Yahoo!, Icahn settle proxy fight; Roche puts up $43.7 billion for Genentech; private equities try TransAlta

By Aaron Hochman-Zimmerman

New York, July 21 - While many had their sights set on earnings, the deal world watched what may be close to the worst case scenario unfold for Carl Icahn as he agreed to end the proxy fight with Yahoo! Inc.

The activist investor/corporate raider will have to learn to settle in for the long haul with his three seats of 11 on the board.

Carl Icahn's M.O. is usually not to hang around and toil away building a company's worth, but with only three seats, a deal with Microsoft Corp. looks less likely to many in the market.

All parties involved still favor a sale in some form or another, but fundamentally most see the deal to end the proxy battle also reinforcing the status quo.

In pharmaceuticals, Switzerland's Roche Holdings, which already holds the majority of Genentech Inc. announced a $89 per share offer for the rest of the company.

Investors had already traded through the offer level by the open.

Also, LS Power Equity Partners and Global Infrastructure Partners made an offer to take Canada's TransAlta Corp. private for C$39 per share.

TransAlta shares improved, but did not threaten to break the offer price.

Meanwhile, in the broader market the Dow Jones Industrial Average ended lower by 29.23, or 0.25% at 11,467.34, while the Nasdaq Composite Index fell by 3.25, or 0.14%, to finish at 2,279.53.

The S&P 500 gave up 0.68, or 0.05%, to close at an even 1,260.00.

Yahoo!, Icahn make a deal

Yahoo! and Carl Icahn may be content with their compromise to allow Icahn et al to occupy three of 11 seats on the Yahoo! board, but investors were not as enthusiastic.

Yahoo! stock traded lower on the announcement of the deal, even during the morning hours when Bank of America Corp. earnings lifted share prices.

Both sides had positive words for the compromise.

"We look forward to working productively with Carl and the new members of the board on continuing to improve the company's performance and enhancing stockholder value," chairman Roy Bostock said in a statement.

"This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the company to continue pursuing its strategy of being the starting point for internet users and a must buy for advertisers," said chief executive officer Jerry Yang.

Carl Icahn added to the sentiments of Yang and Bostock, but still lobbied for the sale of the company in official press release.

"I am very pleased that this settlement will allow me to work in partnership with Yahoo!'s board and management team to help the company achieve its full potential," Icahn said.

"While I continue to believe that the sale of the whole company or the sale of its search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders."

"It looks like Icahn turned into a long-term investor," said Paul Martin of Martin Capital Advisors.

"Because Icahn is backing off for the time being, the possibility of a deal [with Microsoft] is being taken out of the equation," he added.

Shares of Microsoft (Nasdaq: MSFT) dipped $0.22, or 0.85%, to close at $25.64.

Shares of Yahoo! (Nasdaq: YHOO) ended lower by $0.78, or 3.47%, to end the session at $21.67.

Roche bids for remainder of Genentech

Genentech traded through the offer price of $89 per share made by its Swiss affiliate Roche Holdings on Monday.

The $43.7 billion offer represents a premium of 8.8% to Friday's close for Genentech which is already 55.9% owned by Roche.

"Roche's significant investment in Genentech over many years has helped it to focus on innovation and long-term projects, leading to some of the most important breakthroughs in the treatment of cancer and other life-threatening diseases," said Roche's chairman Franz Humer in a statement.

"The transaction will create a unique opportunity to evolve Roche's hub-and-spoke model into a structure that allows us to strengthen the focus on innovation and accelerate the search for new solutions for unmet medical needs," he said.

Roche believes the merger will yield between $750 million and $850 million in synergies, but many speculated over the reason why Roche, which already owns most of Genentech, has decided to buy a company whose independent thought they claim to value.

As Roche "you just have to decide what's the best way to deploy capital at this point," said Martin.

Shares of Genentech (NYSE: DNA) launched $12.06, or 14.74%, to finish the day at $93.88.

TransAlta 'potentially' private?

Canada's TransAlta received an offer of C$39 per share from LS Power Equity Partners and Global Infrastructure Partners to take the Ottawa-based power producer private.

The offer amounts to a 21% premium to Friday's close which set an all-time high.

"To that end, we believe that our proposal for TransAlta provides shareholders with compelling value. It also provides continuity for the company's customers, employees, management and communities where it operates," said LS Power Equity president James Bartlett on behalf of LS Power and Global Infrastructure.

The deal would be financed with a $2 billion debt facility and $1.5 billion backstop credit facility from Credit Suisse, the private equity firms said, adding that they would examine refinancing TransAlta's new $500 million senior notes.

This is "potentially" a good deal for everybody, an equity analyst said.

Still, "LSP doesn't really have the appetite for a hostile bid," he said adding that TransAlta "really isn't in a selling mood ... Their first preference would be to stay independent."

"The flip side is that the deal seems to be at a relatively attractive price," he said.

Attempting to weigh the positives and negatives of the deal, "there is maybe a 50% to 60% chance of privatization in the next six to nine months," he said.

Shares of TransAlta (NYSE: TAC) jumped $4.93, or 15.34%, to close at $37.06.

© 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.