A major shareholder, the hedge fund Pirate Capital LLC reiterating its strong opposition, told independent directors of Mirant Corp. Monday it would call for a special meeting of the company’s stockholders if Mirant did not immediately drop its unsolicited bid for NRG Energy, Inc., prompting the Atlanta-based merchant power plant operator to quickly abandon the hostile takeover, although it continued to characterize the deal as a “compelling opportunity.”
Part of Pirate Capital’s ultimatum that called for action by Mirant by Wednesday included a request that the company retain a financial advisor to help put the company up for sale. Mirant’s formal response and filing to the Securities and Exchange Commission was silent on this issue.
Princeton, NJ-based NRG responded in a prepared statement that it was looking forward to continuing to pursue its strategic plan and looked to create more value in the company. “Over the past 24 months, NRG’s stock has appreciated 120% as the market has recognized the value of our asset mix, the soundness of our strategy, and our history of returning capital to our shareholders,” NRG’s spokesperson said.
In contrast, Mirant’s written announcement attributed to CEO Edward Muller said he was “disappointed that NRG was unwilling to sit down with us to discuss what would have been a compelling opportunity to create significant value for both companies’ shareholders. It is clear, however, that a long and contested pursuit is not in the best interests of Mirant and its shareholders, and as a result, we are withdrawing our proposal to acquire NRG.”
Pirate Capital’s Portfolio Manager Thomas Hudson, Jr., used particularly strong language in his letter sent Monday to Mirant’s independent directors, calling the quest for NRG “a blatant destruction of stockholder value.” Hudson then repeated his earlier request that Mirant drop the bid and retain a financial advisor to put Mirant up for sale.
“Please note that if the board of directors takes any inappropriate action to usurp the rights of its stockholders or in any way impede the stockholder franchise, we will seek to have the directors held responsible for their actions,” Hudson wrote in concluding his letter. “We have no doubt that you are well aware, as are we, of your fiduciary duties as directors, and we trust that you will act accordingly.”
NRG demonstrated its strong rejection of the unsolicited takeover moves by its fellow merchant power generator when the company asked Delaware’s Chancery Court last Monday to dismiss a complaint filed late last month by Mirant. The would-be acquirer had sued over NRG’s staunch rejection of its proposed buyout offer. NRG said it was undervalued and that Mirant had weak stock.
In its filing, NRG said Mirant’s contention is no longer relevant, contending “there is no actual controversy because the issue of whether Mirant is improperly using NRG’s confidential information in connection with its merger proposal is moot.” NRG said that “a declaratory judgment would leave the parties exactly where they stand today — with a proposal that was unanimously rejected by NRG’s board.”
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