Washington Mutual raises $7.04 billion; Nuance eyes $100 million for acquisition; Shear Wind to sell units

By Kenneth Lim

Boston, April 8 - Tuesday was a day of big deals, with Washington Mutual Inc. announcing a $7.04 billion private placement to a group of investors led by TPG Capital.

Nuance Communications Inc. said it will sell $100 million of stock and warrants to pay for its acquisition of eScription.

Meanwhile, Shear Wind Inc. said it is selling C$17 million worth of units in a private deal to fund work on its Glen Dhu Wind Park.

WaMu raises $7.04 billion

Washington Mutual said it sold 55,000 convertible preferred shares at $100,000 apiece for $5.5 billion and 176 million common shares at $8.75 each for about $1.54 billion. The conversion price on the preferreds is $8.75 per common share.

WaMu common stock (NYSE: WM) closed at $11.81 on Tuesday, down by $1.34, or 10.19%.

An investment vehicle managed by TPG Capital will take $2 billion of the securities offered. Some of the investors who are subject to transfer restrictions will receive five-year warrants that will have a strike price based on a post-closing reference price.

TPG founding partner David Bonderman will be appointed to WaMu's board of directors, while TPG nominee Larry Kellner, the current chairman and chief executive officer of Continental Airlines, will be a board observer.

WaMu is a Seattle-based bank. The financing will keep the company's capital ratios well above its targeted levels "during the period of elevated credit costs in its loan portfolios in 2008 and 2009," the company said in a statement.

"We're very pleased that TPG and these major investors have expressed their confidence in WaMu's underlying value and its growth potential," WaMu chairman and CEO Kerry Killinger said in a statement. "This substantial new capital ... will position us for a return to profitability as these elevated credit costs subside. With the support of these investors, we have every confidence in our ability to deal with today's market conditions and restore shareholder value."

"In TPG we have found a great partner with a terrific investment track record," Killinger said. "We are particularly pleased that David will rejoin our board. He has a long history with the company - having previously served as a WaMu director - and we are privileged to once again benefit from his insight and experience."

Keefe, Bruyette & Woods Inc. equity analyst Frederick Cannon had downgraded WaMu common stock to underperform from market perform in a research note for Tuesday based on early speculation about the fundraising.

The large size of the capital raising suggests high credit costs for WaMu in the first quarter, Cannon wrote in his report.

"We believe that a capital raise will dilute common shareholders meaningfully," he wrote. "In addition, the quality of the capital base at WaMu is also likely to deteriorate, especially if a capital raise includes preferred issuance."

"Given the portfolio credit risk, weak capital position, and questionable long term profitability at WM, we believe shares should trade at a meaningful discount to tangible common book value," he wrote.

Nuance plans $100 million sale

Nuance Communications said it is selling $100 million of stock and warrants to finance its planned acquisition of eScription, a provider of computer-aided medical transcription technology.

The company plans to sell 5.76 million shares at $17.36 each to Warburg Pincus. Warburg Pincus also will receive a warrant for 3.7 million shares, which is exercisable at $20.00 for four years.

Nuance stock (Nasdaq: NUAN) rose 5.62%, or $0.98, to close at $18.42 on Tuesday.

This deal will settle at the same time as the closing of the eScription acquisition and is contingent upon the acquisition.

Nuance Communications is a Burlington, Mass.-based speech and imaging technology company.

The eScription acquisition is valued at $363 million, comprising $340 million in cash and $23 million in Nuance common stock. Nuance will also assume about $37 million of vested employee stock options. Closing is expected in Nuance's fiscal third quarter, which ends in September.

"Nuance has experienced robust demand for its on-demand, hosted health-care solution, iChart, in recent years, with growth in the range of 30% to 40%," Nuance's health-care division president, Robert Wise, said in a release. "eScription's exclusive focus on building a highly efficient, scalable on-demand platform will allow Nuance to more completely address the continuing demand in this recurring revenue model. We anticipate that combined revenues for our on-demand medical transcription and clinical documentation solutions will be between $175 million and $200 million in fiscal 2009."

Shear Wind to raise C$17 million

Shear Wind said it has engaged agents to place C$17 million of stock-and-warrant units.

No pricing was available for the units, which will comprise one common share and one half-share warrant each. Each whole warrant will be exercisable for two years.

TD Securities Inc. leads the placement syndicate, which includes Macquarie Capital Markets Canada Ltd. and Blackmont Capital Inc.

Shear Wind, a Halifax, N.S.-based developer of renewable energy, said the proceeds will be used to finance initial construction costs at its Glen Dhu Wind Park project in Nova Scotia and for general corporate purposes.

"Shear Wind is extremely pleased to have the agents engaged for the offering and this will help to accelerate Shear Wind's growth plans for the Glen Dhu Project," Shear Wind president and CEO Mike Magnus said in a statement. "We are currently in the final stages of negotiating a turbine supply agreement and these funds will ensure that turbines are delivered in accordance with our projected build-out timeline on the Glen Dhu Project."

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