CIT still at high risk, analyst says; Perot held firm in Dell deal; Radvision worries go on

By Cristal Cody

Tupelo, Miss., Oct. 2 - Shares of CIT Group, Inc. jumped Friday on the company's release of restructuring plans that will allow it to either exchange debt or quickly enter and exit bankruptcy.

A bankruptcy filing for the New York-based lender remains a serious risk, an analyst said Friday.

In other situations on Friday, Dell Inc. opened its tender offer for shares of Perot Systems Corp. at $30 a share in cash. Dell also released details of how Perot talked the bid up from an initial proposal that was as low as $17 a share.

Also on Friday, a market source said that Cisco Systems, Inc.'s acquisition of Tandberg ASA is likely to succeed. The deal throws more concern on the future of Radvision Ltd., which another analyst notes had "placed all its eggs in the Cisco basket."

Meanwhile, Wall Street fell on renewed concerns over job losses on Friday.

The Dow Jones Industrial Average closed off 21.61 points, or 0.23%, at 9,487.67.

The Standard & Poor's 500 index fell 4.64, or 0.45%, to 1,025.21, and the Nasdaq Composite index lost 9.37 points, or 0.46%, to end at 2,048.11.

CIT makes a plan

CIT said Friday in a filing with the Securities and Exchange Commission that under the terms of the exchange offer, bondholders would trade their existing debt securities for a portion of each of five series of newly issued secured notes and/or newly issued preferred stock.

CIT said the exchange offers, which expire on Oct. 29, are conditioned upon the company reducing its total debt by at least $5.7 billion.

Shares in the company rose 11 cents, or 10.38%, to close at $1.17 on Friday.

CIT said that holders of about $10 billion of the company's debt plan to participate in the exchange offer or vote for a prepackaged reorganization plan in case the lender is forced to file for Chapter 11 bankruptcy protection.

New York-based CIT is a major lender to small and mid-sized businesses.

"There is considerable uncertainty about whether bondholders would prefer to proceed with a debt exchange or force the company into a bankruptcy proceeding," Sameer Gokhale, an analyst with Keefe, Bruyette & Woods, Inc., said Friday in a research note released to Prospect News. "However, we continue to believe that a restructuring outside the bankruptcy court may be the best possible outcome for stakeholders."

Gokhale said CIT's plans to ask for regulatory approval to transfer CIT assets into CIT's bank within 12 months to 18 months might be a lofty goal.

"We continue to believe that a more bank-centric funding model is essential to CIT's long-term funding strategy," he said. "However, in our opinion, there is still uncertainty surrounding CIT's ability to successfully complete its restructuring plan. As a result, we believe the risk of a bankruptcy event remains high."

Radvision fate uncertain

San Jose, Calif.-based Cisco said Thursday it would acquire Norwegian video conferencing company Tandberg, which has dual headquarters in New York and Oslo, Norway, for about $3 billion.

Cisco will launch a cash offer for shares of Tandberg at 153.50 Norwegian kroner a share, which values the company at Kr 17.2 billion.

Tandberg shares traded above the offer on Friday. Its stock added Kr 2.20, or 1.43%, to Kr 155.70.

Still, Tandberg is unlikely to attract a counter bidder to Cisco's bid and the deal should clear regulatory reviews, a market source said Friday.

"We do not see regulatory issues jeopardizing the deal, although they may delay it," the source said.

Cisco expects the acquisition to close in the first half of 2010.

Meanwhile, Radvision's sales likely will have plummeted by then, Daniel Meron, an analyst with RBC Capital Markets Corp., said in a research note released to Prospect News.

Cisco was Radvision's largest video conferencing infrastructure customer with a 40% slice of sales.

U.S.-listed shares of Tel Aviv, Israel-based Radvision lost nearly 33% on Thursday and fell another 10 cents, or 1.68%, on Friday to $5.85.

"We expect sales to diminish in the coming 9 months as the deal progresses as distributors and customers will likely wait for Tandberg-powered products and the focus of Cisco sales force will shift," Meron said. "If M&A was to occur as a final attempt to salvage value, it would be at lower multiple off a lower revenue base in our opinion. We expect the deal to take a toll on numbers towards spring 2010."

Cisco's stock closed down 42 cents, or 1.82%, at $22.67 on Friday.

Perot held firm to price

Round Rock, Texas-based Dell said on Sept. 21 it would acquire Plano, Texas-based computer services company Perot Systems for $3.9 billion in cash.

The tender offer is expected to expire on Nov. 2.

In the tender offer statement filed with the Securities and Exchange Commission on Friday, Dell said it has been interested in acquiring Perot since at least March 2007.

Plano, Texas-based Perot was founded in 1988 by former presidential candidate H. Ross Perot Sr. and provides technology, infrastructure and consulting services.

By early 2009, Dell began deal discussions in earnest with the company, and on April 20, Dell presented a preliminary offer of $17 to $19 a share.

Perot told Dell that it "did not believe it would be productive to continue discussing a possible acquisition in light of Dell's proposed price range," according to the filing.

Exactly two months later, Dell contacted Perot again with an offer of up to $22 a share and then increased the bid again to $26.50 a share on Aug. 24.

Perot representatives told Dell the offer was too low and that a deal at $30 a share would be "required to receive the support of Perot Systems' board of directors." That was the level ultimately offered by Dell.

Dell expects the deal to close between November and January.

Antitrust clearances will be required from the United States, Germany, Ireland, Austria and the Ukraine, according to the SEC filing.

Dell expects to receive the foreign approvals by Oct. 23 unless a second-stage investigation is launched.

The deal includes up to a $40 million termination fee payable by Dell and a $130 million termination fee payable by Perot.

Shares of Perot added 5 cents, or 0.17%, to close at $29.77.

Dell's stock fell 10 cents, or 0.66%, to $15.04 on Friday.

Mentioned in this article:

Cisco Systems, Inc. Nasdaq: CSCO

CIT Group, Inc. NYSE: CIT

Dell Inc. Nasdaq: DELL

Perot Systems Corp. NYSE: PER

Radvision Ltd. Nasdaq: RVSN

Tandberg ASA Oslo: TAA

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