Exelon undeterred by NRG director; Atlas Energy eyes future offers; Heart-Argyle shares fall

By Cristal Cody

Tupelo, Miss., April 27 - NRG Energy, Inc.'s new board appointment makes no difference in its defense against a $5.15 billion hostile takeover from Exelon Corp., an analyst told Prospect News on Monday.

Also on Monday, executives of Atlas America, Inc. and Atlas Energy Resources, LLC said the two companies will merge in a stock deal valued at about $500 million to explore for natural gas - and the combination could prompt a bigger deal down the road.

In other situations, the "second time is the charm" for Hearst Corp.'s increased bid to buy out Hearst-Argyle Television, Inc. at $4.50 a share in cash, an analyst said Monday.

Meanwhile on Monday, the markets braced for a swine flu outbreak and investors sent airline and travel-related stocks down on concerns of a pandemic.

The Dow Jones Industrial Average lost 51.29 points, or 0.64%, to close at 8,025.00.

The Standard & Poor's 500 index dropped 8.72 points, or 1.01%, to 857.51, and the Nasdaq Composite index fell 14.88 points, or 0.88%, to end at 1,679.41.

NRG defense fails

NRG on Monday said it appointed Gerald Luterman, the former chief financial officer of KeySpan Corp., to its board of directors. The company now has expanded its board to 14 members from 12.

Exelon has proposed the board be expanded to up to 19 directors.

Exelon representatives said in a statement provided for Prospect News on Monday that the company is continuing with its takeover plans.

The Chicago-based power company has offered 0.485 of an Exelon share for each share of NRG.

"The recent appointment of a new director to NRG's board will not affect Exelon's proxy solicitation nor will it affect our strategy for the election of independent NRG directors who are fully committed to the fiduciary interests of NRG shareholders," the company said.

Princeton, N.J.-based NRG, which operates 48 power plants, has urged shareholders to reject the offer, but more than 51% of shares have been tendered. The offer expires June 26.

An analyst told Prospect News on Monday that the new director makes no difference.

"It's immaterial on this appointment," the analyst said. "Jesus could be president of NRG's board, but if nine appointees at Exelon want to do something different, it's probably going to happen their way. Right now, it appears the deal will go through."

NRG shares rose 4 cents, or 0.23%, to close at $17.35 on Monday. Shares have traded from $14.39 to $45.00 over the past year.

Exelon's stock added $1.28, or 2.86%, to close at $46.00.

Atlas looks ahead

Atlas America said on Monday it will buy the remaining 52% of Atlas Energy's outstanding shares that it does not already own.

Atlas Energy shareholders will receive 1.16 Atlas America shares for each class B common unit.

Under the merger's terms, Atlas Energy will become a subsidiary of Atlas America and the new company will be renamed Atlas Energy, Inc.

Executives said all cash and resources will be focused on exploring more than 550,000 acres that Atlas Energy controls in the Marcellus shale formation. The formation, which covers several states including New York, Pennsylvania and West Virginia, is estimated to be one of the country's largest reserves of natural gas.

Richard Weber, president of Atlas Energy, said Monday on a conference call with analysts and investors that the combined company could be in a position for a bigger deal down the road.

"Our goal is to make these companies as valuable as possible, and it's quite possible that outside players looking at the situation may very well decide our company is a very attractive acquisition possibility," he said. "We're willing to do what's best for our shareholders."

Weber said the companies' merger does not affect Atlas Pipeline Partners LP's deal with Williams Cos., Inc., which agreed to a Marcellus shale joint venture deal on April 1. Atlas Energy Resources is the joint venture's anchor customer.

Directors of Atlas America and Atlas Energy, along with a special committee of Atlas Energy independent directors, have approved the merger.

The deal must be approved by Atlas America shareholders and Atlas Energy class B unitholders and receive consent from a majority of the lenders under the Atlas Energy credit agreement.

Atlas America representatives did not return messages on additional regulatory clearance information, but the deal is expected to close late in the third quarter.

Edward Cohen, chairman and chief executive officer of Atlas America, said on the call that the merger is the right move, even in this market.

"We're keeping our fingers crossed and hope it's as clear to everyone else as it is to us," he said.

The two Moon Township, Pa.-based natural gas and oil developers have shared resources and staff, and now the combination will clear up any confusion, analysts said on the call.

"It helps clean things up and clear up the future growth profile," one analyst said Monday.

Atlas America shares gained 59 cents, or 4.75%, to close at $13.00, while Atlas Energy shares added 46 cents, or 3.21%, to close at $14.81. Atlas Energy's stock has traded from $7.97 to $45.40 over the past year.

Shares of Atlas Pipeline Partners fell 25 cents, or 5.64%, to $4.18 on Monday.

Tulsa, Okla.-based Williams' stock lost 35 cents, or 2.54%, to close at $13.42.

Hearst ups bid

Hearst increased its buyout offer for Hearst-Argyle Television by 50 cents to $4.50 a share in cash, which represents a total premium of about 115% over the stock's closing price on March 24, the last day of trading before the tender offer was announced.

Hearst, which now owns 82% of the company's class A shares, said it expects to start the tender offer within the next few days.

The increased bid is a "positive surprise," James Dix, an analyst with Wedbush Morgan Securities Inc., said in a research note released to Prospect News on Monday.

"We think this will seal the deal," he said. "With the raised offer, we believe Private Capital Management, which we believe owns 7 million shares, will support the proposed transaction and Hearst will get support from the necessary number of [Hearst-Argyle Television] holders."

New York-based Hearst, one of the country's largest media companies, first tried to buy out Hearst-Argyle Television in 2007 with an offer of $23.50 a share.

New York-based Hearst-Argyle Television owns and manages 29 television stations and is the largest ABC affiliate owner and the second-largest NBC affiliate owner.

Shares of Hearst-Argyle Television lost 5 cents, or 1.10%, to close at $4.50 on Monday.

The stock has traded from $1.38 to $24.50 over the past year.

Mentioned in this article:

Atlas America, Inc. Nasdaq: ATLS

Atlas Energy Resources, LLC NYSE: ATN

Atlas Pipeline Partners LP NYSE: APL

Exelon Corp. NYSE: EXC

Hearst-Argyle Television, Inc. NYSE: HTV

NRG Energy, Inc. NYSE: NRG

Williams Cos., Inc. NYSE: WMB

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