By Cristal Cody
Tupelo, Miss., March 2 - NRG Energy, Inc.'s announced acquisition of Reliant Energy, Inc.'s Texas assets on Monday may include a hitch that could slow down Exelon Corp.'s hostile takeover attempt of NRG.
Also on Monday, Max Capital Group Ltd. agreed to a buyout by IPC Holdings, Ltd. for about $912 million in stock. The deal is a 16-cent discount to Max's closing price on Friday of $16.50.
Genentech Inc. shares sank by $3.96, or 4.63%, to close Monday at $81.59 after its chief executive officer said the company expects a better offer from Roche Holding AG.
Moving to Wall Street, buyers left the market in droves on Monday, and traders are bracing for a 6,000-point Dow.
"A lot of people think we're going to test that number," Michael McCarty, chief equity and options strategist at New York-based broker-dealer Meridian Equity Partners, told Prospect News on Monday. "Some of the biggest market participants went to the sidelines mid-summer last year and have not returned."
The Dow Jones Industrial Average shed 299.64 points, or 4.24%, to close at 6,763.29 - the first time below 7,000 since Oct. 28, 1997.
The broader indexes also sank on Monday.
The Standard & Poor's 500 index lost 34.27 points, or 4.66%, to finish at 700.82, and the Nasdaq Composite index dropped 54.99 points, or 3.99%, to end the first trading session in March at 1,322.85.
"We've got this mass of deleveraging going on, with hedge fund liquidations, market balances reduced and stock that was sold," McCarty said. "People are coming to the conclusion that what we have here isn't just houses were overpriced or it's a subprime problem, but rather it's a problem of decades and decades of over-leverages."
Exelon mulls NRG's Reliant purchase
NRG Energy said Monday it plans to buy Houston-based power company Reliant Energy's Texas retail assets for $287.5 million in cash and about $111 million in working capital.
NRG expects to close the transaction late in the second quarter of 2009.
The company said the deal includes a "double-digit" breakup fee if NRG is acquired by a company that does not want Reliant but declined to release the specific amount.
However, David Crane, NRG's president and CEO, said on a conference call with analysts Monday that the company does not think Exelon can stop the acquisition.
"Our board was well advised of the duty of care they needed to exercise in considering this transaction in light of the exchange offer from Exelon," he said. "To the best of our knowledge, there's nothing we think that's out there in terms of them trying to obstruct the transaction."
Exelon said in a statement Monday that it is evaluating NRG's acquisition proposal.
"NRG hasn't provided enough information about its deal with Reliant to enable us to make an informed judgment about the impact of that deal on Exelon's pending offer to acquire NRG and the resultant impact on the value our deal creates for shareholders," John Rowe, Exelon's chairman and CEO, said in the statement.
"Nonetheless, given the announcement that Reliant may become part of NRG and our support for retail energy markets, we will certainly evaluate how all the pieces fit together in our proposed transaction."
Exelon has offered 0.485 of an Exelon share for each share of NRG in the deal, which is valued at about $5.58 billion.
Princeton, N.J.-based NRG has enough power to supply nearly 20 million homes.
Chicago-based Exelon, the nation's largest nuclear power operator, said that 51% of NRG shares have been tendered in its offer, which has been extended through June 26.
NRG shares closed down 34 cents, or 1.80%, to $18.56 on Monday.
Reliant shares dropped 48 cents, or 13.87%, to close at $2.98.
Exelon's stock lost 74 cents, or 1.57%, to close at $46.48.
Genentech waits for leverage
Roche has offered $85.60 a share to Genentech holders to gain the 44% of shares the Swiss drug maker does not already own.
The tender offer for South San Francisco, Calif.-based biotechnology company Genentech expires on March 12.
Genentech CEO Arthur Levinson said Monday at an analysts and investors conference that the company expects billions of dollars in sales of its cancer drug, Avastin.
Trial information about the drug is due in April.
Analysts have told Prospect News that the information is expected to be positive and should give Genentech more leverage in attracting a higher bid.
IPC, Max Capital report few overlaps
Under the terms of IPC's buyout, Max Capital shareholders will receive 0.6429 of an IPC share for each Max Capital share.
The deal values Max Capital at about $16.34 a share, based on IPC's closing stock price on Friday of $25.41.
The deal is expected to close in the third quarter of 2009 and is contingent upon shareholder and regulatory approvals.
The Bermuda-based companies will operate under the Max Capital Group Ltd. name to provide specialty insurance and reinsurance services.
W. Marston Becker, chairman and CEO of Max Capital, and James P. Bryce, president and CEO of IPC, said in a combined statement that the companies have little business overlap.
Company representatives did not return calls for additional information about which regulatory approvals will be required.
Shares of IPC fell 72 cents, or 2.83%, to close at $24.69.
Max Capital's stock dropped 30 cents, or 1.82%, to $16.20 on Monday. The stock has traded from $9.56 to $31.00 over the past year.
Mentioned in this article:
Exelon Corp. NYSE: EXC
Genentech Inc. NYSE: DNA
IPC Holdings, Ltd. Nasdaq: IPCR
Max Capital Group Ltd. Nasdaq: MXGL
NRG Energy, Inc. NYSE: NRG
Reliant Energy, Inc. NYSE: RRI
| Roche Holding AG: | Swiss: RO
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