Wednesday, May 28, 2008

NRG's Attempt to Steal Calpine (CPN; NRG)

From the Kinnaras Capital blog:

After the market closed on May 21, Harbinger Capital Partners (“Harbinger”) revealed that Calpine Corp. (“CPN” or the “Company”), of which Harbinger owns 24%, received an offer from NRG Energy Inc. (“NRG”) that valued CPN at roughly $11.3B or $22.60 per share. This represents a paltry premium to CPN’s current share price and investors should realize this move is simply an attempt by NRG to steal the Company from investors who may have difficulty in assessing how valuable the reorganized CPN and its fleet of power generating assets will be.

Unfortunately, Harbinger appears willing to sell CPN sooner rather than later. Harbinger holds a significant chunk of the Company’s warrants which expire in August. In order for those warrants to generate value for Harbinger, CPN stock must exceed $23.88 by August 25th.

Second, since Harbinger was involved in the reorganization of CPN, its cost basis for the common shares it owns is probably extremely low, making a sale in the $24 range more than acceptable. In addition, SPO Advisory Corp. (“SPO”), which owns 15% (or more) of CPN appears to be aligned with Harbinger which means nearly 40% or more of the shares is controlled by these two entities. This would be similar to Harbinger’s push to sell Northwestern Energy one it emerged from bankruptcy a few years ago. Nonetheless, discussing why NRG’s offer makes little sense for those that did not receive shares through debt for equity swaps may help sway the remaining investors and Board....MUCH MORE