Mirant called off its hostile takeover bid of NRG and may be forced into a sale. "Mirant is sitting on a lot of cash," Denise Furey, Fitch senior director, told Circuit. She added that it will be even more cash-rich after it sells assets in the Philippines, increasing its acquisition odds. A hedge fund with a small stake in Mirant is pushing for its sale. Pirate Capital, which owns 1.6 percent of the energy firm, is known for buying up company shares and creating dissension if it doesn't get its way, forcing a sale. Pirate's move is backed by two other investment companies, which together own about 7 percent of Mirant's stock. Mirant agreed to meet with Pirate Capital executives June 21 to discuss "the best way to maximize shareholder return," according to a June 15 Securities and Exchange filing. "We look forward to more fully presenting our views to the company and we anticipate a frank and productive discussion," Thomas Hudson, managing member of Pirate Capital, said in a June 14 letter to Mirant. Earlier, Pirate notified Mirant that if it didn't drop its bid to acquire NRG and hire an investment bank to pursue the prompt sale of the company by June 14, then Pirate would push for a special meeting of stockholders. It will try to increase the size of the board to 15 members, elect 6 new directors, and remove at least 4 of the 9 current directors. "I agree that Mirant overreached in its attempt to buy NRG," reported Stephen Simpson, Motley Fool analyst. But, he added, "with folks like Pirate Capital on board, Mirant can forget about sailing calm seas for the foreseeable future." "Taking its bid off the table was an intelligent move," said Leon Coperman, chief executive officer of Omega Advisors, one of the firms backing Pirate. Some suspect that Mirant moved to buy out NRG before the latter moved to acquire Mirant, as industry consolidation is seen by many as the way of the future (Circuit, June 9, 2006). NRG, which bought out Dynegy's 50 percent ownership in West Coast Power this year, announced that its stock has appreciated 120 percent in the last two years. "We are posed for further value creation and look forward to the continued execution of our strategic plan," NRG stated June 12. Mirant, which emerged from bankruptcy in January, announced that it was withdrawing its plans to buy the company at the beginning of this week. "The discussions we have had with shareholders over the past several weeks have been beneficial and played a role in the decision to withdraw our NRG acquisition proposal," stated Ed Muller, Mirant chair and chief executive officer, in a June 16 SEC filing. "The NRG proposal was unique in its value creation for shareholders; however, our analysis of other company acquisitions shows that they would not create value and, as a result, are not being considered." The black mark on NRG's short-term credit rating was removed after the takeover plans were halted. Standard & Poor's affirmed its B-2 rating - dropping its CreditWatch with negative implications. It also reiterated the company's long-term rating of B+. If NRG succeeds with its plan to buy Texas Genco for $5.8 billion (Circuit, Jan. 7, 2006), S&P may raise its ratings a notch. "On the other hand, if the company continues a growth strategy financed with debt and cash flows deteriorate, Standard & Poor's could revise the outlook to negative or lower the ratings," said David Bodek, S&P credit analyst.
