Huntsman Corporation (HUN) - Hexion Specialty Chemicals

July 1, 2008 (8:35a) - European Commission Approval / Status Report

The European Commission has conditionally approved this transaction. Excerpts from the official EC press release included the following:

"To remove the Commission's concerns, Hexion offered to divest all facilities belonging to its own epoxy resin business at Duisburg (Germany), its facility at Stuttgart (Germany), its facility at Argo (US), its High Performance Resin Unit at Norco (US), as well as RD assets in Duisburg, Stuttgart and Houston (US), including tangible and intangible assets, such as IPRs, licenses, permits, contracts, brands and personnel. After market testing the proposed remedies, the Commission concluded that they were suitable and viable to address the competition concerns identified in its market investigation and, on this basis, decided to authorise the transaction, as modified by the commitment."

In a separate and more critical development, hedge fund company D.E. Shaw has announced that it intends to help resolve the current dispute between the two entities by serving as a mediator and/or financing source to expedite the transaction. This development comes less than a day after HUN publicly repeated its claims that Hexion/Apollo remain obligated to extend the July 4 termination date and ultimately complete the transaction.

While these are certainly positive events that provide some hope that this deal can be salvaged, it remains perceived that Hexion/Apollo have very little interest in pursuing the transaction at this time. Barring a near-miraculous turnaround in this situation, this transaction is expected to be terminated in the near future.

 

June 23, 2008 (12:30p) - HUN Files Counter-Lawsuit

HUN has, not surprisingly, filed this lawsuit against Apollo Management for, according a HUN press release:

"(F)raud and tortious interference in connection with inducing Huntsman to terminate its merger agreement with Basell to enter into a merger agreement with Apollo affiliate Hexion Specialty Chemicals instead.".

In response, Hexion has issued the following statements on behalf of Apollo:

"It is unfortunate that Huntsman has chosen to file a baseless lawsuit against Apollo and to personally sue two of its principals. Huntsman's Texas suit violates a clear provision of the merger agreement which requires that any litigation be brought exclusively in the State of Delaware. As we alleged in our suit, primarily due to Huntsman's underperformance, we believe that consummating the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent. In fact, Huntsman's suit does not dispute that the combined company would be insolvent. We believe Huntsman's lawsuit is wholly without merit."

There is really very little that can be added to this situation. There is now clearly almost no possibility that this transaction will proceed in any form, regardless of HUN's efforts or rhetoric.

This publication anticipates a negotiated termination of this transaction in the near future, most likely before the end of July or perhaps at some point in early August.

 

FTD Group, Inc. (FTD) - United Online, Inc. (UNTD)

June 30, 2008 (5:20p) - Preliminary Proxy Statement Filed

The companies filed the initial proxy statement for this transaction with the SEC on June 27, 2008, under the name "Classmates Media CORP".

The delay in filing the initial proxy statement is evidently a result of the size of the document which far exceed the majority of proxy's in terms of length. This is a very solid indication that a proxy review waiver will difficult to obtain in this case, which in turn would push the close beyond the initial August projection, and quite possibly beyond September.

It will be pointed out once again that the SEC has very rarely conducted lengthy (+60 days) merger proxy reviews over the last two to three years, so the actual chances of this occurring here are relatively small. However, the combination of a late first proxy filing and an extremely voluminous document must be considered red flags for a quick SEC process.

If the SEC holds to its habit of clearing the more complex proxies in roughly 60 days, the companies will be able to complete the transaction before the end of September. A late-September close is the current projection, although this could easily change if the companies are unable to turn the first proxy around very quickly.

William Wrigley Jr. Co. (WWY) - Mars, Inc.

June 30, 2008 (4:40p) - Preliminary Proxy Statement Filed

WWY filed the first amended proxy statement for this transaction with the SEC on June 26, 2008.

WWY shareholder meeting details are not provided in the document.

The revised proxy confirms that the HSR waiting period expired on June 20, 2008 without the issuance of a second request.

The proxy also discloses that this transaction will require consent from the Australian Competition and Consumer Commission and Canadian Competition Bureau. The Australian CCC began its review on June 23 and has established a review deadline of July 15, 2008 for this case (31930). Details of the Competition Canada review have not been obtained as of this entry.

Nevertheless, neither the Canadian, nor the Australian reviews are expected to impact the timing to close for this transaction. Since the proxy review was not waived for this transaction, the SEC is now perceived as the key timing factor. Assuming the proxy receives a standard 45- to 60-day review -- which translates into proxy clearance in a mid/late-July time frame -- the WWY shareholder meeting and close will likely occur during the third or fourth week of August 2008.

BCE, Inc. (BCE) - Teachers Private Capital

June 30, 2008 (11:20a) - Status Report

Various reports (lead by this Globe and Mail article) are suggesting that the financing negotiations may result in the deal close being pushed until the latter part of this year.

This publication perceives the comments coming from the negotiations as standard rhetoric and the posturing as standard procedure for a situation of this nature. As such, it continues to be anticipated that the parties will reach a mutually agreeable settlement on this deal's financing and the companies will successfully complete the transaction before the end of August 2008.

June 23, 2008 (8:35a) - Supreme Court of Canada Approval

The Supreme Court of Canada reversed the previous decision by the Québec Court of Appeal on Friday (6/20), thereby approving the transaction in terms of the Canadian legal system.

The lending banks (Citigroup, Deutsche Bank, Toronto Dominion) have issued the vague statement in response to the Supreme Court ruling:

"The banks expect that the transaction will close in accordance with the Definitive Agreement."

There is currently no solid indication that the banks will attempt to force the companies to renegotiate the financing terms, but this is certainly not out of the question under the circumstances of this transaction.

Nevertheless, the Supreme Court victory leaves very little doubt that this transaction will now be successfully completed in one form or another, and this is currently expected to occur within the next two months.

W-H Energy Services, Inc. (WHQ) - Smith International, Inc. (SII)

June 30, 2008 (10:40a) - Preliminary Prospectus Filed

SII filed the initial prospectus statement for this transaction with the SEC on June 24, 2008.

The current exchange offer expiration date is July 22, 2008.

The document discloses that an HSR notification was filed with the FTC/DOJ on June 24, 2008. This creates a waiting period expiration date of July 24, 2008. As discussed previously, this transaction is essentially immune from HSR delays due to the different types of drilling services offered by the respective companies. It is very likely that early termination will be granted before the current expiration date, and almost as likely that this will occur before the current exchange offer expiration date of July 22.

The prospects does not specifically identify non-U.S. requirements but offers the following vague reference on this matter:

"Under the laws of certain foreign nations and multinational authorities, the transaction may not be completed or control may not be exercised unless certain filings are made with these nations’ antitrust regulatory authorities or multinational antitrust authorities, and these antitrust authorities approve or clear closing of the transaction."

As WHQ's operations are virtually limited to U.S. operations, it is very unlikely that any formal non-U.S. regulatory approvals will be required for this transaction.

Given that this transaction will not require WHQ shareholder approval, a completion before the end of July is the current expectation, with an outside chance of some slippage into mid-August, at the latest.

The TriZetto Group (TZIX) - Apax Partners

June 30, 2008 (9:25a) - TZIX to Adjourn Shareholder Meeting

TZIX has announced that it plans to adjourn today's special shareholder meeting associated with the transaction to an unspecified date in mid-July. A TZIX press release cites the following for today's decision:

"On June 27, 2008, the Delaware Court of Chancery issued a memorandum opinion and order granting in part and denying in part the plaintiff's motion for a preliminary injunction enjoining the proposed merger. While the Court rejected most of plaintiff's arguments in support of the motion for preliminary injunction, finding that the process leading up to the proposed merger was fair, comprehensive and reasonable and that plaintiff failed to demonstrate a probability of success on most of its disclosure claims, the Court preliminarily enjoined TriZetto from conducting or allowing any vote by its stockholders to approve the proposed merger until TriZetto makes additional disclosures in its proxy materials regarding the potential financial benefits of the merger to UBS Securities LLC, TriZetto's financial advisor, based on its previously disclosed interest in certain convertible notes issued by TriZetto and related bond hedge and warrant transactions entered into with TriZetto in 2007. As a result, the special meeting will be adjourned until an expected date in mid-July in order to give TriZetto stockholders an opportunity to evaluate the proposed merger in light of the additional disclosure."

Obviously, this is a fairly rare development where the Delaware Chancery Court is concerned as the Court rarely offers shareholders any type of injunctive relieve in merger situations. Nevertheless, this event is not perceived as terribly troubling for the transaction general, but rather as a technicality that can and will be easily resolved by TZIX providing the necessary adjustment to the definitive proxy statement.

The transaction remains expected to be successfully completed before the end of July 2008.

Grey Wolf, Inc. (GW) - Basic Energy Services (BAS)

June 30, 2008 (9:05a) - Third Precision Drilling Offer Rejected

GW summarily rejected Precision Drilling's third unsolicited offer on June 27, stating the following:

"Grey Wolf’s Board of Directors concluded that pursuing discussions with Precision is not in the best interests of Grey Wolf stockholders, particularly in light of Precision’s adamant and publicly-announced refusal to consider any increase in its final offer. An effort to seek clarification of Precision’s proposal led Grey Wolf to conclude that Precision’s third offer was truly Precision’s final, non-negotiable offer."

GW's latest rejection is somewhat of a surprise, if only in that the company seems unwilling (at least publicly) to consider entering discussions with Precision for what truly can not be described as an inferior offer at this point. Furthermore, the current Precision offer is clearly in the best interests of GW shareholders in comparison to the current terms with BAS -- a fact that will not be lost on GW shareholders over the next two weeks.

The current expectation is that GW will be forced to adjourn its July 15 shareholder meeting in order to convince BAS to increase its offer to at least match the value of the current Precision Drilling offer. It must be assumed at this point the GW and BAS are discussing revised terms now, with the realization that the current terms are vulnerable to rejection by GW shareholders on July 15.

XM Satellite Radio (XMSR) - SIRIUS Satellite Radio (SIRI)

June 30, 2008 (8:25a) - Status Report

This entry will simply note that no substantial indication exists for an FCC decision today as recently projected as an expectation by Commissioner Martin. Although the FCC decision for this case could literally be issued at any point, the overall impression remains that concerns within the FCC leadership specific to approval and/or conditions will prevent the Commissioner vote and final decision from occurring within the next few day, and perhaps weeks.

At this point, there is very little to add with respect to assessing the chances for approval or company rejection of a highly conditional approval. It will simply be stated again that an FCC approval with minor conditions is not expected in this situation. It also remains entirely possible that the majority of voting Commissioners will only consent to this proposed merger by attaching conditions that the companies may deem unacceptable. The chances of this occurring remain at roughly -25%, with that percentage perhaps being greater with the continuing delay following Commissioner Martin's circulation of a draft decision.

However, it will also be pointed out that the companies are more likely (+75%) to accept any/all conditions that may be imposed, even if the original rationale for this transaction is compromised. This has now developed into a situation where the companies have little choice but to capitulate the demands of the FCC and attempt to move forward as a single entity under the current market conditions.

The FCC decision is tentatively expected within the next three to four weeks.

Corn Products International (CPO) - Bunge Limited (BG)

June 26, 2008 (11:25a) - Initial Analysis

This appears to be a fairly simple transaction overall, particularly with respect to product overlaps, which have a tendency to create major delays in food-related transactions. In this case, CPO's various corn-derived products do not compete directly with BG's various agricultural products, nor is there much indirect competition between the two companies' products. The rationale for the deal seems to be the recent demand for corn products, rather than a true vertical addition to BG's current offerings. As such, this combination will draw absolutely no interest from the FTC, despite the fairly high occurrence of HSR delays in mergers in this industry.

With respect to the SEC, CPO has had some issues with its quarterly reports (four amendments since 2004) and some past problems with its annual reports (one amendment in 2004). However, the company has had very few encounters of the last three years, which tends to be the SEC's informal period for reviewing merger proxies. Naturally, this is not a definitive indicator in this case, but it does suggest that the proxy review for this transaction will not be terribly long or arduous.

In short, assuming the companies are able complete and file the initial proxy statement before the end of July (or by very-early August), shareholder meeting and a close can be projected in mid/late-October, at the latest. Any delays in the proxy process -- keeping in mind that the federal holiday season is fast approaching -- could result in some slippage into November of this year. This does not seem very likely for this transaction.

Anheuser-Busch Cos. (BUD) - InBev

June 26, 2008 (9:20a) - Status Report

According to various reports (originating with The Wall Street Journal), BUD will again formally reject the InBev offer which remains at $65 per share. A BUD announcement is expected either today or tomorrow.

It will be stated once again that this publication has very little expectation of a transaction occurring here between BUD and InBev, friendly or otherwise.

If InBev does indeed attempt a hostile takeover, the chances of success are exceedingly small and will very likely cause more long-term harm to the company in U.S. It is very difficult to believe that InBev is not fully aware of this concept and will act accordingly over the coming weeks. This, of course, translates into ceasing its efforts to force a transaction with BUD.

LTX Corporation (LTXX) - Credence Systems Corporation (CMOS)

June 23, 2008 (9:35a) - Initial Analysis

Although there is a direct overlap in the Automated Test Equipment (ATE) niche here, it appears that LTX is a second-tier player to industry leaders Advantest, Teradyne, and Verigy. In essence, this transaction is an effort to consolidate two of the top secondary players, thereby establishing a fourth top-tier player. As such, this transaction will raise absolutely no FTC interest. Estimated market shares as of 2005 are provided below:

ATE Market Share (c. 2005)

Advantest - 50%
Teradyne - 17%
Verigy - 14%
Credence - 7%
Others - 12%
 
It is also interesting to note this 2004 EETimes article in which CMOS is cited as placing itself among the lesser competitors in the ATE niche:

"According to a chart from Credence, Advantest, Agilent and Teradyne are considered first-tier players in ATE. In the same chart, Credence, before the deal with NPTest, puts itself in a list of second-tier ATE players, along with LTX, NPTest, and Yokagawa."

Thus, the SEC proxy review will in all likelihood determine the timing to completion for this transaction. Neither company possesses a history with the SEC to suggest that a terribly lengthy merger proxy review will occur here. In a worst-case scenario, a proxy review of 45 to 60 days in this case would result in a close in roughly mid-October 2008. However, it is much more likely that SEC consent will be obtained by late-August, allowing the shareholder meetings and close in late-September 2008.

Allied Waste Industries (AW) - Republic Services, Inc. (RSG)

June 23, 2008 (11:10a) - Initial Analysis

This transaction will combine the second (AW) and third (RSG) largest non-hazardous waste disposal companies in the United States, thereby creating a literal duopoly in this industry in terms of the national market.

However, there are two elements here which should ultimately allow this transaction to succeed from a regulatory perspective: A) The combined AW-RSG entity will have just more than half the industry market share of leader Waste Management with respect to annual revenues, and B) On a local/regional level, the waste industry will remain highly competitive/fragmented due to the presence of countless smaller, independent companies. The latter factor essentially defines the waste remediation industry and how federal regulators tend to view mergers amongst the top-tier, national players.

The two charts below show fairly recent market data that will apply directly to the HSR review of this transaction. The first is a rough estimate of the three major waste companies' market share data based entirely on customers. The second is a breakdown of each companies' facilities by volume and annual revenue as of 2006. Note that Waste Management will continue to be the top player in this industry, again, on a national scale, if this transaction succeeds:

	Waste Management (WMI)	Allied Waste Industries (AW)	Republic Services (RSG)
Customers Served (approx. million)	21	10	5.5

	Waste Management (WMI)	Allied Waste Industries (AW)	Republic Services (RSG)
Collection Companies	413	304	135
Active Landfills	283	168	59
Transfer Stations	370	161	93
Recycling Facilities	131	57	33
Revenue - FY 2006 ($ mil)	$13,363	$6,028.8	$3,070.6

Under previous DOJ/FTC administrations, this combination might be vulnerable to some antitrust interest, if not mild scrutiny. However, the current regulatory environment suggests that this particular case will likely receive very little, if any, DOJ/FTC interest. In a very worst case scenario, the companies may need to re-file the HSR notification, but the chances of this currently seem very low (10%).

Based on the information gathered to this point, the current expectation is a deal completion in less than four months, or by mid/late-October at the latest.