Airlines mull further talks; CME opposes regulation plan; MI Development considers shake-up

By Aaron Hochman-Zimmerman

New York, March 31 - Both stocks and baseball began the week half-heartedly as many games were cancelled and stocks struggled to find a direction.

It was a "a pretty slow day" in the deal department, a market source said, but Delta Air Lines Inc. and Northwest Airlines Corp. began turning their engines in a possible attempt to make their deal fly without the pilots completely on board.

CME Group Inc. was ready to buy into a regulatory merger in principle, but indicated it would put up a fight against the Treasury Department's current proposal for regulation of the exchanges.

Also, Bank of America Corp. reportedly may abandon the sale of its equities prime brokerage due to a lack of interest.

In real estate, MI Developments Inc. is considering moving a few pieces in order to restructure itself as well as sell its controlling stake of Magna Entertainment Corp.

In pharmaceuticals, Israel's Teva Pharmaceutical Industries Ltd. announced an upcoming agreement with Bentley Pharmaceuticals, Inc.

The Dow Jones Industrial Average ended better by 46.49, or 0.38%, at 12,262.89, while the Nasdaq Composite Index added 17.92, or 0.79%, to finish at 2,279.10.

The S&P 500 picked up 7.48, or 0.57%, to close at 1,322.70.

Airlines try another rejoin

Shares of Delta (NYSE: DAL) fell just $0.01, or 0.12%, to $8.60 while shares of Northwest (NYSE: NWA) managed to add $0.23, or 2.63%, to close at $8.99 as Northwest reportedly asked Delta if it would proceed without the blessing of the pilots.

The merger between the two collapsed as representatives of the pilots could not find a way to merge the seniority lists into a combined airline.

The airlines will have to "take into consideration" the idea of a pilots' strike if a merger undercuts their interests, a market source said.

Chicago Exchange opposes regulatory merger plan

In the financial sector, shares of the Chicago Mercantile Exchange (NYSE: CME) sank $10.20, or 2.13%, to end the day at $469.10 as it released a statement about the Treasury Department's proposed changes to the oversight of its operations.

"We agree with secretary Paulson's conclusion that the SEC [Securities and Exchange Commission] and Congress need to act promptly to align more closely the SEC's systems and procedures with the governing philosophy of the CFTC [Commodity Futures Trading Commission]," the exchange said in the release.

"We strongly agree with Treasury that significant reform of the securities regulatory framework, especially the adoption of a principles-based regulatory oversight structure like that already adopted by Congress for U.S. futures markets, is necessary before any such merger could occur," the release continued.

However, "the secretary's suggestion that market rules involving margin, insider trading, customer suitability and short sales need to be synchronized suggest that there has not been sufficient understanding of the function of the differences of those rules in the two markets. The differences are organic, not accidental, and an effort to homogenize the two regulatory regimes is certain to cause more harm than good," the release said.

An $11 billion or $106 per share offer to buy the Nymex Holdings Inc. (NYSE: NMX) is still pending.

"I've read that CME would fight it in Congress and they tend to be pretty powerful entity," a market source said about the combination of the regulators.

"If they offer their opposition it's not going to be passed too easily," he said.

Share of Nymex shed $2.08, or 2.24%, to finish the session at $90.63.

Bank of America

Elsewhere in finance, shares of Bank of America (NYSE: BAC) slid $0.16, or 0.42%, to end at $37.91 as it was rumored to that its sale of its equities prime brokerage may fall by the wayside.

The offer was not well received by possible buyers such as Barclays Capital and BNP Paribas.

MI Developments stews over shake-up

Shares of Canada's MI Developments (NYSE: MIM) launched up $3.46, or 13.70%, to $28.72 as its board of directors received a reorganization proposal intended to distribute cash to shareholders and create a focused real estate investment vehicle, according to a press release.

The real estate vehicle will distribute 80% of its income to shareholders.

Holders of voting and non-voting shares would be able to exchange their existing shares for $15.50 in cash and shares of a new public company, the release said.

The current voting share structure would also be scrapped in favor of one vote per share.

As part of the proposal, the controlling portion of Magna Entertainment held by MI Development will be sold to an investor to be identified by the Stronach Group for $25 million.

MI Development's sale of Magna includes the transfer of $150 million in cash and land in Aurora, Ontario. The Stronach Group would control the limited partnership through a 51% ownership stake.

Under the proposal, the new MI Development would increase its line of credit to $1.1 billion. Magna would have to guarantee a $1 billion five-year term loan in exchange for a guarantee fee from the new MI Development.

UBS and the Bank of Montreal "have provided a highly confident letter concerning the term loan," the release said.

Teva targets Bentley

Also internationally, shares of Israel's Teva Pharmaceutical (Nasdaq: TEVA) added on $0.18, or 0.39%, to $46.19 as it announced it will acquire Bentley Pharmaceuticals (NYSE: BNT) after Bentley spins off its drug delivery business to its shareholders.

Shares of Bentley jumped $2.51, or 18.27%, to $16.25.

Teva will pay $360 million or $15.02 per share as well as shares of CPEX Pharmaceuticals Inc.

"This is an important acquisition for Teva, as the combination of Teva Spain and Bentley will provide us with a platform to capture a leading position in the fast-growing Spanish generic pharmaceutical market," said Shlomo Yanai, Teva's president and chief executive officer.

"Spain was identified as one of our target markets in the strategic review we conducted last year. We are extremely pleased that we will have Bentley's strong management and work force, complementing our existing management team, to support our growth strategy."

Gilat to join conglomerate

Also in Israel, shares of Gilat Satellite Networks Ltd. (Nasdaq: GILT) tacked on $0.39, or 3.74%, to close at $10.83 after it announced it has agreed to be acquired by a consortium of private equity investors that includes Gores Group LLC, Mivtach Shamir Holdings Ltd. and companies affiliated with Roy Ben-Yami, Ami Lustig and Eytan Stibbe and DGB Investments, Inc., according to a press release.

Gilat will be sold for $475 million or $11.40 per share which represents a premium of approximately 38% over Gilat's average closing share price during the 30 trading days ended April 25, 2007, the release said.

"We will be working closely with the Gilat team to help drive strategic growth, including in the government defense sector in the United States and international markets," said Rod Sherwood, chief financial officer of The Gores Group.

The transaction is expected to close in September of 2008.

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