Addax deal hinges on legal OKs; investors await NRG report; Entrust stock up on improved bid

By Cristal Cody

Tupelo, Miss., July 10 - Shares of Addax Petroleum Corp. traded Friday at a discount a day after Sinopec International Petroleum Exploration and Production Corp. opened its C$8.27 billion tender offer.

Meanwhile on Friday, Proxy Governance, Inc. recommended that shareholders of NRG Energy, Inc. vote against Exelon Corp.'s nominees for the board, but a market analyst told Prospect News the key will be RiskMetrics Group Inc.'s report, which is expected to be released on Monday.

In other situations, shares of Entrust Inc. jumped 7.65% to close at $1.97 on Friday after the company struck a revised deal with Thoma Bravo, LLC for $2.00 a share - an offer that likely will persuade shareholders, an analyst said in an interview.

Stocks ended the week mixed on Friday.

The Dow Jones Industrial Average fell 36.65 points, or 0.45%, to close at 8,146.52 on Friday.

The Standard & Poor's 500 index lost 3.55 points, or 0.40%, to 879.13, while the technology-heavy Nasdaq Composite index closed up 3.48 points, or 0.20%, at 1,756.03.

Bill O'Grady, chief market strategist with Confluence Investment Management LLC, said Friday that the week ahead brings a heavy schedule of federal economic releases, including manufacturing and housing data, that should give a better snapshot of the market climate.

"Fears of weaker growth have dominated sentiment," he said. "With a larger set of data to examine, we should be able to better assess if the economy is as soft as market action would suggest."

Addax shortens regulatory wait

Calgary, Alta.-based oil and gas explorer Addax Petroleum agreed June 24 to a buyout by Beijing-based oil and gas investor Sinopec for C$52.80 per share in cash.

Shares of Addax Petroleum closed up 73 cents, or 1.48%, at C$49.90 on Friday.

"We like the discount although it could widen on regulatory delays and information flow like oil price weakness," Emiliano Leggieri, an analyst with Pali International, Ltd., said in a research note on Friday.

The deal must receive several regulatory approvals, including from the government of the People's Republic of China and the Minister of Natural Resources of the Kurdistan Regional Government.

The transaction includes a C$300 million termination fee if China does not give its approval by Aug. 24.

Sinopec's tender offer expires Aug. 14. The transaction is expected to close in the third quarter.

"Sinopec has little room to walk under the MAC clause and Sinopec can walk if the PRC approvals are not granted or the KRG opposes the deal," Leggieri said.

Addax's oil and gas exploration and production operations are located in West Africa and the Middle East and include a joint operation in Iraq's self-ruled Kurdish region with Turkey's Genel Enerji AS oil company.

Eyes on proxy report

Chicago-based Exelon, the nation's largest nuclear power company, urged NRG investors to vote for its nine nominees and its proposal to expand the board to 19 seats in a letter sent Friday.

"The letter emphasizes that the offer brings $2-3 billion in immediate value to NRG shareholders, and there is nothing that NRG can do on a standalone basis to match that," Exelon said in a statement.

Shareholders will vote on the proposals at NRG's annual meeting on July 21.

Proxy Governance's recommendation against Exelon's proposals was not unexpected, an analyst who was not cleared to speak told Prospect News on Friday.

"This one is nice [in] that it's encouraging investors to not support the transaction, but this is not really in any way a swinging factor," the analyst said, adding that RiskMetrics' report will carry more weight. "Proxy opinions tend to impact mostly pension funds, and there's not too many pension funds involved in NRG."

Princeton, N.J.-based NRG on Wednesday rejected Exelon's revised bid of 0.545 of a share of Exelon stock for each NRG share for an offer valued at about $27.00 a share.

NRG shares slid 74 cents, or 3.09%, to close Friday at $23.24.

Exelon's stock fell 10 cents, or 0.21%, to $48.34.

New bid persuades market

Thoma Bravo increased its bid to $124 million, or $2.00 a share, from $114 million, or $1.85 a share, just ahead of Friday's meeting where Entrust shareholders were set to vote on the takeover.

The special shareholders meeting has been rescheduled to July 28.

The deal includes a $2 million termination fee if shareholders reject the acquisition.

Private investment firm Thoma Bravo first reached a deal on April 13 to acquire the Dallas-based security software company for $1.85 per share, but it increased the bid by 8.00% after some investors questioned the offer.

Michael McGrath, chairman of Entrust's board, said in a statement that a special committee and an independent financial adviser sought other offers for the company.

Shares of Entrust have traded from 98 cents to $2.95 over the past year.

"We are confident that the transaction with Thoma Bravo, as amended, achieves the highest attainable value for our stockholders," he said.

An analyst who did not want his named used told Prospect News on Friday that the deal should close at this price level.

"This gives it a lot better chance to close, and investors wanted a little bit more. It's probably fair value at two bucks," he said. "This will probably get some of the investors that were thinking of possibly voting against it to vote for it."

Mentioned in this article:

Addax Petroleum Corp. Toronto: AXC

Entrust Inc. Nasdaq: ENTU

Exelon Corp. NYSE: EXC

NRG Energy, Inc. NYSE: NRG

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.