FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump

Enlivening SFX's Portfolio

The New York Times reported today that SFX Entertainment (Nasdaq: SFXE), the nation's largest promoter, producer, and venue operator of live entertainment events, has put in a bid worth $100-$110 million for the assets of Livent Inc. The company's stock tapped up a $2 3/8 gain to $55 3/4 in morning trading. You may recall that Livent, the owner of the new Ford Theatre in Times Square and Broadway hits such as "Ragtime" and "Fosse" among other things, filed for bankruptcy late last year after massive accounting fraud was uncovered. Buying the operation out of bankruptcy would allow SFX to pick up the assets of Livent without having to deal with most of the legal problems associated with Livent's past. Any deal would have to be approved by Manhattan's bankruptcy court, and creditors could also attempt to derail the transaction.

I don't know that much about the live entertainment business, but I am intrigued by SFX simply because of its management team, which is headed by Robert F.X. Sillerman. Earlier this decade, Sillerman successfully built SFX Broadcasting into a major radio outfit prior to its merger into Capstar Broadcasting (NYSE: CRB) last year. (SFX Entertainment was spun out of SFX Broadcasting prior to the deal.)

Investing in a roll-up company, one that grows primarily by acquiring smaller competitors, generally involves more risk than internal growers. In addition to facing normal operating risk, roll-ups must be able to successfully integrate companies with different operating procedures and also always have access to capital so that more companies can be purchased. To be successful, the company must have a strong leader, preferably one with substantial experience. While that doesn't guarantee success, it does increase the likelihood.

Last year, theater operations accounted for only 18% of the company's pro-forma revenue. This deal appears to make a lot of sense. In addition to adding a premiere Broadway venue, the potential transaction would enhance SFX's stature among show producers. This, in turn, could enhance Livent's offerings in the 38 markets where the company schedules traveling Broadway performances. The profitable possibilities are pretty easy to imagine and Sillerman has a proven track record of success. This company is one that I want to watch and learn more about.

UPS

Viral infection treatment developer Trimeris (Nasdaq: TRMS) moved up $1 13/16 to $13 9/16 after announcing a secondary offering of 2.5 million shares at a price of $11.75 per share. The company said it will use some of the expected $27.2 million in proceeds to fund the clinical development of its T-20 anti-HIV drug, which is in Phase II trials and has already received the FDA's fast-track approval designation.

Credit card lender Providian Financial Corp. (NYSE: PVN) bounced back $7 15/16 to $91 1/4 after falling 13% yesterday on ill will from a planned class action lawsuit by a cardholder and a concurrent investigation of the company's business practices by the San Francisco District Attorney's office. This morning, at least three brokerage firms raised their ratings on the company.

Newly public online broker DLJdirect (NYSE: DIR) advanced another $12 to $42 after jumping 50% in its first day of trading yesterday. For a closer look at the company's initial public offering, see yesterday's Fool on the Hill.

Latin American-oriented online network StarMedia Network (Nasdaq: STRM) picked up $12 7/16 to $38 1/2 this morning after rising 74% yesterday following its initial public offering of 7 million shares at a price of $15 per share.

Disease management services and healthcare information provider Matria Healthcare (Nasdaq: MATR) gained $7/8 to $5 13/16 after CIBC World Markets started coverage of the firm with a "buy" rating.

Spanish language radio broadcaster Heftel Broadcasting Corp. (Nasdaq: HBCCA) rose $3 3/16 to $60 5/8 on news it will replace Lawter International (NYSE: LAW) on the Standard & Poor's MidCap 400 Index. Lawter is merging with specialty chemical company Eastman Chemical (NYSE: EMN).

Internet service provider Prodigy Communications Corp. (Nasdaq: PRGY) advanced $1 1/2 to $24 1/2 after agreeing to acquire the U.S. consumer, business, and campus online dial-up subscribers of Britain's Cable & Wireless PLC (NYSE: CWP) for $50 to $75 million in cash.

Internet access and business Web services firm RMI.NET Inc. (Nasdaq: RMII) marched $2 higher to $13 1/4 after signing a partnership with Microsoft (Nasdaq: MSFT) to provide e-commerce products to medium-sized businesses using Microsoft's Commerce Site Server, hardware from Compaq (NYSE: CPQ), and processors from Intel (Nasdaq: INTC).

Network Appliance (Nasdaq: NTAP) gained $3 to $48 after Goldman Sachs started coverage of the data network storage and Internet caching devices maker with a "recommended list" rating.

DOWNS

Merger talks between Chevron Corp. (NYSE: CHV) and Texaco (NYSE: TX) have stalled with little progress made toward a deal, The Wall Street Journal reported. It has been nearly three weeks since it was first reported that Chevron was in negotiations to buy Texaco for about $42.8 billion. Shares of Chevron gave up $1 3/8 to $92 11/16 this morning, while Texaco moved back $2 3/8 to $62 7/8.

Business Internet services provider PSINet Inc. (Nasdaq: PSIX) lost $5/8 to $43 3/4 this morning. The company last night said it will issue about 6.9 million common shares of company stock "in connection with acquisitions of other businesses or assets." PSINet said the stock will be issued at prices reasonably related to the market price of PSINet's common stock at the time of the acquisition.

Telecommunications and data communications products maker Teltrend Inc. (Nasdaq: TLTN) fell $3 to $19 after reporting fiscal Q3 EPS of $0.32 before a provision for the upcoming sale of the company's networking product line. The EPS figure was flat with IBES' four-analyst estimate. CEO Howard Kirby Jr. said the quarter met company expectations and he is "working hard on the acquisition front."

Online new music company Launch Media (Nasdaq: LAUN) lost $1 3/16 to $17 1/2 after last night turning in Q1 losses of $0.70 per share. Last year's loss was $1.00 per share. Registered users increased 63% to 1.1 million from the end of December.

Online professional bookstore Fatbrain.com (Nasdaq: FATB) thinned out $1 3/4 to $17 5/8 on news of fiscal Q1 losses of $0.46, worse than last year's $0.25 per share loss. IBES' two-analyst estimate was an $0.50 loss. The company officially changed its name to the decidedly 21st-century Fatbrain.com March 29, leaving the oh-so-passe Computer Literacy Inc. moniker to languish in the annals of history.

Coal producer Consol Energy (NYSE: CNX) burned off $7/16 to $11 7/8 after warning that it expects earnings for the quarter ending June 30 will be "significantly lower" than the same period a year ago due to lower average sales prices and increased costs and interest payments. The company anticipates earnings to be roughly 15% to 35% of the $39.9 million it earned in the year-ago quarter.

Contract electronics and printed circuit board manufacturer Dii Group (Nasdaq: DIIG) dropped $1 3/8 to $32 1/8 after last night announcing plans for a 6 million share secondary offering -- about a 20% boost to the current outstanding -- to fund acquisitions and capital spending and to pay down debt.

Financial and mortgage guaranty reinsurer Capital Re Corp. (NYSE: KRE) moved back $1 7/8 to $17 3/8 this morning. The company agreed to be bought by specialty liability insurer ACE Ltd. (NYSE: ACL) in a stock swap valuing Capital at $18.90 per share based on yesterday's closing prices. The approximately 4% discount likely displeased Capital investors.

Auto parts retailer AutoZone (NYSE: AZO) slowed $2 1/8 to $29 after Donaldson, Lufkin & Jenrette downgraded the stock to "market perform" from "buy."

Assisted living services company CareMatrix Corp. (Nasdaq: CMDC) lost 1 1/2 to $15 5/8 as J.P. Morgan cut the company from "market performer" from "long-term buy."

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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool Editing Brian Bauer (TMF Hoops), another Fool Bob Bobala (TMF Bobala), a Fool's Fool Jennifer Silber (TMF Amused), Fool at last