TALKING POINT/PUROLATOR COURIER CORP <PCC>
Purolator Courier corp's stock rose on
specualtion that a disgruntled former Purolator director would
find a new suitor for the company, traders said.
    Purolator agreed in late February to a 35 dlr-a-share, 265
mln-dlr offer from E.F. Hutton LBO Inc and certain members of
its Purolator courier division's management.
    The stock today hit 36-1/4, up one.
    Today, Purolator revealed in a filing with the Securities
and Exchange Commission that director Doresy Gardner resigned
from its board of directors in a letter dated March 10.
    The letter from Gardner said he resigned the board because
the merger agreement with Hutton barred directors from
soliciting new offers and he believes shareholders might get a
better deal. Gardner said he believes a better offer might be
found if the company would agree to be sold to some other
entity, or if it could sell off all or part of its U.S. courier
division.
    "Basically, (the courier division) is a company that has
450 mln dlrs in revenues. It's a very large company and it's
being sold for 50 or 60 mln dlrs," said Gardner in a telephone
interview with Reuters.
    Gardner is an official of Kelso Management, a firm
associated with Fidelity International Ltd. A group of Fidelity
companies owns eight pct of Purolator, and Gardner said he
personally owns 20,000 shares.
    A Purolator official said the company has no comment on the
letter from Gardner.
    Arbitragers speculated another overnight messenger service
may emerge as a likely bidder for Purolator. Before the
transaction with Hutton LBO was announced, analysts had also
speculated another courier company would be the most likely
suitor.
    While one arbitrager acknowledged there in fact may be no
new bidders, he said the possibility one could appear pushed
the stock into play again.
    "There's no shortage of possibilities. It's just a question
of management's willingness to let the process continue," said
one arbitrager.
    Arbitragers said a new buyer might be found because they
believe Hutton LBO has taken on no risk in the transaction.
Hutton has begun a tender for 83 pct of Purolator at 35 dlrs
cash per share. The balance of Purolator's stock will be bought
for securities and warrants in a new company holding the U.S.
courier operations.
    The arbitragers said tender offer documents show that
Hutton does not need to use its cash in the transaction and
will emerge with a giant, majority equity interest in
Purolator.
    "As far as I can tell from the public documents from the
deal that's on the table, Hutton is basically putting up zero.
One always likes a situation like that. You always like to
think if they can do this deal at no risk, there should be
someone else in the world that could do it higher," said one
arbitrager.
    The firm, however, is supplying temporary financing, and
sources close to the transaction disputed the claim that the
firm will not end up paying for its equity position.
    While one scenario mentioned in the tender offer document
did note that the E.F. Hutton Group subsidiary may not have to
keep cash in the transaction, the sources said there is some
risk to the firm.
    "There are a variety of contingencies and restricted cash,
and all sorts of things that make it very speculative," said
one of the sources, adding there are also severance payments to
employees.
    The E.F. Hutton Group subsidiary is supplying 279 mln dlrs
in so-called "bridge" financing for the transaction. The bridge
financing is a temporary loan from Hutton.
    The financing is to be replaced with permanent financing,
expected to come from banks. However, it may take some time to
replace the financing, the source said, resulting in what could
be a substantial expense to the firm.
    Gardner said Hutton stands to gain fees of 10 to 20 mln
dlrs from the transaction, but sources close to the transaction
said fees are at the low end of the scale.
    "It's a very complex transaction, but basically what
happens is they ostensibly put up money but the fees recapture
any investment they might have once the merger takes place,"
Gardner said.
 Reuter
