Cliffs, Alpha terminate merger; Elliot's Epicor bid expires; wireless deals face long regulatory process

By Cristal Cody

New York, Nov. 17 - Monday marked a grim day for any hopes and dreams of closing a deal between Cliffs Natural Resources Inc. and Alpha Natural Resources Inc.

The companies said after the market closed that they have terminated the merger agreement, with Cliffs agreeing to pay Alpha a $70 million termination fee.

Elliot Associates LP also didn't get the answer it wanted on Monday with its tender offer for Epicor Software Corp. scheduled to expire with few shares tendered - barring a last-minute rush.

Also ahead, several impending mergers in the wireless communications industry should go through without a regulatory hitch, an analyst said Monday.

Meanwhile, the markets continued to take a tumble.

The Dow Jones Industrial Average fell 223.73, or 2.63%, to close at 8,273.58 Monday.

The Standard & Poor's 500 index fell 22.54, or 2.58%, to 850.75, while the Nasdaq Composite Index slumped 34.80, or 2.29%, to 1,482.05.

Cliffs pays off Alpha

Cliffs Natural Resources' shares fell 3.06% to close Monday at $19.65, though the shares more than made up that lost ground, rising 6.87% in after-hours trading on news of the breakup.

Alpha stock closed at $24.90, down 5.93%. The stock was down an additional 6.63% in after-hours trading.

As part of the termination, Alpha also agreed to dismiss litigation against Cliffs in Delaware Chancery Court.

The companies said each board's decision was made after considering various issues, including the current environment, uncertainty in the steel industry, shareholder dynamics and risks and costs of potential litigation.

Cliffs' largest shareholder, Harbinger Capital Management, which controls 15.57% as of August, had said it believed the Alpha deal was not in the best interests of shareholders.

Just last week, though, the top proxy advisory firms recommended that Alpha shareholders vote in favor of the acquisition by Cliffs.

The value of both companies' stock has dropped since Cliffs offered to acquire Alpha in July for 0.95 of its shares and $22.23 in cash for each Alpha share. The day before the announcement, July 15, Alpha's stock closed at $94.92 while Cliffs, then called Cleveland-Cliffs Inc., closed at $111.46.

Elliot offer fizzles

Elliot Associates' $7.50 a share tender offer for Epicor Software expired on Monday without a word from the New York hedge fund.

On Friday, only 0.14% of Epicor shares had been tendered.

Elliott, which owns about 10.2% of the company's stock, had initially offered $9.50 a share for the company.

Epicor's board has rejected Elliot's offers.

Epicor shares fell 7.41% to close Monday at $4.25.

Shareholders are grumbling, saying they would be thrilled with the $9.50 offer and they should take the $7.50 offer and run before the stock hits $2.

No other offers are out there for the moment, a market source said Monday.

"We think the company is going to stand alone for now," the source said.

Epicor makes business software for retail, manufacturing, hospitality and other industries.

Wireless regulatory hurdles no problem

Several upcoming wireless mergers are expected to pass a lengthy regulatory approval process, an analyst said Monday.

Still, an impending merger between CenturyTel Inc. and Embarq Corp. doesn't offer many warm, fuzzy feelings.

"Based upon where Embarq is currently trading, at about 14% discount to the implied takeout price, I'd say the eventual closing of the deal is still being discounted by the market," said Michael Nelson, a wireless analyst with the Stanford Group.

Embarq shares rose 3.05% to close at $31.08 Monday.

The stock has a significant spread between the value of the offered CenturyTel shares, at $35.10 per Embarq share, and Embarq's closing share price of $30.38 on the day the offer was made.

CenturyTel of Monroe, La., offered Oct. 27 to buy Overland Park, Kan.-based Embarq for stock initially valued at $5.8 billion. Embarq shareholders will get 1.37 shares of CenturyTel for each share of Embarq.

The deal is expected to close in the second quarter next year, pending regulatory approvals.

The merger requires approval from the Federal Communications Commission, U.S. Department of Justice and 33 public utility commissions from each state that the two companies operate in.

Embarq was spun off from Sprint Nextel Corp. in 2006.

CenturyTel shares rose 1.98% to close Monday at $25.75 a share.

The deal is just one of several in the wireless industry.

AT&T said Nov. 7 that it plans to buy rural phone company Centennial Communications Corp. for $944 million in cash, or $8.50 a share.

AT&T expects to gain approval from Centennial shareholders and regulators by the second quarter of 2009.

"Historically over the last couple of years, virtually every wireless deal has gone through and been approved with minor conditions, which historically have been limited to some divestures in certain markets," Nelson said.

Centennial shares closed Monday unchanged at $7.52 in trading. AT&T stock rose 0.08% to close at $23.87 Monday.

The AT&T deal is just "the latest merger in a series of acquisitions that we've seen in the wireless sector over the last couple of years," Nelson said. "There's been significant consolidation."

Verizon Communications Inc. also is underway its in acquisition of Alltel Corp. for $28.1 billion. Verizon shares closed at $29.24 on Monday, down 2.53%.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

AT&T NYSE: ATT

CenturyTel Inc. NYSE: CTL

Centennial Communications Corp. Nasdaq: CYCL

Cliffs Natural Resources Inc. NYSE: CLF

Embarq Corp. NYSE: EQ

Epicor Software Corp. Nasdaq: EPIC

Verizon Communications Inc. NYSE:VZ

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