Hub higher; Tweeter spikes on short covering; Vertrue deal disappoints; Doral up; Palm off

By Ronda Fears

Memphis, March 22 - Hub International Ltd. got a boost from an increased bid of roughly $1.8 billion to take it private, and the stock was holding above the new buyout level on speculation that there could be more competition that will drive the offer higher, according to one trader.

Meanwhile, Palm Inc. continued to pull back Thursday, extending losses from after-hours selling in the previous session. And Motorola Inc.'s warning about a soft market, which sent its stock tumbling 7% on Thursday, was a big drag on the entire technology sector, traders said. Palm shares (Nasdaq: PALM) lost $1.71 on the day, or 8.79%, to close at $17.74.

Subprime mortgage lenders continued to be bait for distressed players, another trader said, with speculation running rampant about bankruptcy and bailouts with New Century Financial Corp. remaining at the forefront of the scuttlebutt, at least insofar as an imminent bankruptcy is concerned.

New Century took another dive amid reports that it has hired Lazard Ltd. as financial adviser in a restructuring effort; earlier in the week, there was a rumor that the company was talking with Miller Buckfire, another restructuring firm. Still in tact, however, is a belief that the San Diego mortgage company will file bankruptcy "any time now," the trader said. The stock (Pink Sheets: NEWC) traded as low as $1.42 on Thursday but settled with a loss of 11 cents, or 6.59%, at $1.56.

"Just about all the bad news is in place now so we will see where it takes New Century now," the trader said.

"This sector is not finished. The headlines make it sound like this is the end of the subprime mortgages; that will never be the case, and the distressed hedge fund guys know that. They are piling in. This is not Chapter 11; it's Chapter 1."

He pointed to extended gains at Accredited Home Lenders Holding Co. (Nasdaq: LEND), which gained 61 cents on Thursday, or 5.1%, to close at $12.57, following an 11% advance the day before.

Adding pressure to many other subprime lenders, however, such as Fremont General Corp., was testimony Thursday at a Senate Banking Committee by a top executive at Countrywide Financial Corp. Sandy Samuels, chief legal officer of Countrywide, said the slump in home prices could produce record levels of foreclosures on loans made in 2006 to subprime borrowers. In the prepared remarks, he said foreclosure rates on subprime mortgages taken out last year may approach or exceed the level in 2000, when the foreclosure rate hit nearly 10%.

Elsewhere of note, as had been rumored for some time, Blackstone Group LP, one of the world's biggest private equity firms, on Thursday filed its highly anticipated initial public offering aiming to raise up to $4 billion. That event, another trader said, "seems to support the idea that the merger and acquisition frenzy we've seen so far this year is far from over."

Hub up on bid hubbub

Chicago-based insurance broker Hub said Thursday its suitors agreed to boost their buyout offer by 4%, to $41.50 per share from $40, after competing proposals were submitted. That propelled the stock to the new buyout level and beyond on thinking that a bidding war might ensue, a trader said.

Hub shares (NYSE: HBG) traded up to $42.23 in the session, he noted, before easing back to close at $41.55, a gain of $2.28 on the day, or 5.81%.

"It was a surprise really but now that it's out there people are thinking maybe there are more bids lurking around," the trader said.

The stock had hovered just below the $40 buyout price since it was announced on Feb. 26, he said. At that time, the offer was a 16% premium to where the stock had been trading and was rather disappointing, he said, but there was not a lot of visibility about there being another interested party.

Under the original buyout offer from private equity firm Apax Partners and Morgan Stanley Principal Investments, the company had until March 19 to take and consider other bids.

In a statement Thursday, the company said that process resulted in Apax and Morgan Stanley boosting their offer; Hub did not disclose the competitor(s) who entered a bid or the value of other offer(s).

The Apax agreement was also amended to include a provision that Hub would pay $53 million to the potential buyers if it accepts another bid. Hub said the buyout would be financed with debt and said it has commitments from Morgan Stanley and Merrill Lynch.

Hub provides property, casualty, life and health insurance as well as employee benefits and risk management products.

ICE hot over Chicago Merc

The takeover battle for the CBOT Holdings Inc., parent of the Chicago Board of Trade, between IntercontinentalExchange Inc. and Chicago Mercantile Exchange Holdings Inc. heated up Thursday with a round of banter from the rival bidders. But one trader said CBOT and Chicago Merc shares were "being held in check" as the saga plays out.

"There is a nice tight price control in effect," the trader remarked. "Guys playing this on a call spread are in control; remember the CME deal is mostly stock."

CBOT shares (NYSE: BOT) slipped $3.95 in the session, or 2%, to close at $193.29 while Chicago Merc shares (NYSE: CME) added $3.63, or 0.67%, to $544.13.

ICE shares (NYSE: ICE) lost $2.49 on the day, or 1.92%, to settle at $127.26.

In a deal struck Oct. 17, the Chicago Merc is offering to CBOT shareholders the choice of receiving 0.3006 share of CME per CBOT share or cash at an exchange ratio based on a 10-day average of closing prices of CME common stock at the time of the merger, capped at $3 billion.

ICE is offering 1.42 shares of ICE per CBOT share but said Thursday it is willing to throw in a cash sweetener.

Doral driven by deal buzz

Beyond the subprime mortgage crisis in the United States, Puerto Rico-based Doral Financial Corp. saw a sharp spike Thursday as rumors of a potential buyout by fellow Puerto Rico bank W Holding Co. and a recapitalization transaction with Doral bondholders intertwined and fueled heavy short covering, a stock trader said.

In fact, the trader speculated that an order imbalance at the open triggered the short covering and the spike sparked the widespread rumors.

Doral shares (NYSE: DRL) traded up to $1.99 but ended at $1.91, a gain of 37 cents on the day, or 24.03%. Some 5.66 million shares changed hands versus the norm of 2.56 million shares.

The stock trader said a linkup between Doral and W Holding Co., two banks based in Puerto Rico, would probably be arranged as a merger of equals that would likely be cheered by everyone. But, he said it "seems pretty far-fetched" as W Holding, much like Doral, has been having "difficulty staying afloat."

W Holding shares (NYSE: WHI) advanced 33 cents on the session, or 6.61%, to close at $5.32. It, too, saw heavy volume of 1.75 million shares versus the norm of 669,402 shares.

Over in the bond market, where everyone is on the lookout for a refinancing of the Doral $625 million floating-rate notes by July, there was another rumor that Doral is apparently looking into recapitalizing.

There have been rumors off-and-on since the first of the year that Doral was in talks with the bondholders about a debt-for-equity exchange to extinguish the floaters, provided there is some cash involved. Doral's sale of its New York branches earlier this month fueled speculation that the refinancing transaction was near, and the stock trader said the recapitalization buzz Thursday was likely an extension of that.

The Doral floaters were active in afternoon on the scuttlebutt, seen at 94.25 bid, 94.5 offered.

Vertrue deal lacks virtue

No one liked the Vertrue Inc. buyout deal, one trader said, but there is not a great deal of hope that it can be bested. The Norwalk, Conn., internet marketing firm announced that it had accepted a management-led buyout offer of $48.50 per share - a meager 1.9% premium to Wednesday's market.

Vertrue shares (Nasdaq: VRTU) rose 51 cents, or 1.07%, to $48.09.

One Equity Partners, Oak Investment Partners and Rho Ventures are involved in the transaction valued at roughly $800 million, and Vertrue chief executive Gary Johnson will remain in his role at the company.

"The buyout is calling shareholders fools. It's almost ridiculous," the trader said. "But I am telling people they should take it, gladly, and move on."

But, he said the company might not be able to draw a better offer because of weak financial performance. He said there were some players thinking it could do better because 2006 revenues were up 11.5% but he said the bottom line was "pitiful" with a drop of 4.7% in pre-tax income.

Tweeter signals turnaround

Tweeter Home Entertainment Group Inc.'s restructuring plan announced Thursday drew mixed responses, but the overall feeling was pretty positive according to one trader. He said the news initially drew heavy short covering, which was perhaps a bit overdone, and the stock eased after the close, but it suggests that most players think the company has turned a corner.

Tweeter shares (Nasdaq: TWTR) gained 37 cents on the day, or 27.62%, to close at $1.71 and then in after-hours activity dropped as low as $1.63 but were last seen at $1.68, the trader said.

"The CEO is coming out and saying that future earnings, profits will be excellent in 2007 and especially 2008. The CEO will repeat this during their upcoming earnings conference call. Investors like excellent future performance more than past performance," the trader said.

The Canton, Mass., electronics retailer said it will shut 49 stores, two regional warehouses, and layoff those employees, which is about 20% of its workforce. Moving forward, the company said it will reinvest resources to expand on its popular Consumer Electronics Playground concept stores.

Tweeter said the restructuring will dramatically improve its profitability and cash flow.

Visteon skids on Valeo buzz

Another trader said Visteon Corp. faltered amid ongoing speculation that French automaker Valeo was under pressure to make a play for the Michigan-based supplier to and former subsidiary of Ford Motor Co.

"No one knows what to make of it," the trader remarked.

"All the parts suppliers are in dire straits, but I'd think one of the more distressed names like Delphi would be higher on the takeout list."

He pointed to reports from Paris that Valeo is under pressure from a large stakeholder, Pardus, to make a bid for Visteon, but Valeo executive chairman Thierry Morin said he does not want to buy all of Visteon but would be interested in acquiring certain assets of Visteon or Delphi Corp. Delphi, which was a former unit of General Motors Corp., is in bankruptcy

Uncertainty about Visteon's fate in the situation, he said, is further clouded by reports that Apollo Management is considering making a bid for Valeo.

Visteon shares (NYSE: VC) were off 4 cents to $8.69 on Thursday amid very light volume.

Delphi shares (Pink Sheets: DPHIQ) lost 5 cents to $2.82.

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