NRG investors support Exelon bid; Validus gets pushy; Apollo stockpiles cash for overseas buys

By Cristal Cody

Tupelo, Miss., April 30 - On Thursday, NRG Energy, Inc. executives said the date of the annual shareholders meeting will be decided soon, but a delay won't stop the inevitable closing of Exelon Corp.'s hostile takeover, an analyst told Prospect News.

In other hostile deals, Validus Holdings, Ltd. on Thursday outlined plans to push through its $1.68 billion takeover attempt of Bermuda insurer IPC Holdings, Ltd., but the approach changes nothing, an analyst said in an interview.

Moving to potential transactions, Phoenix-based Apollo Global Inc. has a high chance of completing a takeover offer for London-based professional education and training company BPP Holdings plc, an analyst said Thursday.

Meanwhile on Thursday, Chrysler LLC's bankruptcy filing gave a slight pause to investors.

The Dow Jones Industrial Average fell 17.61 points, or 0.22%, to close at 8,168.12.

The Standard & Poor's 500 index dropped 0.83 of a point, or 0.10%, to 872.81, while the Nasdaq Composite index closed up 5.36 points, or 0.31%, at 1,717.30.

NRG investors pick Exelon

NRG Energy executives said on the company's earnings conference call Thursday that the board is expected to decide a date for the shareholders meeting within the next few weeks.

The Princeton, N.J.-based energy utility held the 2008 shareholders meeting on May 13, 2008.

On Thursday, NRG reported first-quarter income for the three months ended March 31 of $198 million, or 70 cents per share, compared with $45 million, or 12 cents per share, in the same period last year.

NRG said it spent $5 million in the quarter in its defense against Exelon's takeover attempts.

Exelon, a Chicago-based power utility, has launched a proxy contest to expand NRG's board by five members for a total of 19 directors.

Exelon also has offered 0.485 of an Exelon share for each share of NRG in a deal valued at about $5.15 billion.

NRG's board has rejected the bid, but "they will lose that battle," an analyst told Prospect News on Thursday.

As of February, 51% of shares had been tendered in the offer, which expires on June 26.

Exelon's offer is not the best deal shareholders should get, but they are willing to take the trade-off, the analyst said.

"Exelon has made shrewd calculations on the cost benefits of the transaction in this market environment. They particularly addressed the situation of risk in a manner that is attractive to existing NRG shareholders," he said.

"In this kind of economic uncertainty, a great number of NRG shareholders have told me personally they find more comfort in the arms of Exelon than in the arms of NRG, despite the fact that NRG is well hedged," the analyst said. "Exelon is a much larger company, and that makes it more attractive. They're saying 'yes, we recognize the valuation discount, but we think it's worth it.'"

NRG's stock gained 80 cents, or 4.66%, to close at $17.98 on Thursday.

Exelon shares rose 19 cents, or 0.41%, to close at $46.13.

Validus deal doesn't spark

Validus Holdings' offer is conditioned upon IPC dropping its merger with Max Capital Group Ltd.

Hamilton, Bermuda-based Validus has offered 1.2037 shares for each share of IPC, an 18% premium based on the closing prices of both companies on March 30, the last day of trading before the offer's announcement.

IPC's board has rejected the offer and plans to continue its $912 million stock acquisition of Bermuda specialty insurer Max Capital, which is expected to close by the third quarter.

Validus said Thursday that it plans to solicit IPC shareholders to vote against the merger with Max Capital at IPC's annual meeting on June 20.

If shareholders do vote against the Max Capital merger, Validus said it would start an exchange offer for IPC shares and petition the Supreme Court of Bermuda to sanction the deal.

"The fact that IPC's board has agreed to an extraordinarily restrictive agreement with Max, that precludes IPC from engaging in discussions with Validus, has left us with no choice but to take our offer directly to IPC shareholders," Ed Noonan, Validus' chairman and chief executive officer, said in a statement. "We intend to acquire IPC shares by whichever method we determine is most effective and efficient."

Noonan said the company could close on the deal by mid-July at the latest.

IPC and Max Capital representatives were not immediately available for comment.

"I don't think it really changes anything," an analyst told Prospect News on Thursday of Validus' plans. "They still have to wait for the Max offer to be approved or denied at the shareholders meeting anyway."

Validus shares lost $1.02, or 4.36%, to close at $22.40 on Thursday.

IPC's stock added 22 cents, or 0.85%, to $26.04, while Max Capital shares rose 5 cents, or 0.30%, to close at $16.55.

Apollo odds good

BPP Holdings said on Wednesday that it received an offer from Apollo Global for 620p per share in cash, or £303.5 million, which equals $447 million.

Apollo Global is a subsidiary of Phoenix-based Apollo Group Inc., which is the parent company of the University of Phoenix. Apollo Global owns a university in Chile and a majority holding in a university in Mexico.

An analyst said Thursday there should be no regulatory or other issues to prevent a combination.

"Apollo has more than $900 million available for acquisitions outside the U.S. in the professional education space," the analyst said. "Funding the transaction is unlikely to be a problem. We would not expect surprises from the due diligence process as BPP has a good balance sheet and recently renegotiated its debt."

Apollo Group shares rose 47 cents, or 0.75%, to close at $62.95 on Thursday.

Shares of BPP rose 3.5p, or 0.61%, to 581.5p on the London Stock Exchange.

Mentioned in this article:

Apollo Group Inc. Nasdaq: APOL

BPP Holdings plc LSE: BPP

Exelon Corp. NYSE: EXC

IPC Holdings, Ltd. Nasdaq: IPCR

Max Capital Group Ltd. Nasdaq: MXGL

NRG Energy, Inc. NYSE: NRG

Validus Holdings, Ltd. NYSE: VR

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