| ||||||||||
| ||||||||||
— Arbitrage —
This proxy season is looking fairly active. It's no wonder: diminished stock valuations, a grim outlook for corporate growth, defensive corporate postures and investors looking for opportunity all add up to proxy fights. Here are two current contests. NRG Energy Inc. |NRG Deal value $5.78 billion Spread 02/17/09 $4.57, or 23% Exelon Corp.'s hostile bid for NRG Energy Inc. includes a fight for NRG board seats, but the target has taken the fight to regulators as well. Exelon began a proxy solicitation to expand the staggered NRG board from 12 to 19 members and has nominated nine dissident directors to fill five of the new seats and replace the four current NRG board members who would stand for re-election at the upcoming meeting. NRG's 2008 annual meeting was held in mid-May.
Exelon has an exchange offer outstanding for NRG for 0.485 of an Exelon share for each NRG share. NRG rejected Exelon's offer in November, but Exelon has not raised the bid since then. NRG insists that it is a buyer or seller at the right price. The proxy contest has spilled into the regulatory world with NRG arguing to the Nuclear Regulatory Commission that the bid and proxy contest are destabilizing and constitute a premature change of control. NRG also argues that Exelon's application is incomplete because it lacks NRG's consent. Exelon argues that the Williams Act calls for federal regulators to avoid impeding shareholder rights under a tender offer and that its board nominees are independent. NRG has also filed papers before the Federal Energy Regulatory Commission to challenge the processing of the application. Terra Industries Inc. |TRA Deal value $2.1 billion Spread 02/17/09 -$1.24, or -5% Terra Industries Inc. is fending off a hostile exchange offer from CF Industries Holdings Inc., which offered 0.4235 of a CF share for each share of Terra. CF also intends to replace three members of Terra's staggered board of directors. Terra's 2008 shareholder meeting was held in early May. This battle may turn on antitrust issues, as well as valuation. Terra argues that the offer undervalues it fundamentally and on a relative basis to CF. The companies presented slightly different outlooks for their nitrogen-based fertilizer business for the spring. Terra was bullish that conservative orders last fall will force fertilizing up even as farmers reduce planting. On the regulatory front, CF is banking that the market for
fertilizer will be defined as international. An extended antitrust
review is likely; at least some of the product lines the companies
share have regional characteristics. The product overlap in the Midwest
could translate to Both Terra and CF reported record fourth quarters and full-year
financial results recently. The arb market may be anticipating a
spoiler bid or the arrival of a white knight for either Terra or |
|
|
|
|
|
