.08, up 216.48 points, or 2.79%.

The Standard & Poor's 500 index added 23.30 points, or 2.87%, to end at 834.38, and the Nasdaq Composite index rose by 51.03 points, or 3.29%, to 1,602.63 on Thursday.

Validus unlikely victor

Bermuda-based specialty insurance and reinsurance provider Max Capital Group Ltd. sent a letter on Thursday to acquirer IPC Holdings to remind it of the advantages and mandated agreements of their merger in comparison to Validus' takeover offer.

Validus, a Bermuda-based reinsurance and insurance firm, offered on Tuesday to buy IPC for $1.68 billion in an all-stock deal, based on an exchange of one IPC share for 1.2037 Validus shares.

IPC has a $912 million stock acquisition underway of Max Capital.

"As you are well aware, the IPC/Max plan requires that shareholders have the opportunity to vote on our amalgamation before IPC's board can terminate our agreement and thereafter begin discussions with a bidder such as Validus," W. Marston Becker, chairman and chief executive officer of Max Capital, said in the letter.

"We anticipate that we will be able to hold our respective shareholder meetings in June, and only after those shareholder votes would Validus be able to pursue its proposal."

Max Capital believes the companies can close on the merger as soon as June.

"By contrast, we believe that Validus would not be in a position to close a transaction with IPC until September 2009 at the earliest," Becker said.

IPC Holdings' board said it is reviewing the offer, but market sources lean toward the company rejecting the bid.

"Our core view is that the most likely scenario is the completion of the Max-IPC merger," an analyst said Thursday. "We would not rule out the possibility of an increased offer by Validus. However, our estimates suggest that Validus hardly has any room to boost its offer."

IPC shares fell 60 cents, or 2.18%, to close at $26.88. The stock has traded as low as $19.01 and as high as $33.75 over the past year.

Max Capital's stock dropped 19 cents, or 1.07%, to close at $17.61.

Validus shares closed off 41 cents, or 1.71%, at $23.50 on Thursday.

Focus Media's bit parts

Shanghai-based digital media company Focus Media said in December it would sell its digital out-of-home advertising networks to Sina, China's biggest internet operator, for 47 million Sina shares.

The $1.2 billion deal is expected to be approved by China's Ministry of Commerce this month.

Once the deal closes, Focus Media is likely to start a search for a strategic buyer for the remaining assets, Sachin Shah, a senior special situations analyst for ICAP Corporates LLC, said in an interview.

Focus Media's remaining operations include a network of movie theaters and outdoor billboard and internet advertising.

"They are viable as a standalone entity, but they are going to be able to attract more value for their shareholders if they did a significant partnership or sold those remaining assets to another strategic entity, other than Sina," he said.

The standalone company has a $9.50-a-share fair value, while the remaining segments are valued at 85 cents a share with the opportunity to go up to $1.70 in value, Shah said

Several strategic buyers in Asia could be interested with demand at a high, he said.

Chinese online gaming maker Changyou.com Ltd. launched a $120 million Nasdaq initial public offering on Thursday to strong demand - an "indication the market is receptive and has an appetite for different forms of the business," Shah said.

Changyou.com shares closed up $4.00, or 25.13%, at $20.02.

Focus Media shares added 8 cents, or 1.16%, to close at $6.98 on Thursday, well off a 52-week high of $43.74.

Sina shares closed up 62 cents, or 2.58%, at $24.61.

CombiMatrix underappreciated

Mukilteo, Wash.-based CombiMatrix's molecular diagnostic products are a growth driver, may be grossly underappreciated by the market and could prompt a sale, Derek Taller, an analyst with Benchmark Co., LLC, said Thursday.

"Management has stated publicly that a major transformational event will likely occur this year," he said in a research note released to Prospect News. "We believe an acquisition or bid for the company is likely that may reset its fair market value."

Taller estimates a $20.00-a-share buyout price.

The company has the potential to receive multi-million-dollar government contracts for an avian influenza detection system, he said.

"Given the acquisitive environment with regard to molecular diagnostic companies, we believe the platform technology alone could justify current valuation," Taller said.

CombiMatrix became independent from parent company Acacia Research Corp. in 2007.

Shares lost 9 cents, or 1.24%, to close at $7.65 on Thursday. The company's stock has traded from $4.73 to $16.38 over the past year.

Mentioned in this article:

Changyou.com Ltd. Nasdaq: CYOU

CombiMatrix Corp. Nasdaq: CBMX

Focus Media Holding Ltd. Nasdaq: FMCN

IPC Holdings, Ltd. Nasdaq: IPCR

Max Capital Group Ltd. Nasdaq: MXGL

Sina Corp. Nasdaq: SINA

Validus Holdings, Ltd. NYSE: VR

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