Time on NRG's side; House punches Ticketmaster's ticket; Biovail set for acquisitions

By Cristal Cody

Tupelo, Miss., Feb. 26 - Time is on the side of NRG Energy, Inc. in the power company's fight to ward off the hostile takeover by Exelon Corp., an analyst told Prospect News on Thursday.

The chief executive officers of Ticketmaster Entertainment, Inc. and Live Nation, Inc. were grilled again about the companies' merger on Thursday - this time before the House of Representative's subcommittee on courts and competition policy.

In other action, look for several deals to come from Canadian drug maker Biovail Corp. now that the company has lost out on the acquisition of Ovation Pharmaceuticals, Inc.

Meanwhile, the markets sank Thursday.

The Dow Jones Industrial Average lost 88.81 points, or 1.22%, to close at 7,182.08.

The Standard & Poor's 500 index shed 12.07 points, or 1.58%, to 752.83, and the Nasdaq Composite index dropped 33.96 points, or 2.38%, to 1,391.47.

Time on NRG's side

After Exelon reported on Thursday that 51% of shares have been tendered in its offer, NRG Energy said it understands investors want to see the transaction continue.

"In that regard, NRG's management and board of directors remain open to considering a transaction with Exelon at a fair exchange rate and on reasonable terms. Unfortunately the current Exelon offer, which remains unchanged, has neither," the company said in a statement.

NRG said it will continue to undertake a market discovery process to explore other options.

Princeton, N.J.-based NRG is a leading power company able to supply power to nearly 20 million homes.

Chicago-based Exelon, the nation's largest nuclear power operator, said that 125.4 million NRG shares have been tendered.

Exelon extended the offer until June 26, which gives NRG nothing but time to work up a higher bid or competing offer, an analyst told Prospect News.

Exelon has offered 0.485 of an Exelon share for each share of NRG in the deal, which is valued at about $5.58 billion.

Gordon Howald, an analyst with Calyon Securities (USA) Inc., said shareholders have made a solid showing of where their support lies.

"A lot of this is reaction to the broader markets and reaction to the economy and the fact that commodity prices have collapsed," he told Prospect News.

"Time is on their side. This isn't a done deal," Howald said. "It appears this is going to go all the way to the proxy. A tender offer is only an indication of interest and can be rescinded at any point in time. Maybe they can find another buyer and start a bidding war."

NRG shares closed down 92 cents, or 4.46%, to $19.70 on Thursday.

Exelon's stock fell by 81 cents, or 1.66%, to close at $47.88.

House presses Ticketmaster, Live Nation

On Tuesday, Ticketmaster CEO Irving Azoff and Live Nation CEO Michael Rapino testified before the Senate Judiciary Committee antitrust subcommittee.

On Thursday, they did it again in front of the House subcommittee.

The merger, which is expected to close in the second half of the year, has been hammered with concerns from artists and lawmakers about the consolidation of ticket sale and concert promotion power.

Beverly Hills, Calif.-based Live Nation is a major concert promoter, and West Hollywood, Calif.-based Ticketmaster holds the lion's share of ticket sales for events.

Under the deal's terms, shareholders of Ticketmaster will receive 1.384 shares of Live Nation stock for each share of Ticketmaster.

Azoff said in his testimony that the merger "will give us greater flexibility in how we promote, market and sell tickets to events" and "the fierce competition we face in our businesses will continue to thrive."

Peter Luukko, president and chief operating officer for Comcast-Spectacor, LP, a Philadelphia-based sports and entertainment firm, testified that the merger would not affect competition.

"The economy is distressed right now, and as a result, many sports teams and other live entertainment acts are struggling to sell event tickets," he said. "I certainly don't have any reason to believe that the combination will in any way stifle competition."

Rapino testified that he had two choices for the future of the company.

"I can hope the economy gets better or I can seek a more proactive approach to protect our employees, reward our shareholders and grow our company. That is the motivation behind this merger."

Live Nation's shares dropped a nickel, or 1.44%, to close at $3.42, while shares of Ticketmaster lost 19 cents, or 3.92%, to close at $4.66 on Thursday.

Biovail deals on the way

Biovail is planning several acquisitions after the company lost out on the purchase of Deerfield, Ill.-based Ovation Pharmaceuticals, which will be acquired by H. Lundbeck A/S, a Copenhagen-based drug maker, for $900 million,

"There are other opportunities we are looking at that are interesting, though not as large," CEO Bill Wells said Thursday on the investors conference call.

"We're focused on specialty neurology, although there are one or two opportunities we're looking at on the outer circles of our target. We're not suggesting we will be able to acquire these assets are fire sale prices because these are good assets, but we've been invited to the table."

The company said earlier this week that its founder and former CEO, Eugene Melnyk, has asked the board to convene a shareholders meeting.

Melnyk wants to elect two directors to the company's 10-member board.

Last year, he tried to replace the entire board in a proxy measure that failed, and analysts expect Melnyk to have an even tougher chance this year.

"I don't think people are that disappointed in the current managers," Claude Camire, an analyst with Paradigm Capital Inc., said in an interview with Prospect News. "People are waiting for those acquisitions because there's only so much they can do with the current products they have."

Camire said that he has examined more than 100 companies that could be Biovail's target, with no clear standouts.

"They have lots of money and there's lots of companies out there in trouble," he said. "Most of these companies are trading at a discount compared to last year."

On Thursday, Biovail reported fourth-quarter earnings of $120.4 million, or 76 cents a share, for the quarter ended Dec. 31, up from a loss of $32 million, or 20 cents a share, in the same period a year earlier.

The profit was attributed to a $90 million deferred income tax benefit.

Also on Thursday, the company declared a quarterly dividend of 37.5 cents a share payable April 6 to shareholders of record as of March 10.

Biovail shares closed at $10.58, down 37 cents, or 3.38%, in trading on Thursday.

Mentioned in this article:

Biovail Corp. NYSE: BVF

Exelon Corp. NYSE: EXC

Live Nation, Inc. NYSE: LYV

NRG Energy, Inc. NYSE: NRG

Ticketmaster Entertainment, Inc. Nasdaq: TKTM

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