Case Calls Rise as Deal Talk Builds

A farm equipment company creeps into the M&A crowd.
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Wall Street woke up Monday to more traditional media companies attempting to land a beachhead in Internet country, with

GE's

(GE) - Get Report

television network

NBC

saying it will add

Xoom.com

(XMCM)

to its Web holdings to create a venture dubbed NBCi.

But in the options world, for once, Internet stocks weren't the play of the day. Farm equipment was.

Takeover speculation hit

Case

(CSE)

call options, and though volume wasn't runaway on Monday, the volatility in the contracts has been rising steadily, according to Paul Foster with

1010WallStreet.com

. He's been tracking the implied volatility in May 40 calls, for example, that passed 90 today, up from 69 last Friday, the low 50s early last week and 25 in 1998.

According to word passing through the options pits, the two names said to be looking at Case are Swedish automaker

Volvo

(VOLVY)

and Italian automaker

Fiat

(FIA)

.

"Volvo has the money to purchase a U.S. asset, and they have a long-term view about cyclical equipment, particularly as we're at the low end of the cycle," said Foster.

Other options investors said Fiat was a more likely suitor, given its ownership of

New Holland

(NH) - Get Report

, the Dutch agricultural machinery arm of the Italian car manufacturer.

"It's clear from the option premium that somebody thinks a deal is going to happen," said Lillian Seidman, half of the Seidman-Skupp options team at

Miller Tabak Hirsch

. "Whether or not it will be at a substantial premium? Well, the talk has been between 40 and 45 a share, that's a safe range. And it may be a partial stock-and-cash deal. But the options are definitely intimating that the stock wants to trade higher. And it's not like we're waiting on earnings."

Premium on Case's May 40 calls rose 5/8 ($62.50) to 1 3/4 ($175) on volume of 493, compared with open interest of 299. The stock was up 1 11/16 to 38 1/8.

A spokesman for Case wasn't immediately available to comment. Last month, Case posted a loss for the first-quarter ended March 31 of $48 million, or 68 cents a share, in contrast with the year-earlier quarter's net income of $69 million, or 88 cents a share. Sales of agricultural equipment at the Racine, Wis., company fell 30% to $549 million.

Just in case you were snoozing, there were 20th-century industries with options jumping around.

Mexican telecom giant

Telmex

(TMX)

out-of-the-money August 95 calls saw their first trades, with volume hitting 2,000 contracts. The price tag on the series was 5 3/4 ($575) as buyers, or a buyer, hit them today. Telmex shares were up 2 3/16 to 90 5/16.

Spain's

Telefonica SA

(TEF) - Get Report

was reportedly in merger talks with U.S. telecom company

SBC Communications

(SBC)

and Mexico's Telmex.

The call buyers playing for a

Republic New York

(RNB)

takeover were disappointed today, even though a deal with

HSBC

is imminent.

The stock fell 1 7/8 to 68 1/8 and the premium on both calls and puts had come in drastically today. The in-the-money May 65 calls, for instance, were down 2 7/8 ($287.50) to 3 1/4 ($325) at midday.