Yahoo! zooms; Ingersoll-Rand up; Genesco gains; Cadence off; Trump trips; Wendy's slumps

By Ronda Fears

Memphis, June 18 - Yahoo! Inc. was higher in the regular session Monday on accelerated chatter about a deal of some sort, including possible alliances with News Corp., AT&T Corp. and Time Warner Inc. as well as the long-standing linkup name, Microsoft Corp. But Yahoo! shares really took off after hours when the company announced its chief executive's departure.

While traders said the market on a broad-based basis was keen to be long on high-beta internet stocks - like Apple Inc., Research In Motion Ltd. and Google Inc. - there was considerable buying interest in other hot takeover sectors despite the negative close for the broader markets.

Ingersoll-Rand Co. Ltd., which a month ago began looking for strategic alternatives for its Bobcat and construction-related businesses, got a big lift from a Bear Stearns upgrade on valuation and as an attractive buyout candidate after the divestiture. Traders said there are rumors of Caterpillar Inc. and Terex Corp. being interested in Bobcat, along with private equity.

Shoe and hat retailer Genesco Inc., which fought off a hostile takeover overture from Foot Locker Inc. last month, accepted a $54.50 per share offer - a 9.8% premium - from Finish Line Inc. The event pushed Foot Locker and other sports footwear names higher, like Nike Inc.

There had not been a lot of scuttlebutt of another bid in the wings for Genesco, but when asked if the Finish Line deal was a surprise, one trader remarked, "No deal would be a surprise these days."

No deal was just the concern, though that sent a couple of names lower on Monday.

Cadence Design Corp., for example, fell on a rumor that takeover talks with two private equity firms, speculated to be offering bids in the neighborhood of $30 per share, were in a stalemate over the price tag for the software firm.

Trump Entertainment Resorts Inc. also plunged after the exit of its chief executive, as players see that boding ill for the Atlantic City casino's odds in catching a deal.

Struggling fast food chain Wendy's International Inc. was another caught in the downdraft Monday after it cut its earnings forecasts for 2007 on sluggish sales and higher costs. The company also said a special committee of its board created in April to explore a possible sale of the company has put that effort on the front burner, and hired J.P. Morgan and Lehman Brothers Inc.

Ice cream and restaurant operator Friendly Ice Cream Corp., however, agreed to be acquired by an affiliate of Sun Capital Partners Inc. for $337.2 million, or $15.50 a share - an 8.2% premium to Friday's market and a 31% premium to the stock price on March 6, the day before the company went on the auction block. The stock (Amex: FRN) gained 80 cents, or 5.58%, to $15.13.

Some three-way action names also moved, in mixed fashion.

Aluminum giant Alcoa Inc., Australian mining company BHP Billiton Ltd. and Canadian rival Alcan Inc. were all firmer on reports from London that BHP was reviving plans to make a $40 billion bid for Alcoa, which has launched a hostile bid for Alcan. There also have been rumors that Alcan is contemplating a counteroffer for Alcoa. Traders say the market believes Alcoa will be the ultimate target in the next metals deal. Alcoa (NYSE: AA) added 28 cents to $41.88. BHP (NYSE: BHP) rose 73 cents to $58.60. Alcan (NYSE: AL) advanced 70 cents to $83.55.

And, in the Dow Jones & Co. Inc. saga, there were reports that General Electric Co. and Pearson plc are considering a joint $5 billion bid to rival News Corp.'s $5 billion, $60-per-share, bid for Dow Jones. Despite stiff resistance from the Dow Jones controlling Bancroft family, traders say many players and onlookers expect Dow Jones will be sold in some sort of deal in the end. GE (NYSE: GE) was off 5 cents to $38.07. Pearson (NYSE: PSO) lost 8 cents to $17.13. Dow Jones (NYSE: DJ) edged up 2 cents to $59.03. News (NYSE: NWS) lost 34 cents to $23.62.

A pair of smaller deals hit the tape on Monday, as well.

Online payment processor Authorize.Net Holdings Inc. accepted a cash-and-stock takeover valued at $565 million from CyberSource Corp. in which shareholders will receive a total of $125 million in cash and 1.1611 shares of CyberSource - the equivalent of roughly $19.49 per share, a 16% premium to Friday's close. Authorize.Net said it won't proceed with its offer to buy Payment Services Interactive Gateway Corp. because of the CyberSource deal. Authorize.Net (Nasdaq: ANET) gained $1.30, or 7.77%, to $18.03. CyberSource (Nasdaq: CYBS) lost 69 cents, or 5.35%, to $12.21.

American Technical Ceramics Corp. agreed to a $231 million acquisition by rival electronic components supplier AVX Corp. at $24.75 per share - a 47% premium to Friday's market. AVX (NYSE: AVX) lost 6 cents, or 0.33%, to $18.01. American Technical Ceramics (Amex: AMK) advanced $7.18, or 42.71%, to $23.99.

Yahoo! deal may look different

Yahoo! has been a name bandied about in the context of takeover chatter for months and months, but traders said Monday that there is a growing view that its deal will be different, more like a strategic partnership with another big internet concern.

"It may not be a straight-out takeover. It could be a possible partnership, strategic alliance," one trader said.

"Everyone right now loves to be long the internet high-beta stocks. We are seeing a changing of the guard and with that a new mindset" that might cultivate more cooperative deals to address the possible need for consolidation.

Yahoo!'s change in CEOs was just one example, he said.

Yahoo! (Nasdaq: YHOO) gained 81 cents in the regular session, or 2.97%, to close at $28.12. In after-hours trade, given the CEO news did not hit the tape until after the close, Yahoo! shares shot up another $1.41, or 5.01%, to $29.53.

Volume was astronomical during the session, with 71.8 million shares traded versus the norm of 24.6 million shares, and in post-market activity, and another trader said "a good part of that was profit taking."

Yahoo! chairman Terry Semel ended his six-year tenure as CEO and will hand over the reins to co-founder Yang in a move most players see as its latest attempt to regain investor confidence, following its annual meeting last week when the company came under fire by stockholders because of weak performance in the stock.

"The pressure is not off the company. They will have to do more than this," the second trader said.

"A lot of people feel like they will be forced to look for some sort of deal."

Ingersoll-Rand raised

Bear Stearns analyst Ann Duignan upgraded Ingersoll-Rand to outperform from peer perform on Monday, saying the stock has a lot more upside than down and that once the heavy machinery maker sells its Bobcat division it would be ripe as a buyout target.

The analyst estimated Bobcat would fetch $3.2 billion, which would give Ingersoll-Rand about $11 per share in cash.

"That will make the company an attractive buyout candidate, because private equity firms like to buy companies with a lot of cash," Duignan said in a report circulated Monday.

"Collaborating with our credit strategy team, we think that PE firms could see a compelling IRR [investment rate of return] while paying $60 per share to take the company private. In our view, management should consider accelerating share repurchases, or risk a takeover.

She also upped her price target on the stock to $60, and said several valuation methods support equity value ranges between $52 and $67 per share.

Ingersoll-Rand (NYSE: IR) climbed $2.39, or 4.56%, to $54.75.

On May 15, Ingersoll-Rand confirmed market buzz that it is exploring strategic alternatives for its Bobcat and construction-related businesses, including an outright sale or a spinoff to shareholders. On that news, the stock advanced to $49.29 on May 15.

Ingersoll-Rand said it expects to conclude the process in the second half of 2007.

Westport, Conn.-based farm and construction equipment giant Terex has been mentioned among the potential bidders for Bobcat, traders said. Terex (NYSE: TEX) slipped by 6 cents to $84.84 on Monday.

Cat on the prowl?

Caterpillar Inc. also has been mentioned as a potential bidder for Bobcat, one trader said. Many players think Caterpillar is on the hunt, he said, and some think Navistar International Corp. may be on its radar.

To further complicate it, he noted that there have been rumors that Navistar is looking at General Motors Corp.'s Allison Transmission division, which makes transmissions and hybrid propulsion systems for commercial trucks, buses and military vehicles.

"Caterpillar as a buyer makes more sense to me. They have been pretty active," the trader said.

"It's almost like you ask yourself, so who's next for Caterpillar to pick up."

Caterpillar (NYSE: CAT) advanced 74 cents, or 0.91%, to $81.85.

Navistar (Pink Sheets: NAVZ) lost 35 cents, or 0.56%, to $61.65.

Genesco deal pushes Nike

Genesco's deal with sports footwear retailer Finish Line lifted its spurned suitor Foot Locker as well as Nike, as the market anticipates further deals down the road. As for Genesco, the stock lagged well behind the acquisition price on what one trader referred to as "a little time value risk" as the deal is not expected to close until the fall.

Genesco's buyout at $54.50 per share - versus the boosted $51 from Foot Locker, which had been bumped up from $46 in April - sent the stock (NYSE: GCO) up by $4.15, or 8.37%, to settle at $53.75 after trading as high as $54.15.

"A lot of the premium got priced in when the Foot Locker talks were going on," the trader said.

After Genesco fended off Foot Locker, he said there had been a report in Women's Wear Daily that a buyout firm was looking to acquire Genesco and Skechers USA Inc. and combine the two afterward. Nothing ever came of that, he said, but Nike and Skechers have been on the radar as takeover targets for a while.

Nike was the best gainer on the Genesco event, he said, and even that was only slight. The stock (NYSE: NKE) added 21 cents, or 0.39%, to $53.63. Skechers (NYSE: SKX) was off 4 cents to $30.02.

"They have all made a run on consolidation and takeover speculation," the trader said.

"Nike is a favorite because of its high-profile name."

He added that many think there is more news to come, based on Stride Rite Corp.'s comments about discount shoe retailer Payless ShoeSource Inc. in late May. At that time, Stride Rite said that once it closed the Payless purchase it would change its name to Collective Brands Inc. and intimated it would be looking for more acquisitions.

Cadence players bail out

Cadence Design players bailed out en masse following a report that no deal would be forthcoming for the designer of software to create computer chips because it had hit an impasse in negotiations with private-equity firms Kohlberg Kravis Roberts and Blackstone Group on a buyout price.

A couple of weeks ago, Cadence shares hit a new 52-week high of $24.90 when the identity of the buyout firms began circulating, but traders said that spike also sparked heavy profit taking amid skepticism about a deal.

"There was always a cloud of doubt around this one," one trader said, noting that the stock has about doubled since the beginning of the year.

"We're not talking about an under-valued situation here, you see."

Cadence Design (Nasdaq: CDNS) fell by 70 cents, or 3%, to close Monday at $22.60 after trading as low as $21.78; some 10.4 million shares changed hands versus the norm of 4.4 million shares.

Trump trades off on CEO exit

Trump Entertainment's prospects of a deal also are waning, a trader said Monday after news that its CEO, James Perry, was leaving. Donald Trump's casino company said Perry is leaving, effective July 1, because of his wish to return to his family in California, but the trader said many think it was because of a failure to successfully negotiate a deal.

"If Perry is leaving because he couldn't get a deal, then the news could be a positive thing," the trader said.

"It could be that with Perry gone, they can now get a deal done. I think it could go either way. It all comes down to price, right? I think the company may be having to back down and feels like they need a fall guy."

Trump shares (Nasdaq) lost $1.30 on the day, or 8.17%, to close at $14.61.

The trader noted that the New Jersey paper, Star-Ledger, reported that Perry was fired amid controversy about narrowing the list of potential bidders, that Perry was the lone dissenter in a board vote to enter negotiations with a group led by former casino executive Dennis Gomes. Dune Capital Management is reportedly another bidder.

Trump said in May it had received preliminary and conditional interest from prospective buyers. The company went on the auction block in March and hired Merrill Lynch to help with that.

Wendy's warning a scare

The downward outlook revision from Wendy's also was seen as a possible means of backing down the stock price amid negotiations, by another trader.

On Monday, the fast food chain cut its pretax earnings forecast range for the year to $295 million to $315 million, compared with its previous outlook of $330 million to $340 million, and said it now expects to earn $1.09 to $1.23 per share for the year, compared to the earlier target of $1.26 to $1.32 a share issued on March 20.

"They have been for sale now, or looking at alternatives, for about two month with nothing," the trader said.

"I think they have had some lookers, but the stock has made a run since they first started talking about putting the company up for sale that maybe it's passed the mark where the bidders are willing to pay."

Wendy's (NYSE: WEN) lost $1.47 on the news, or 3.7%, to settle Monday at $38.26.

When the company formed a special committee in late April to review its strategic options, including a revision to its strategic plan, changes to the capital structure or a possible sale or merger of the company, the stock was trading around $31 a share.

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