Monday, July 30, 2007

Paperstand (FUN, ADBE, VMED, IR)

The NY Post has learned that Cedar Fair (FUN) has entered into quick-moving talks with investment firm Destiny Capital Solutions about a $4.1bn takeover. While the talks with Destiny Capital are at an early stage and could break down, and while other bidders could emerge, the spokesman said the two sides have had constructive negotiations since first making contact 2 weeks ago. The deal Destiny Capital proposed calls for paying $4.1bn, or a 20% premium over Cedar Fair's current mkt value, to acquire all of the theme-park operator's shares. The firm also said it plans to commit at least $500 million, and as much as $800 million, to upgrade Cedar Fair's 12 amusement parks, six water parks and six hotels.

According to the WSJ, Adobe (ADBE) faces a wave of criticism from printing co's protesting a deal that gives FedEx Kinko's stores a prominent link on Adobe software. The brouhaha could hurt Adobe's standing with important customers and partners and also throw a wrench into FedEx's plans to revitalize Kinko's. At issue is a new button on some Adobe software, released in June, that lets ppl electronically transfer documents directly to a FedEx Kinko's store to be printed. The button appears on new versions of Adobe's Acrobat and Reader software. "Our members frankly feel betrayed," says Joseph P. Truncale, President and CEO of the National Association for Printing Leadership.

The WSJ reports that Liberty Group (LBTYA) is considering bidding for Virgin Media (VMED), which put itself on the block earlier this summer after receiving an unsolicited bid from private-equity firm Carlyle Group that valued Virgin's equity at roughly $8-10bn. Michael Fries, Liberty's CEO, cautioned in an interview yesterday that Liberty's interest in Virgin Media was preliminary and the co hadn't received detailed financial information yet. He also noted that Liberty typically prefers cable assets in mkts that have more growth potential than the UK. Nevertheless, he said that Liberty is in the business of buying overseas cable co's, so Virgin Media would naturally be of interest. "We owe it to our shareholders to look at this type of co given its size, scale and unique financial attributes, including its tax position," he said.

Doosan Infracore last night said it agreed to acquire the Bobcat construction-vehicle business from Ingersoll-Rand (IR) for $4.9bn. The deal also represents a higher-than-expected price for Bobcat, which some analysts had predicted would fetch around $3bn. Ingersoll said it would sell or spin off the business after weak results tied to the housing downturn. Ingersoll intends to use the proceeds for share buybacks.

The WSJ reports that ABN Amro (ABN) Mon said it no longer recommends a takeover bid from Barclays (BCS), meaning the British bank and a European consortium will compete to buy ABN without the advantage of a recommendation from ABN's boards. Until now, ABN Amro had supported the friendly bid from Barclays, effectively opposing a competing bid from a consortium of three banks led by bank od Scotland and including Fortis and Banco Santander. ABN Amro said it had made changes to its merger protocol agreed with Barclays and is now free to discuss the competing offer.

"Heard on the Street" column discusses energy stocks, saying that high energy prices have meant big profits for this sector, and that has accounted for roughly 1/3 of the mkt's earnings growth in the past 2 years. But rising costs, increased intl taxes and a dearth of good exploration opportunities are shrinking margins. There is a growing sentiment that the energy sector's profits, while remaining strong, won't grow much from here. "We have seen the peak in the earnings power unless we get another significant increase in the commodity price, and we don't see that being supported by the fundamentals," says R. Lewis Ropp, of Barrow, Hanley, Mewhinney & Strauss. The firm holds large positions in Occidential Petroleum (OXY) and ConocoPhillips (COP), but went from being "Mrkt Overweight" in energy last year to "Mkt Weight" this year. A major reason for the shifting sentiment is that while rising commodity prices over the past few years have boosted earnings and stock prices, the large publicly traded energy co's have struggled to increase daily production of oil and natural gas. Last week, Exxon Mobile (XOM) and Shell reported global production was down 1% and 2.3%, respectively. Moreover, rising costs have nibbled away at margins. Renting a state-of-the-art floating drilling rig in '01 cost about $200K a day; the same rig now fetches more than $500K a day. "The earnings of big producers are plateauing, and they're really growing their earnings through share repurchases," says Chris MacDonald, of WHG Funds.

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