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1. Not Sure Entrust Deal Will Go Through at This Price
4/13/2009 12:53 PM EDT
( ENTU) announced an agreement to be acquired for $1.85 a share in cash.
Last November, Empire Capital, which owns 20% of ENTU at an average cost of $2.61/share, entered into a settlement agreement with the company in an effort to avoid a proxy contest for board representation. As part of the settlement, Empire was given board observation rights (i.e., a non-voting position) so long as it maintained an ownership above 10%.
Since Empire will remain underwater with this deal, I'm waiting to see how it weighs in.
2. Genworth Misses TARP Deadline
4/13/2009 12:34 PM EDT
Not sure if anyone saw the news late Friday where
missed the TARP deadline by failing to become a bank-holding company in time. Genworth had planned to acquire a "mom and pop" bank called Interbank, but the acquisition didn't progress quickly enough.
Genworth says now that the deal is off, since the only reason it tried to buy the bank in the first place was to achieve "bank holding" status in order to access TARP funds. The stock is down 21% today.
This reminds me of the 2003 NFL draft, when the Vikings missed sending their first-round pick (No. 8 overall) to the podium during the 15-minute allotted time window. They ended up picking 10th after that fiasco.
3. Cautious on W.W. Grainger
4/13/2009 10:36 AM EDT
is not a name everyone follows, but I am a bit leery of the upcoming quarter tomorrow morning. The company principally operates in the industrial sales and marketing segment, selling electronic and construction wholesale equipment. It sells tools, pumps, cleaning products and motors to a wide array of customers in the U.S. and aboard. Most of the items GWW sells are considered "large-purchase" items and are purchased once or twice a year, max. The company recently fired 400 workers, citing lower sales in its industrial supply business, as same-store sales have trended lower (-9% in Jan. and -10% in February). Insiders have sold $2.6 million worth of stock over the past month or so, and the stock is more than fairly valued at 15.04 next year's earnings. The $75 puts for $1.50 seems interesting here -- worth watching.
4. Morning Trade
4/13/2009 9:27 AM EDT
We have a slight bias to the downside this morning, with the emini trading off by just shy of 1%. If the bulls are going to continue to push this market higher, they need to sustain a trade back above 848. Traders should be attracted to the long side above 848 with strong resistance at 855 in their sights. If there are any bears left in this market, they should make an appearance near this level. We may see false breaks above 855, as moderate resistance is just above at 858.
If the bulls take a break today, we could see this market drift toward moderate support at 840. Choppy downside action would not be a big surprise after Friday's ramp ... but a break of 840 and only weak support at 836 keep this market from trading back to strong support at 829.50. Traders should be a little concerned if we can't hold the 829.50 ... but not panicked. Moderate support at 825.50 and 822 should help the bulls on any break of 829.50.
5. Wellpoint Raises Cash -- Perhaps for More M&A
4/13/2009 7:17 AM EDT
decision to sell its pharmacy benefits management unit (PBM) is not a surprise, because the
already reported last month that the company was looking for a buyer. The PBM ranked fourth in the industry and lacked the critical mass to offer the same rebate levels as the industry leaders.
Back in early March, Credit Suisse assumed the unit would fetch $3 billion (although that analysis did not anticipate the future tax benefits portion of this deal). The analysts noted that the Wellpoint unit generates $375 million in EBITDA, and there could be an additional $150 million in synergies.
was presumed to be the other bidder for the unit, and the stiff price may preclude any rival bid. The deal is unlikely to create antitrust concerns, as the combined entity is still smaller than Medco.
The transaction appears to be for a mixture of cash and up to $1.4 billion in stock. The deal would provide Wellpoint further ammo for its own M&A, or perhaps buybacks. For Express Scripts, this is a big cash commitment, and the company will need to explain how it will line up financing on the 9 a.m. CDT conference call. Wellpoint will hold its call an hour earlier at 9 a.m. EST. Wellpoint's use of proceeds discussion could give a hint as to the next M&A activity for the firm.
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This article was written by a staff member of RealMoney.com.