Reckson wrangling roils REITs; Bandag rises 12% on Bridgestone buyout; NovaGold, Barrick slide

By Ronda Fears

Memphis, Dec. 5 - Traders were not very happy with deals announced Tuesday - Bandag Inc.'s $1.05 billion cash buyout bid from Bridgestone Americas Holding and Direct General Corp.'s $628.2 million buyout by a private equity group - as premiums remain tight.

"Deals are tight this week," said a risk arbitrage trader in New York. "I was a large setup [Monday] in BK [Bank of New York Co. Inc.] versus MEL [Mellon Financial Corp.] when it was wider but it didn't last long."

He said there was not much arb interest in the Bandag or Direct General deals, as well as the LSI Logic Corp. purchase of Agere Systems Inc. and Station Casinos Inc. management-led leveraged buyout from Monday. And, as a cash play, he didn't see a lot of reason to play any of those names.

Station Casinos, in fact, pulled back sharply from a big spike Monday on the news that Fertitta Colony Partners LLC - a new company formed by Station Casinos chief executive Frank J. Fertitta III and president Lorenzo J. Fertitta along with Colony Capital Acquisitions LLC, an affiliate of Colony Capital LLC - was offering $82 a share. The stock ran up to near $85 on a bidding war speculation but retreated sharply Tuesday. Station Casinos shares (NYSE: STN) gave back $2.09 on Tuesday, or 2.46%, to $82.81.

Claire's Stores Inc., however, continues to be of interest, the risk arb trader said, following news Friday that the Pembroke Pines, Fla., retailer of low-priced jewelry to teens had hired Goldman, Sachs & Co. to explore strategic alternatives for enhancing shareholder value, including a possible sale of the company. That pushed the stock up 5% on Friday.

"I am very active in CLE but can't tell you in which direction," the trader said.

While he was tacit on his tact in the Claire's story, the stock was obviously a victim of heavy selling Tuesday, as the shares (NYSE: CLE) lost 38 cents, or 1.15%, to $32.80 amid volume of 2.97 million shares versus the norm of 1.36 million shares.

Reckson pressures REITs

The ongoing saga in the three-way wrestling match, perhaps more akin to King of the Mountain in terms of a real estate stake-out, for Reckson Associates Realty Corp. put pressure on the entire slate vying for the New York REIT.

"What a mess, huh," sighed one equity trader. "No one is tinkering much with their positions. It looks like Icahn has been frozen out of the deal."

Reckson's board of directors has remained steadfast in supporting the bid of SL Green Realty Corp., valued at $4.1 billion, while billionaire investor Carl Icahn continues to make a pitch. Since Mack-Cali Realty Corp. and Harry Macklowe have backed out of the Icahn bid, which was to be presented via special entity Rome Acquisition LP, he is now using American Real Estate Partners LP as his main venue for the Reckson bid, and is offering $1 billion of cash and $3.3 billion worth of new preferred shares.

Reckson shares (NYSE: RA) slipped 18 cents, or 0.39%, to $45.57.

SL Green shares (NYSE: SLG) edged off by 34 cents, or 0.25%, to $133.66.

American Real Estate shares (NYSE: ACP) lost 42 cents, or 0.51%, to $81.88.

As it stands, Reckson shareholders are due to vote on the SL Green bid Wednesday.

Bandag gains 12% on buyout

Bandag Inc. took a ride Tuesday to just under the buyout price in Bridgestone Americas $1.05 billion cash merger offer, but players were not extremely excited about the deal.

"It was OK," said one trader. "There wasn't much to play with."

Bridgestone Americas is acquiring Bandag for $50.75 per share in cash, a 12.2% premium to Monday's close of $45.04.

The transaction is expected to close late in first quarter or early second quarter of 2007, subject to the receipt of shareholder and regulatory approvals.

Muscatine, Iowa-based Bandag makes tire re-treading materials and equipment. Bandag has a network of 900 franchised dealers that produce and market retread tires. In addition, the company owns Tire Distribution Systems Inc., a retail operation that sells retread tires, and it owns 87.5% of Speedco Inc., a provider of highway truck lubrication and tire services to truck owner-operators and fleets. In 2005, Bandag had worldwide sales of $921 million.

Nashville-based Bridgestone Americas, which operates Bridgestone Firestone North American Tire, is the U.S. subsidiary of Tokyo-based Bridgestone Corp.

NovaGold still 'no' to Barrick

In addition to the pullback in gold futures, NovaGold Resources Inc. and Barrick Gold Corp. were pressured by the Canadian mining companies' still being at odds over Barrick's hostile takeover bid of $16.25 per share. And, if Barrick is unsuccessful, onlookers expect NovaGold shares to sink.

Gold for February delivery closed Tuesday down by $3 at $647.90 an ounce on the New York Mercantile Exchange. The contract has been closing above the $650 level since the last day of November.

NovaGold shares (NYSE: NG) dropped 10 cents on the day, or 0.62%, to $16.15.

Barrick shares (NYSE: ABX) lost 55 cents, or 1.75%, to $30.95.

One trader speculated that if Barrick walks away from its pursuit, then NovaGold shares are likely to take a hard dive.

"ABX now has a big position in NG shares at $16, so if they decide to dump those it will get ugly," he said.

Toronto-based NovaGold said Tuesday it continues to recommend shareholders reject Vancouver, B.C.-based Barrick's hostile bid of $16 per share, which expires Dec. 6.

Direct General gains 24%

Direct General Corp. got a big bounce from news that it will be bought out by a private equity group at $21.25 per share, but the stock came up short of the offer, and traders said the stock was pretty much "locked away."

The stock (Nasdaq: DRCT) gained $3.99 on the day, or 24.17%, to $20.50.

"It's all locked away, and probably will sit tight until it goes away," said one trader.

Nashville-based insurance holding company Direct General agreed to a takeover by a private equity group made up of Elara Holdings, an affiliate of Fremont Partners and Texas Pacific Group, for about $432.4 million in cash, or $628.2 million including the assumption of debt.

The per-share offer price of $21.25 is a premium of nearly 28.2% to Monday's close of $16.51.

Disney play adds over 2%

Domestic cable network operator ESPN Inc. - an indirect subsidiary of The Walt Disney Co. - agreed Tuesday to buy the London-based cable channel NASN Ltd. as part of its strategy to broadcast more American sports in Europe. While terms of the deal were not disclosed, Disney shares gained on the session.

ESPN Inc. is 80% owned by ABC Inc., which is a subsidiary of Disney. The deal will allow Disney to expand its ESPN operations in Europe, which are now limited to its ESPN Classic channel, a soccer web site and a business that sells some sports shows to other European networks.

Disney shares (NYSE: DIS) added 76 cents on the day, or 2.27%, to $34.20.

NASN, also known as the North American Sports Network, is the only European channel dedicated to North American sports. It has more than 6 million subscribers in 26 European countries. NASN is owned by the private equity firm Benchmark Capital Europe and Irish sports broadcaster Setanta Sports Holdings Ltd.

The Wall Street Journal reported, citing a person familiar with the deal, NASN was being sold for €80 million to €90 million, including debt assumption.

As part of the deal, ESPN also will receive NASN's exclusive rights to show National Hockey League and Major League Baseball games in Europe and the exclusive rights to the National Football League in some parts of Europe.

NASN was started in late 2002 by a New York lawyer, Amory B. Schwartz, who had moved to London for work and was unable to watch his favorite baseball team, the Philadelphia Phillies, on television. The channel initially targeted U.S. expatriates living in Europe but found it was drawing more European than American viewers.

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