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            B R E A K F A S T   W I T H   T H E   F O O L
                      Friday, December 1, 2000

benjamin.rogers@enron.com
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--Mark Twain


PEPSI COURTING QUAKER, AGAIN
Quaker Oats and Pepsi are talking once more, but will the
outcome be the same?

By Mike Trigg

The Quaker Oats (NYSE: OAT) story took another spin yesterday,
when the world's second-largest soft drink company, PepsiCo
(NYSE: PEP), resumed talks to purchase the maker of Gatorade for
$14.3 billion. Not long ago, similar discussions were brought to
a halt after Quaker rejected Pepsi's offer, citing a dispute in
price.

The story with Quaker is an interesting one. After similar talks
with Coca-Cola (NYSE: KO) and French food conglomerate Groupe
Danone (NSYE: DA) failed to materialize, investors are left to
ask: Is this time for real?
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According to The Wall Street Journal, the two sides appear close
to agreement, with the deal potentially wrapping up in the next
couple of days. If the two sides in fact do reach agreement, an
announcement would be made Monday morning. Both companies have
planned board meetings for this Saturday.
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Apparently, the proposed deal is no different than the last.
Quaker Oats shareholders would receive 2.3 shares of Pepsi
stock, valued at $104.36, based on Pepsi's closing price of
$43.38 yesterday. That's a 27% premium to Quaker Oats, stock
price as of November 2, the day original talks were made public.
Pepsi hasn't offered a "collar" -- the original deal breaker --
to Quaker, which is a form of price protection that fixes a
price within a set limit of how far the buyer's shares can rise
or fall. The same Wall Street Journal article reports that an
arrangement is being negotiated that would allow Quaker to
abandon the deal if the value provided to Quaker shareholders
became less than $90 per share upon closing.

If the deal does go through this time around Pepsi would surpass
Coca-Cola as the leader in the non-carbonated U.S drinks market,
holding nearly one-third of the market, compared to Coca-Cola's
21%. According to the Street, Pepsi would also be able to jump
start sales of Quaker Chewy Granola bars, selling them through
its Frito-Lay food division.
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NEWS TO GO

Information transfer device maker Crossroads Systems (Nasdaq:
CRDS) announced better-than-expected third-quarter results after
the market's close yesterday, reporting a net loss (excluding
goodwill and stock compensation) of $4.8 million, or $0.18 per
share, compared to a loss of $870,000, or $0.04 per share, in
the year-ago period. The Street consensus called for the company
to lose $0.21 per share. Crossroads, top line came in at $8.4
million, an 18% increase year-over-year.

Discount airline company Cheap Tickets (Nasdaq: CTIX) announced
that CFO Dale Jorgensen plans on retiring in February. Jorgenson
will remain with the company after his retirement to aid in the
transition and provide assistance on certain projects. ``While
my time with Cheap Tickets has been very rewarding, I have
decided to devote more time to my family and other personal
interests. I am very pleased to have been part of the progress
the company has made moving into the public market and see a
great future for Cheap Tickets' unique multi-channel revenue and
distribution model,'' said Jorgensen.

Carbon dioxide seller Kinder Morgan Energy Partners (NYSE: KMP)
announced a deal with GATX Corp. (NYSE: GMT) to purchase two oil
product pipelines and 12 storage terminals for $1.15 billion in
cash and debt. Kinder Morgan Partners Chairman and CEO Richard
Kinder estimated the deal would increase earnings per share
between $1.62 and $1.75 in 2001, with the Street consensus
calling for the company to earn between $1.50 and $1.62 a share
in the coming year. The deal is expected to close in the first
quarter of next year.

Heating and cooling products provider Modine Manufacturing
(Nasdaq: MODI) announced that it was revising earnings and sales
forecasts for its third quarter and the full fiscal year (ends
March 31, 2001). The Racine, Wisconsin-based company expects
third-quarter revenue to be down 10% to 13% and earnings 55% to
65%. For the full year, sales should be down 7% to 10% with
earnings dropping between 25% and 30%. The company cited a weak
euro and lower sales in the heavy-truck and light-vehicle
markets. Modine earned $2.20 per share in the previous year.

Steel processing company Worthington Industries (NYSE: WOR)
announced that its second-quarter (ended yesterday) earnings
would fall short of expectations and that it had halted its
proposed $300 million acquisition of three Pennsylvania limited
partnerships: MetalTech, NexTech, and GalvTech. The company said
earnings would be substantially lower than the $0.15 per share
it posted in the previous quarter and that the full-year Street
earnings expectation of $1.07 was unrealistic. The Street
consensus called for the company to earn $0.22 per share in the
second quarter. The company cited the weakness in several of its
business, including its steel-processed products operations.
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17 INDUSTRIES WORTH A LOOK
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