Mirant, Under Pressure, Drops NRG Bid

Power generator Mirant Corp. withdrew its $8-billion unsolicited bid for NRG Energy Inc. on Monday under pressure from Mirant shareholders, who said they could make more money if Mirant sold itself instead.

Hedge fund Pirate Capital, which owns 1.6% of Atlanta-based Mirant’s shares, sent a letter to Mirant’s board of directors saying that it would call a special shareholders meeting to replace board members if Mirant did not drop its offer by Wednesday, according to a regulatory filing.

Other funds known for taking stakes in companies and pressuring them into change, including Jana Partners and Omega Advisors, also came out against the deal early on.

“They are succumbing to very serious shareholder pressure,” said Peter Lobravico, vice president of risk arbitrage trading and sales at brokerage firm Wall Street Access.

“It is clear ... that a long and contested pursuit is not in the best interests of Mirant and its shareholders,” Mirant Chairman and Chief Executive Edward Muller said in a statement.

Mirant disclosed its cash-and-stock bid, which was worth $57.16 a share, in May. NRG in Princeton, N.J., rejected it outright, saying it was the wrong deal at the wrong time. NRG argued that the offer undervalued its shares, that Mirant’s stock was a weak currency, and that it was not the time for a sale, given industry growth trends.

NRG said after Mirant dropped the fight that it would continue with its strategic plan.

Arbitrage traders said Mirant’s move was likely to appease its shareholders, who said that the offer undervalued Mirant’s own shares and that Mirant should instead put itself up for sale or sell some assets.

Mirant shares fell 7 cents to $24.38, while NRG shares fell $3.93, or 7.7%, to $46.92.