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Closing Bell: Tyco International


Since becoming CEO of Adidas-Salomon (ADDDY) in 2001, Herbert Hainer has made no secret of his ambition to take on world leader Nike (NKE). On Aug. 3, he made his biggest move yet, agreeing to pay a 34% premium to buy Reebok Internationa (RBK)l for some $3.8 billion. "I am convinced that one plus one is three," Hainer declared.

That's the kind of bravado one would expect from a man who introduced the "Impossible is Nothing" campaign at Adidas. When it closes next year, the deal will more than double Adidas' U.S. market share in both footwear and apparel.

But Nike will still be miles ahead of the combined Adidas and Reebok, which will continue as separate brands. And even Reebok CEO Paul Fireman admits, "We still have to convince consumers to buy our product." The hope is that Reebok will help Adidas market to urban youth, while Adidas will lend its engineering expertise to Reebok. Now Hainer must prove he can make his math work.

Time Warner (TWX) CEO Richard Parsons is closing out a painful chapter in the company's history. On Aug. 3, he announced the media giant will set aside $3 billion to settle a shareholder class action and other litigation related to accounting irregularities at its America Online (TWX) unit. Time Warner has already settled similar charges with the Securities & Exchange Commission and the Justice Dept. for about $500 million, without admitting or denying the allegations. The latest reserve resulted in a $331 million net loss for the second quarter. Now Parsons can focus on the acquisition of Adelphia Communications (ADELQ) and the spin-off of the Time Warner Cable Div.

The long-running saga of Cendant (CD) is drawing to an end. On Aug. 3, a federal judge sentenced former Cendant Vice-Chairman Kirk Shelton to 10 years in prison and ordered him to pay $3.3 billion in restitution to Cendant in connection with accounting fraud at the New York hospitality and real estate company. Shelton was a top executive at CUC International, a direct-marketing company that merged with HFS in 1997 to form Cendant. Massive accounting fraud was uncovered at CUC shortly after the deal closed. Shelton's attorney did not return a phone call seeking comment. Former Cendant Chairman Walter Forbes, whose case ended in a mistrial, will be retried. Jury selection is scheduled to begin on Sept. 15.

In a deal that could help it remain a pioneering force in telecom, Vonage will team with wireless service provider TowerStream to offer phone service to TowerStream's 1,000 small and midsize corporate customers in major U.S. cities starting Aug. 2. Right now, Vonage serves mainly residential customers, picking up more than 800,000 users through June. But it's eyeing a new market that researcher IDC expects to explode from $89 million in revenue to nearly $2 billion by 2008. Better yet, Vonage won't have to rely on the phone or cable companies to do it. TowerStream uses wireless broadband connections that will help Vonage ramp up service quickly.

The Bush Administration called on its loyal business allies in Washington to lobby on behalf of the Central American Free Trade Agreement, which President Bush signed on Aug. 2. Now those business groups want a favor in return: assign trade negotiators to the 147-nation World Trade Organization talks that are a year behind schedule. The six nations involved in CAFTA are so small that their imports aren't expected to boost corporate bottom lines. But the WTO talks could result in lowered foreign barriers for America's service exports and strengthened intellectual-property protection for the U.S. film, software, and pharmaceutical industries.

-- CIBC (BCM) agreed to pay $2.4 billion to settle charges related to Enron.

-- CNOOC (CEO) dropped its bid for Unocal (UCL).

-- KKR, Five Mile Capital Partners, and Goldman Sachs (GS) will buy a 60% stake in GMAC's commercial mortgage business (GM).

Tyco International (TYC) posted a 29% gain in third-quarter earnings on Aug. 2, but investors punished its shares after the company warned fluctuating steel prices and higher taxes will crimp earnings growth in the fourth quarter. Tyco's shares fell 9.6%, to $27.86, on the news.


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