Validus lures investors with new IPC bid; Target board fight heats up; DOJ clears Atlas merger

By Cristal Cody

Tupelo, Miss., May 18 - Validus Holdings, Ltd. raised its hostile takeover bid for IPC Holdings, Ltd. on Monday to include $3.00 in cash and 1.1234 Validus shares for each IPC share - and the new terms could be enough to convince investors to accept the offer, an analyst told Prospect News.

Also on Monday, William Ackman, who heads the hedge fund Pershing Square Capital Management LP, continued his fight for five seats on Target Corp.'s board of directors.

In other deals, shares of Atlas America, Inc. and Atlas Energy Resources, LLC jumped on Monday after the companies received early termination of their merger under the Hart-Scott-Rodino antitrust filing with the Department of Justice. The Atlas corporate structure also is expected to continue to slim down with an eventual sale of Atlas America subsidiary Atlas Pipeline Partners LP, an analyst told Prospect News on Monday.

Meanwhile, stocks staged a rally on Monday and sent the Dow Jones Industrial Average to close up 235.44 points, or 2.85%, at 8,504.08.

The Standard & Poor's 500 index gained 26.83 points, or 3.04%, to close at 909.71, and the Nasdaq Composite index added 52.22 points, or 3.11%, to 1,732.36.

Validus bid

Validus' new $1.69 billion bid values IPC at $30.14 a share. The offer represents a total 21.9% premium based on Validus' and IPC's closing stock prices on March 30, the last day of trading before the first offer was announced.

Validus' first bid included no cash and 1.2037 shares for each IPC share.

Ed Noonan, Validus' chairman and chief executive officer, said in a statement Monday that the Hamilton, Bermuda-based insurance provider added the cash because it was a "request we have heard repeatedly from IPC shareholders whom we've talked to extensively over the last few weeks."

Doug Mewhirter, an analyst with RBC Capital Markets Corp., said in an interview on Monday that the new offer has "given the IPC shareholder something more substantial to chew on" though it still may not be enough to convince investors.

"It's definitely improved the prospects for Validus' case," he said. "What made it more valuable was the addition of the $3.00 in cash, and that's something in our informal talks with shareholders had been a sticking point. Validus didn't seem committed to putting real money on the table."

Pembroke, Bermuda-based IPC, which provides property catastrophe reinsurance, said in a statement Monday that its board and legal and financial advisers will review the revised offer.

Validus also urged IPC shareholders to vote against IPC's stock amalgamation with specialty insurance and reinsurance company Max Capital Ltd., in which IPC will be absorbed into Max.

W. Marston Becker, chairman and CEO of Hamilton, Bermuda-based Max Capital, said in a statement Monday that the company remains committed to completing the amalgamation with IPC.

The deal is expected to close soon after IPC's and Max's annual shareholder meetings on June 12.

Validus' offer for IPC expires on June 26.

IPC shares rose 21 cents or 0.79%, to close Monday at $26.84.

Max Capital's stock added 36 cents, or 2.14%, to $17.18.

Shares of Validus fell 34 cents, or 1.41%, to $23.82.

Target fight

Ackman's Pershing Square, which owns 7.80% of Minneapolis-based Target's outstanding stock, wants the retailer to spin off its assets into a real estate investment trust.

In a letter to shareholders released on Monday, Ackman said, "Target's board has also been unwilling to explore any alternatives to unlock real estate value, an error that we believe demonstrates the board's lack of initiative to explore value-creating opportunities for shareholders."

On Thursday, Proxy Governance, Inc. recommended that Target shareholders elect two of Pershing's nominees, including a real estate executive. Proxy Governance also recommended shareholders vote to reject the retailer's proposal to set the board size at 12 instead of 13 members.

Target shareholders will vote at the annual meeting on May 28.

One analyst Prospect News spoke to was unsure of Ackman's success because Minnesota, where Target is based, can be "a pain ... to a corporation."

Target is expected to report its first-quarter earnings on Wednesday.

Shares gained $1.56, or 3.88%, to close Monday at $41.77.

Atlas family tree

Atlas America and Atlas Energy received clearance of their $500 million stock merger on Friday, according to regulatory notices released on Monday from the Justice Department.

Atlas America shares jumped $1.03, or 6.63%, to close at $16.56, while Atlas Energy's stock added $1.20, or 6.84%, to close at $18.75.

Atlas America and Atlas Energy said on April 27 the two companies will merge to explore for natural gas in the Marcellus shale formation, which covers several states and is estimated to be one of the country's largest reserves of natural gas.

Atlas America said it will buy the remaining 52% of Atlas Energy's outstanding shares that it does not already own. Under the terms of the deal, Atlas Energy shareholders will receive 1.16 Atlas America shares for each class B common unit.

Atlas Energy will become a subsidiary of Atlas America, and the new company will be renamed Atlas Energy, Inc.

The deal must be approved by Atlas America shareholders and Atlas Energy class B unitholders and receive consent from a majority of the lenders under the Atlas Energy credit agreement.

The deal is expected to close in the third quarter.

An additional shakeup of the Atlas corporate structure is predicted because Atlas Pipeline Partners faces liquidity concerns in fiscal year 2009.

"It's more likely to be sold to a third party than rolled back in," an analyst told Prospect News on Monday.

"They're having pressure on their cash flow and [are] going to potentially violate their bank covenants," he said. "But they're in the process of trying to sell assets, and if successful, they probably won't violate the bank covenants - but they probably won't have a dividend distribution."

The three Moon Township, Pa.-based natural gas and oil developers share office resources and staff.

Shares of Atlas Pipeline rose 29 cents, or 6.04%, to close at $5.09 on Monday.

Mentioned in this article:

Atlas America, Inc. Nasdaq: ATLS

Atlas Energy Resources, LLC NYSE: ATN

Atlas Pipeline Partners LP NYSE: APL

IPC Holdings, Ltd. Nasdaq: IPCR

Max Capital Group Ltd. Nasdaq: MXGL

Target Corp. NYSE: TGT

Validus Holdings, Ltd. NYSE: VR

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