The potential collapse of the $10.6 billion buyout of Huntsman Corp. (NYSE: HUN) is hardly a shock.

For one thing, rising oil prices are crushing specialty chemical makers. Another thing is that the deal was announced almost a year ago, an eternity for the closing of a merger and acquisition. The Wall Street Journal argues that private equity shop Apollo Management and its Hexcion Specialty Chemicals Inc. are making a "novel" argument to get out of the deal.

"In a complaint filed in the Delaware Court of Chancery, Hexion said Huntsman's poor financial results -- increased net debt and lower-than-expected earnings -- would render the combined company insolvent," the paper said, adding that legal experts expect Huntsman to file a countersuit. Of course, shares of Salt Lake City-based Huntsman were plunging in premarket action and will likely open much, much lower. CNBC's David Faber points out that the Huntsman deal was "held out" to be the strongest of the LBO deals. That's scary.

In a press release, Huntsman CEO Peter Huntsman said, "These actions appear to be a blatant attempt to deprive our shareholders of the benefits of the Merger Agreement that was agreed to nearly a year ago." The company added that it intends to "vigorously enforce" its rights under the merger agreement and seek to consummate the merger under the agreed upon terms.

Even though Microsoft (NASDAQ: MSFT) revoked its buyout offer, Yahoo!'s (NASDAQ: YHOO) shares have been resilient. Actually, they are up 5% today.

Then again, the Yahoo! shareholder base is full of arbs, hedge funds and activists who want to force the company to get some type of transaction done.

Funny enough, the CEO of Yahoo!, Jerry Yang, is indicating that he's still interested in a hookup. But, of course, Microsoft seems to be pretty cool on things. After all, the firm was bidding against itself.

However, the fact remains that Yahoo!'s shareholders are perturbed. Take Gordon Crawford, who manages Capital Research Global Investors and controls roughly 16% of Yahoo!'s shares. He said he's "extremely angry at Jerry Yang" and wonders what the board was thinking. Basically, Crawford would have been happy with $34 per share.

MAJOR PAPERS:

• Following the collapse of The Bear Stearns Companies Inc (NYSE: BSC), the industry is rampant with rumors wondering about the financial well being of scores of other institutions, according to a Wall Street Journal report called "The Credit Crisis Hits Wall Street". True or not, its giving fits to the companies, regulators, and investors.
• Skyrocketing fuel prices and a weakened economy are taking their toll on the airline industry, reported the Wall Street Journal. Additionally, the proposed Delta Air Lines Inc (NYSE: DAL) merger with Northwest Airlines Corporation (NYSE: NWA) has lost its momentum as airline pilots cannot agree on a structured seniority system.

OTHER PAPERS:

• According to people close to the situation, the New York Times reported that before the end of the month, Citigroup Incorporated (NYSE: C) is planning to lay off another 2,000 investment bankers and traders.
• The Detroit News reported that Ford Motor Company (NYSE: F) appears to have fallen short of its goals in the latest, and possibly last, round of company-wide buyouts for hourly workers.

Ford Motor (NYSE: F) is pulling out all the stops to entice more of its workers to leave the company. According to a piece in The New York Times, the automaker is using DVDs and glossy brochures to pitch its buyout packages, which range from free college tuition for entire families to cash payments of $140,000.

Ford has eliminated 32,000 jobs in the last two years, and plans to cut more. But it's not just jobs that it's getting rid of. The real target is more troubling: middle-class wages. As the Times puts it, Ford is a company "that long offered middle-class wages for blue-collar jobs." That deal is now coming to an end. Many of the workers who leave will be replaced by new workers making much lower wages, roughly $14 an hour. And $14 an hour is not a middle-class wage.

Ford played a central role in creating an American working class that could afford to participate in the economic life of the country. Ford's famous $5 a day for his factory workers was not altruistic. It was intended to create a much broader range of consumers who could afford to buy Ford cars and trucks. Henry Ford understood that the expansion of his company and the industry required relatively high-earning workers.

After reaching an all-time low of $15.25 recently, shares of Blackstone (NYSE: BX) have staged a nice comeback. In today's trading, the stock price is up 6.71% to $17.0.2

So, are we seeing a turnaround in the buyout market? Not necessarily.

This week, there is a "Super Return" conference in Munich. Basically, it's a get-together for the big-wigs of private equity. And yes, Blackstone's chief operating officer, Hamilton James, is one of the attendees. Unfortunately, he has more bad news, according to a piece in Reuters.

That is, the debt markets have continued to deteriorate over the past month -- which will make it even more difficult to get deals done as well as work off the huge buyout debt backlog. His message is that the tough times will last at least until 2009.

Even so, James thinks there is still opportunity. Basically, with low prices on buyout debt, Blackstone can pick up some bargains. More importantly, the firm has billions in fresh capital to be opportunistic.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

I often visualize big business by utilizing my own metaphor of naval warfare. I may be the only guy on the planet to do this, but I don't think so. The exercise helps me in assessing the strengths and weaknesses of the companies I'm considering. It also helps me in putting intra-corporate affairs into perspective.

In my view, Microsoft Corp. (NASDAQ: MSFT) has been like a swift and smooth-running state-of-the-art aircraft carrier. It's well outfitted for its task, able to strike at a moment's notice. It has a well-seasoned and knowledgeable crew. Yahoo! Inc. (NASDAQ: YHOO) has been similar to an aging destroyer group that has been at a loss for an effective admiral. Would you care to guess what I call Google in this scenario? Most of you probably already know. Google Inc. (NASDAQ: GOOG) is like a battle ready nuclear submarine, running deep, cold, and nearly silent, with the ability to effectively engage in battle from a very long distance away.

With Microsoft Corporation (NASDAQ: MSFT) bidding $44.5 billion for Yahoo, Inc. (NASDAQ: YHOO) one would instantly think that Microsoft is the winner -- and they could be -- in about a year or so... maybe. In the meantime, Google Inc. (NASDAQ: GOOG) will benefit immediately. The deck chairs are being re-arranged and there will be one less player. But before everyone thinks Microsoft is going to walk away the big winner, think again.

The game changer right now is Google. With 76% search engine market share, it will still be 4X the size of Microsoft after the Yahoo transaction is closed. Google has been successfully expanding its presence globally, and not in just the usual countries, but in the Brazils, the Portugals, the Argentina's, the Australias, etc. Seeding these remote, but lucrative locations is done and Google is now reaping the rewards.

Google can now capitalize domestically with its customers and Yahoo's/ Microsoft's customers as well by playing the disruption card. Basically, when a technology company is about to be acquired a lot of potentially negative things can and do happen: employees and customer relationships are disrupted. Google can unequivocally claim to customers that they are indeed "the" priority right now and that smooth media/advertising projects are awaiting their approval. Yahoo/Microsoft aren't sure which players are staying or leaving yet. Customers don't like that!!

For the private equity space, it's been a mixed bag this week. The good news is that the $17.1 billion acquisition of Harrah's Entertainment got done (the largest casino deal in history). The buyers included TPG and Apollo Global Management LP.

But there was some bad news too -- it looks like Blackstone (NYSE: BX)'s proposed buyout of Alliance Data Systems (NYSE: ADS) is on the rocks.

So, in this environment, it's understandable that Wall Street is jittery with buyout deals. Just look at the pending buyout of Clear Channel Communications (NYSE: CCU).

Symantec Corporation (NASDAQ: SYMC) shares are trading higher this morning on news of two buyouts in the software industry. Sun Microsystems (NASDAQ: JAVA) announced this morning that it has agreed to buy open-source software maker MySQL AB for $1 billion, and Oracle (NASDAQ: ORCL) reported this morning that it has agreed to buy BEA Systems Inc. (NASDAQ: BEAS) for about $8.5 billion. Investors might think that SYMC could be an eventual buyout target. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on SYMC.

After hitting a one-year high of $21.32 in October, the stock hit a one-year low of $15.15 last week. SYMC opened this morning at $15.16. So far today the stock has hit a low of $15.57 and a high of $16.16. As of 11:00, SYMC is trading at $16.12, up $0.72 (4.7%). The chart for SYMC looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

Last week Bank of America (NYSE: BAC) bought Countrywide Financial (NYSE: CFC). The deal benefits Bank of America in that it gets a big chunk of the US mortgage market and a nice tax write-off, while Countrywide gets saved from a deep mortgage mess and pending liquidity crisis.

What is interesting to options traders though is the option activity that happened in the days before the deal. The deal was widely reported on Friday 1/11/08. But the stock options tell a slightly different story. It appears as if there are some who got wind of this deal a little early.

Call options allow an investor to take on a levered position in the stock and make huge gains if the stock appreciates. In the days before the buyout the call options were extremely active and this is typical of insider trading on the news. If you look at the number of options trading on the day before the announcement and the number that were trading several days earlier, it is very apparent that some traders had wind that something was up. On 1/10/08, the day before the announcement 195,000 January call contracts traded hands. If you compare that to the volume of three days earlier there were only 13,000 January calls traded. That is a 14 fold increase in the daily number of January contracts trading.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about. Mr Kersten does not own or control BAC or CFC positions at the time of this writing.

The New York Times reports that Bank of America (NYSE: BAC) will buy Countrywide Financial (NYSE: CFC) for $4 billion in stock -- or $7.16 a share -- $500 million below CFC's current market value of $7.75 a share, or $4.5 billion. Although this outcome is better than a bankruptcy filing or a government bailout, Bank of America may be letting its ego get in the way of sound business strategy.

Yesterday I told TheStreet.com that I thought Bank of America -- which in August bought 16% of Countrywide by buying $2 billion in preferred shares yielding 7.25% with an option to buy 111 million shares of its stock at $18 -- was doubling down on a bad bet. Since then, Countrywide's stock has fallen 63% from $21 to $7.75 -- wiping out $1.3 billion worth of that 16% stake's value. To me this proves that Countrywide's CEO Angelo Mozillo was wrong when he said last March that the subprime mess would be "great for Countrywide because at the end of the day, all of the irrational competitors will be gone."

While this deal will end Countrywide's irrational existence, Bank of America is likely to survive. For Bank of America shareholders, the question is whether the value of Countrywide's assets -- a $1.4 trillion loan servicing portfolio, a bank, an insurance company, a subsidiary that provides borrowers with loan closing services like appraisals and flood certifications; and a broker-dealer that trades securities -- exceed the cost of its liabilities.

The Blackstone (NYSE: BX) and General Electric (NYSE: GE) buyout of mortgage and vehicle leasing company PHH fell apart. The reason given was lack of available financing. In truth, PHH (NYSE: PHH) is in a business that is currently as far out of favor on Wall Street as an industry can get.

According to Bloomberg, "GE agreed on March 15 to buy PHH, sell the mortgage division to New York-based Blackstone and keep the vehicle-leasing unit. The acquisition price was $31.50 a share." PHH shares currently trade below $18.

The company's third-quarter results were reason enough to cause a buyer to walk. Revenue fell almost 10% to $484 million, and the net loss increased over five-fold to $38 million.

No one should be surprised if the shares go below $15 and stay there for some time.

Douglas A. McIntyre is an editor at 247wallst.com.

Sam Zell formally completed his buyout of the Tribune Company yesterday. It only cost $8.2 billion and months of difficult negotiations -- but now he can go out and get the pitching his newly acquired Chicago Cubs have long needed to win it all. Well, maybe not. Word on the street is that he plans to sell the Cubs and Wrigley Field for a cool billion as soon as he can.

Zell has made it clear that he plans on allowing the various units within the Tribune Company to stand on their own feet. By his count, there are over 60 entities within the company, and each one needs to strike out on its own. As Zell put it, "As I've said over and over again, there are something like 60 entities in the Tribune Co. and I view it as 60 ways to get lucky."

With the credit crunch and the cooling of private equity, the M&A space has been fairly meager lately. But today, we got some good news (at least for deal junkies) -- Ingersoll-Rand (NYSE: IR) has agreed to pay $10.1 billion for Trane (NYSE: TT).

Ingersoll-Rand, founded in 1871, is a major diversified industrial company, with brands like Club Car golf cars, Hussmann stationary refrigeration equipment, and Schlage locks. And with the Trane deal, the company will boost its large climate control business, making it the #2 player behind United Technologies.

Funny enough, it seems that Trane was trying to market itself to private equity buyers by selling off divisions and streamlining divisions. But of course, such a company can also be attractive to a strategic buyer – especially as global markets remain highly competitive.

With the Trane deal, Ingersoll-Rand will have $17 billion in revenues and $2 billion in EBIT (earnings before interest and taxes).

Yet, Wall Street is a bit skeptical, with Ingersoll-Rand's stock price down 7%. Trane's stock, on the other hand, is up 23%.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Shareholders at United Rentals (NYSE: URI) have a right to be mad. Hedge fund Cerberus Capital Management offered to buy the company. Shares rose from about $27 to over $34.

Then Cerberus walked. United Rental stock fell to $20.76 and has not recovered much. The entire matter headed to court. The legal battle was to begin today in Delaware Chancery Court. That has been delayed while the two sides talk.

Cerberus said that it was within its right to break off the contract. According to The Wall Street Journal, "the delay could help United's flagging stock price, as well as clear up some of the negative public perception of Cerberus, a Wall Street buyout shop that provided little detail for why it walked away from its agreement."

In other words, it may have been in the financial interests of Cerberus to walk out, but its may be a shaky legal ground.

Private equity firms have broken a number of these buyouts now, and, in some cases, contracts allowed them to do so. The court system is likely to catch up to them at some point soon. If settlement talks with United do not work out, it may be in this case.

Just one announcement that an LBO shop has had to pay hundreds of millions in damages would send a real shudder through the industry.

Douglas A. McIntyre is an editor at 247wallst.com.