Calpine considers NRG offer; BCE deal on hold; satellite radios must divest, say senators

By Aaron Hochman-Zimmerman

New York, May 22 - Stocks held off another downhill session and managed to inch higher as investors wondered if BCE Inc.'s $52 billion private equity buyout would itself be able to recover from a big defeat in the Quebec Court of Appeals.

BCE promised to appeal the decision, but the drop in its share price left some thinking the BCE deal may have been disconnected.

Recently emerged from bankruptcy, Calpine Corp. saw its shares revitalized by news of a friendly offer from NRG Energy Inc. - although some said the bid may be too small.

Still, investors' dollars showed confidence in the two energy firms.

In retail, Borders Group Inc., which has been exploring options for months, may have found a willing buyer in the United States' largest bookseller Barnes & Noble Inc.

However, some question whether or not anti-trust regulators will regard the deal as by the book.

Also, while media industry regulators at the Federal Communications Commission consider the merger of XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., which was already approved by the Justice Department, two senators added their bipartisan opposition to the deal in its current form.

Meanwhile, the Dow Jones Industrial Average clawed higher by 24.43, or 0.19%, to 12,625.62, while the Nasdaq Composite Index added just 16.31, or 0.67%, to finish at 2,464.58.

The S&P 500 picked up 3.64, or 0.26%, to close at 1,394.35.

Calpine's call

NRG's newly public $9 billion bid for Calpine improved shares prices in early trading even though the stock "was trading at a 4% discount to the offer price," said Calyon analyst Gordon Howald.

"When I spoke to them this morning, NRG pretty much just said, look, we're not going to get into a bidding war for these assets," Howald said, "NRG is a pretty fiscally disciplined company."

Still, "we are confident that a higher bid will be needed to consummate this deal, should Calpine ultimately accept," he wrote in a research report.

Also, the deal may improve valuations across the industry, Howald wrote, but overlap between the two will likely ruffle the dander of a few regulators.

As it stands, the upcoming decisions are Calpine's to make and its largest shareholder, Harbinger Capital, is in favor of the deal, Howald wrote.

Shares of Calpine (NYSE: CPN) tacked on $1.72, or 8.08%, to close at $23.00.

Shares of NRG (NYSE: NRG) fell $2.16, or 5.08%, to finish the day at $40.35.

We're sorry, your deal cannot be completed

With the decision by the Quebec Court of Appeals in favor of Bell Canada's bondholders, it seemed to many that the lines for a private equity takeover of BCE may have been cut.

However, the private equity firms are still interested, a market source said, and BCE said it plans to appeal the court's ruling.

"The judgment overturning the Quebec Superior Court decision rewrites Canadian law relating to the duty of Canadian boards of directors to maximize value for shareholders in the context of a change-of-control transaction, as well as to the entitlements of bondholders in those circumstances," said Martine Turcotte, chief legal officer of BCE and Bell Canada in a statement.

Still, investors did not appear enthusiastic about the deal as shares of BCE (NYSE: BCE) sank $4.73, or 12.50%, to $33.10.

Borders deal out of bounds?

After a book deal between Barnes & Noble and Borders saw the light of day, Borders "reported that the company is in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date," a press release said as late as Thursday.

Still, putting the largest and second largest booksellers in the United States under one book jacket had some concerned over anti-competition issues, a market source said.

Others suggested that online sellers and big box retailers would be enough to end the story on an anti-trust argument.

Borders began seeking buyers in March when investors began to learn of its potential cash problems, a market source said.

Shares of Barnes & Noble (NYSE: BKS) slid by $0.08, or 0.27%, to $29.87.

Shares of Borders (NYSE: BGP) were up slightly by $0.08, or 1.16%, to end the session at $6.99.

We want the airwaves

Sens. Claire McCaskill, D.-Mo., and Olympia Snowe, R.-Me., wrote to FCC chairman Kevin Martin to ask that Sirius Satellite Radio and XM Satellite Radio be forced to divest half their proposed collective holding of the satellite bandwidth.

Combined they would own more than "all terrestrial FM and AM spectrum combined," the letter said.

Also, public advocacy groups such as Public Knowledge, Media Access Project, and New America Foundation met with Martin on Tuesday to ask that 5% of the new entity's bandwidth be used for non-commercial and educational purposes, a market source said.

Shares of XM (Nasdaq: XMSR) lost $0.20, or 1.78%, to close at $11.04.

Shares of Sirius (Nasdaq: SIRI) managed to add $0.05, or 1.94%, to end at $2.63.

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