3Com, Bain pack it in; Borders open for buyers; Quintana-Excel deal to set sail; airlines see longer waits

By Aaron Hochman-Zimmerman

New York, March 20 - As the equities market came rebounding back after Wednesday's tailspin, Bear Stearns Co. remained in its frustrated position, squarely in the crosshairs of JPMorgan Chase & Co.

Bain Capital Partners LLC tolled the bell for 3Com Corp. while Borders Group Inc. announced it was looking for buyers.

Quintana Maritime Ltd. confidently claimed its merger with Excel Maritime Carriers Ltd. would wrap up by April 15.

Meanwhile, XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. came closer to feeling the rhythm of their deal's approval by the Federal Communications Commission and the Department of Justice.

On the other hand, the combination of Delta Air Lines Inc. and Northwest Airlines Corp. looked more like it may not fly.

Also, Dillard's Inc. restless shareholder, the Barington Group, nominated four new board members as expected.

As the rallying session came to a close, the Dow Jones Industrial Average had bounced back to end up by 261.66, or 2.16%, at 12,361.32, while the Nasdaq Composite Index added 48.15, or 2.18%, to finish at 2,258.11.

The S&P 500 finished higher by 31.09, or 2.39%, to close at 1,329.51.

3Com, Bain part ways

Shares of 3Com (Nasdaq: COMS) dumped $0.24, or 10.81%, to close at $1.98 as Bain Capital Partners announced it would terminate the $2.2 billion merger between the two in light of persistent objections from the U.S. government's Committee on Foreign Investment in the United States (Cfius), according to a press release.

The ill-fated deal began on Sept. 28, 2007, but critics noted that the transaction would place 16% of 3Com, a supplier of software and data systems to the U.S. government, under the control of China's Huawei Technologies, which has strong ties to the Chinese military.

The proposal, which was submitted to Cfius, was withdrawn on Feb. 20 before the panel came to a decision.

The sides announced Wednesday that they would meet on Friday to discuss how they will move forward.

Notification of the meeting's cancellation went out by press release Thursday afternoon.

"Bain Capital made several alternative proposals to 3Com that we believe could have satisfied the concerns raised by Cfius," the firm said in the press release. "We regret that we were unable to agree upon an alternative transaction."

Bear snared?

Bear Stearns (NYSE: BSC) shares managed to gain $0.63, or 11.82%, to end the session at $5.96 as reports discussed the ideas which have been floating around Bear for alternatives to the current $2 per share deal with JPMorgan (NYSE: JPM), a market source said.

Still, "they're not going to give anybody but JPMorgan the nod," another market source said about the Federal Reserve.

"It looks like that marriage is set, but at what price we don't know," he said.

JPMorgan stock also added $3.50, or 8.24%, to close at $45.97.

Borders opens dealbook

Shares of Borders (NYSE: BGP) sank $2.03, or 28.59%, to finish at $5.07 as the company announced it is seeking strategic alternatives including selling part or all of the company, according to a press release.

JPMorgan and Merrill Lynch were hired by the Ann Arbor-based bookseller to assist with a future transaction.

Additionally, Pershing Square Capital Management offered $42.5 million in financing as well as an offer to purchase some Borders subsidiaries with a $125 million backstop. The loan comes at a 12.5% annual interest rate, but Borders has the right to seek out better rates until April 4.

The backstop agreement expires on Jan. 15, 2009.

"This will be a challenging year for retailers due to continued uncertainty in the economic environment," said Borders group chief executive officer George Jones in the press release.

"We are pleased to have the confidence and backing of our largest shareholder, Pershing Square, which has agreed to provide funding that gives us adequate opportunity to implement our plans this year and pursue a range of longer term solutions through the strategic alternatives review process ... Furthermore, we believe that resolving our 2008 funding needs and positioning Borders to perform the way we believe it can, puts our company in a position to succeed in future years," he added in the release.

"For the whole company, doubtfully," a market source said when asked if Borders will find a buyer.

"They're pushing more towards divesting parts of it," he said.

"It was down 30% at one point," he noted about the stock, adding: "It could be a lengthy process."

Satellite broadcasters wait on Feds

Shares of XM Satellite Radio (Nasdaq: XMSR) added $0.72, or 6.42%, to close at $11.94 while shares of Sirius Satellite Radio (Nasdaq: SIRI) were better by $0.11, or 3.94%, to finish at $2.90 as the two crept closer yet to completing their merger, according to a market source.

The FCC seems to be moving with a greater sense of urgency, which is a good sign, according to the source.

Approval by the FCC does not guarantee the Department of Justice will see things the same way, but at least an FCC decision may force the Justice Department to act quickly, the source said.

Either agency has the option to squash the deal, but it is believed that there is communication between the two and they will likely draw the same conclusions, the source said.

Quintana's ship comes in

Shares of Quintana Maritime (Nasdaq: QMAR) added $0.38, or 1.80%, to finish at $21.46 as it inches closer to its $2.45 billion acquisition by Excel Maritime (NYSE: EXM).

Excel shares were better by $0.07, or 0.26%, to $26.70.

A market source who met with Excel's chief financial officer, Eleftherios Papatrifon and Quintana's chief executive officer Stamatis Molaris, said that the deal is expected to close on April 15, one day after the shareholders vote.

Airline deal out in the breeze

Shares of Delta Air Lines (NYSE: DAL) slipped $0.43, or 4.12%, to $10.00 while shares of Northwest Airlines (NYSE: NWA) lost $0.51, or 4.83%, to end the day at $10.04.

Many investors have not yet shut the door on the possibility of a merger, but after the Delta pilots hastily rejected arbitration on Wednesday, the deal looks unlikely to happen.

"So much depends on the pilots and sure enough the pilots can't reach an agreement and it looks like it's not going forward," a market source said.

"It just depends on them," he added.

Dillard's four nominated

Dillard's (NYSE: DDS) stock tacked on $1.31, or 7.68%, to end at $18.36 as 5.6% stakeholder, the Barrington Group, made good on its promise to nominate four new members of the board of directors, according to a market source.

In a press release on Wednesday, Barington expressed its disappointment in Dillard's performance and lack of innovation.

"The Barington Group believes that the company's vast value potential is not being realized and lacks confidence in the ability of Dillard's current board, which is composed of directors with an average tenure of almost 20 years," the press release said.

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