Constellation, EDF regulatory fight ahead; Adrenalina wants PacSun meeting; Brocade merger to close

By Cristal Cody

New York, Dec. 17 - Regulatory approvals for the new joint venture between EDF Development Inc. and Constellation Energy Group Inc. may be headed for a tussle with Maryland regulators, despite Constellation's assertion the state's approval is not needed.

Moving into retail deals, athletic apparel and equipment maker Adrenalina continues to pursue a combination with Pacific Sunwear of California Inc.

Looking to Thursday, Brocade Communications Systems Inc. expects to close its acquisition of Foundry Networks Inc. after Foundry's shareholders approved the terms.

Meanwhile Wednesday, enthusiasm waned on Wall Street. The Dow Jones Industrial Average fell 99.80, or 1.12%, to 8,824.34.

The Standard & Poor's 500 index declined 8.76, or 0.96%, to 904.42, and the Nasdaq Composite index fell 10.58, or 0.67%, to 1,579.31.

Constellation regulatory hurdles

Baltimore-based Constellation Energy called off the $4.7 billion merger with MidAmerican Energy Holdings Co. on Wednesday and took the $4.5 billion offer from EDF.

EDF will pay $4.5 billion for a 49.99% interest in the Constellation Energy Nuclear Group LLC, which owns the Calvert Cliffs Nuclear Power Plant in Maryland and the Nine Mile Point Nuclear Station and R.E. Ginna Nuclear Power Plant in New York.

The companies expect the deal to close in six to nine months.

Constellation will remain a publicly traded company.

Constellation spokesman Lawrence McDonnell told Prospect News on Wednesday the new venture requires regulatory approval from four agencies - the U.S. Nuclear Regulatory Commission, the Federal Energy Regulatory Commission, the New York State Public Service Commission and the Committee on Foreign Investment in the United States.

"We intend to thoroughly brief the Maryland Public Service Commission, which we work with closely, but this is a joint venture in just a specific part of the business and it does not require Maryland Public Service Commission approval," McDonnell said.

However, the Maryland commission said in a statement that it could not confirm whether the transaction will require its approval. The commission plans to hold a status conference Friday that had been scheduled for the MidAmerican buyout.

As part of the merger termination, MidAmerican will receive a $175 million breakup fee, $1 billion in 14% interest notes that mature Dec. 31, 2009, $418 million in cash and about 20 million shares of Constellation stock.

Constellation shares plunged $5.74, or 19.97%, to $23.00 in closing Wednesday.

Adrenalina pesters PacSun

Adrenalina continues to acquire shares in Pacific Sunwear, Adrenalina chairman and chief executive Ilia Lekach said Wednesday in a letter sent to Sally Kasaks, Pacific Sunwear's CEO.

The athletic apparel and equipment maker pressed for a meeting with Pacific Sunwear's board to discuss shareholder value.

"While we continue to have an interest in a potential business combination, our main concern is maximizing Pacific Sunwear's stock price for the benefit of all of its shareholders," Lekach said. "We believe it is in the best interest of all shareholders to avoid the costs and distractions of a proxy contest."

Miami-based Adrenalina withdrew its $5-a-share buyout offer for Pacific Sunwear on Monday, citing the fall in the company's stock price.

Shares of Pacific Sun have traded from a low of $1.01 to a high of $15.90 in the past year.

Pacific Sunwear's board turned down Adrenalina's first offer of $295.7 million, or $4.50 a share, in October.

Kasaks said in a letter sent this week to Lekach that the company's major shareholders have not shown support for a combination.

Linda Tsai, a specialty retail analyst with MKM Partners LLC, said Wednesday that Adrenalina probably will not be successful in the pursuit of the teen apparel maker.

"Over the long run, they definitely see themselves as just more than a $5 stock," she said of Pacific Sunwear's board.

"PacSun has more expertise in this area and Adrenalina is one-eighth the size of PacSun. As far as synergies go, it's not something that makes sense right now," Tsai said.

Pacific Sun shares rose 19 cents, or 10.56%, to close at $1.99 Wednesday.

Adrenalina shares closed unchanged at 70 cents.

Brocade, Foundry to close Thursday

Brocade Communications Systems said it expects to close its acquisition of Foundry Networks on Thursday after Foundry's shareholders approved the deal Wednesday.

A majority of shareholders voted in favor of the merger, Foundry said.

Under the deal's terms, Brocade will pay Foundry shareholders $16.50 a share in cash.

Foundry shares rose 55 cents, or 3.42%, past the offer price to close Wednesday at $16.62.

Brocade shares closed down 10 cents, or 2.93%, to $3.31.

Mentioned in this article:

Adrenalina OTCBB: AENA.OB

Brocade Communications Systems Inc. Nasdaq: BRCD

Constellation Energy Group Inc. NYSE: CEG

Foundry Networks Inc. Nasdaq: FDRY

Pacific Sunwear of California Inc. Nasdaq: PSUN

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