Canadian Hydro says deal interest persists; antitrust fears few on Dell buy; MSC back in play

By Cristal Cody

Tupelo, Miss., Sept. 22 - Canadian Hydro Developers, Inc. said on Tuesday it has received other proposals that beat out TransAlta Corp.'s C$654 million hostile bid, but the claims are growing thin, an analyst said in an interview with Prospect News.

Meanwhile, Dell Inc.'s $3.9 billion acquisition of Perot Systems Corp. is expected to close without much competition concerns, a market source said Tuesday.

Also on Tuesday, MSC.Software Corp. said that it received a new higher bid of $8.30 a share in cash from third-party private equity firms. The bidding war between the equity firms and Symphony Technology Group LLC seems set to continue in small steps, an analyst told Prospect News.

In other situations, AerCap Holdings NV is getting more than a good deal in its acquisition of rival aircraft leasing company Genesis Lease Ltd., an analyst said Tuesday.

On Wall Street, investors' moods improved to rally stocks on Tuesday.

The Dow Jones Industrial Average closed up 51.01 points, or 0.52%, at 9,829.87.

The Standard & Poor's 500 index added 7.00 points, or 0.66%, to close at 1,071.66, and the Nasdaq Composite index rose 8.26 points, or 0.39%, to 2,146.30.

Canadian Hydro hints at deals

Canadian Hydro said in a statement that it received a "number of proposals" on Monday.

"We have had a robust data room process, with interest from many parties. TransAlta no longer has the leading proposal," Dennis Erker, chairman of Canadian Hydro, said in a statement. "Our attention now turns to a careful evaluation of the various proposals."

In August, Canadian Hydro said it planned to announce a competing bid from a strategic financial player.

"We never saw one, and now it looks like the company is saying again we're going to see more offers," Matt Gowing, an analyst with Research Capital, told Prospect News on Tuesday. "What is the validity of these offers? Private equity players are clearly candidates, as well as large utilities. It's a wait-and-see game."

Canadian Hydro is a Calgary, Alta.-based renewable energy company with 21 renewable energy-generation facilities using water, wind and biomass technologies in Canada.

The company's board continues to recommend that shareholders reject TransAlta's offer.

TransAlta, a Calgary, Alta., electric energy company, extended its hostile, C$4.55-a-share offer to Oct. 2 on Monday.

Gowing has a price target of C$5.50 a share on Canadian Hydro's stock.

"Right now the market is saying 'this C$4.55 bid isn't going to cut it,'" he said.

Canadian Hydro shares gained 1.77% to close Tuesday at C$5.17.

TransAlta's U.S.-listed stock rose 53 cents, or 2.65%, to $20.54.

Dell timing depends on regulators

Dell is predicted to close its acquisition of Perot Systems by mid-December since competition concerns are minimal, a market observer said Tuesday.

"We estimate that Perot's current share price implies a high probability of the deal closing," the source said. "The businesses of the two companies appear to be complementary."

Competition concerns are unlikely in part because the "IT services market is highly fragmented," the market source said.

While U.S. regulators are expected to give the deal early termination, the transaction's closing could be delayed if reviews are required by overseas regulators, including Germany, the United Kingdom and India, the source said.

On Monday, Round Rock, Texas-based Dell said it will launch a tender offer to acquire the Plano, Texas-based computer services company for $30.00 a share in cash. The bid represents a premium of nearly 68% based on the company's Friday closing stock price of $17.91.

Dell expects the deal to close between November and January.

Perot's stock closed unchanged at $29.56 on Tuesday.

Dell shares lost 28 cents, or 1.75%, to end at $15.73.

MSC considers latest bid

MSC said Tuesday that the latest offer it received is a superior proposal to the deal with strategic private equity firm Symphony Technology Group.

Symphony has until Monday to make a new bid or the merger agreement will be terminated, MSC said in a statement.

Symphony had reached a deal in July to acquire the Santa Ana, Calif.-based simulation software company for $7.63 a share.

An unnamed group of private equity firms made a competing bid for $8.00 a share, which Palo Alto, Calif.-based Symphony later matched. The bid was bumped again last week to $8.15 a share, again matched by Symphony.

MSC spokesman Jennifer Brannon told Prospect News on Tuesday that the company is "bound by nondisclosure agreements and cannot disclose the name until or unless we enter a definitive merger agreement with them."

Kevin Liu, an analyst with B. Riley & Co., Inc., said in an interview Tuesday that there was initial concern that the unnamed firms could not arrange financing, but the terms must be set now.

"The fact they've accepted it as a superior proposal means it's a really firm bid," he said. "The deal from Symphony was essentially guaranteed in terms of financing."

Still, "it seems like Symphony is content to match whatever the other firms do," Liu said.

MSC shares added 10 cents, or 1.22%, to close Tuesday at $8.28. The stock has traded from $3.98 to $13.44 over the past year.

AerCap gets a bargain

AerCap's all-stock acquisition of Genesis is "strategically and financially compelling," Scott Valentin, an analyst with FBR Capital Markets Corp., said Tuesday in a research note released to Prospect News.

"The acquisition is consistent with AerCap's previous comments that the operating environment may have bottomed and begun to stabilize, leading to an eventual recovery," he said. "We view the transaction favorably given the lower-than-expected acquisition price."

Under the terms of the agreement, Genesis shareholders will receive one AerCap share for every Genesis share, which values Genesis stock at $8.81 a share.

Amsterdam-based AerCap values the acquisition of Shannon, Ireland-based Genesis at $1.75 billion.

The transaction is subject to approval by Genesis shareholders and regulatory approvals from the United States, Germany and Turkey.

AerCap expects the transaction to close in the fourth quarter.

"Given the still uncertain recovery in global travel, we expect the shares to continue trading at a discount," Valentin said of AerCap's stock.

However, Valentin raised AerCap's stock target price to $10.00 a share because the combined company will rank as the top independent aircraft leasing company with 358 owned and managed commercial aircraft.

AerCap shares rose 21 cents, or 2.35%, to $9.16.

Shares of Genesis closed up 27 cents, or 3.08%, at $9.03 on Tuesday.

Mentioned in this article:

AerCap Holdings NV NYSE: AER

Canadian Hydro Developers, Inc. Toronto: KHD

Dell Inc. Nasdaq: DELL

Genesis Lease Ltd. NYSE: GLS

MSC.Software Corp. Nasdaq: MSCS

Perot Systems Corp. NYSE: PER

TransAlta Corp. NYSE: TAC

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