Entergy asks shareholders to reject ‘mini-tender’ bid worth $100 million from Canada investment firm

Entergy Corp. is asking its shareholders to turn back an unsolicited “mini-tender” offer from a privately-held Canadian investment firm that has made similar approaches to buy discounted shares from investors at other top publicly traded companies.

On Thursday (June 20), the parent company of Entergy Arkansas said it had been notified of an unsolicited mini-tender offer by Toronto-based TRC Capital Corp. to purchase up to 1 million shares of Entergy common stock at a cost of nearly $100 million, representing approximately 0.53% of Entergy’s outstanding shares as of April 30.

According to Entergy, TRC’s offer price of $97.50 is 4.45% below the closing price of Entergy’s common stock on June 14, 2019, the last trading day prior to the commencement of the offer. In early trading on Thursday, Entergy’s shares were up.

“Entergy does not endorse TRC’s unsolicited mini-tender offer and is in no way associated with TRC, its mini-tender offer or its mini-tender offer documentation,” the New Orleans-based utility operator said in a news release.

Not only did Entergy recommend that shareholders not sell their stock in response to TRC’s mini-tender offer, the four-state utility giant also offered current shareholders an opportunity to withdraw any stock already tendered by providing the company with the written notice from TRC’s offer, prior to the expiration date at 12:01 a.m. Eastern Time on July 17.

“Entergy urges common shareholders to obtain current market quotations for their shares of common stock, to consult their broker or financial advisor, and to exercise caution with respect to TRC’s offer,” the company said.

TRC has garnered a reputation on Wall Street for approaching investors with surprise, below-market offers that allow the Canada investment firm to snap up shares in profitable Fortune 500-type, publicly-traded companies or other top Wall Street firms with strong dividend payouts.

However, the federal Securities and Exchange Commission (SEC) has issued past warnings for investors of offers because they are not subject to the same regulatory protections as larger, traditional tender offers of more than 5% for beneficial ownership that require further filing disclosures and other securities procedures.

Under the SEC’s Regulation 14E, the only requirement for mini-tender offers is for the target company to state its position by recommending that investors accept or reject the bid or take a neutral position. However, the mini-tender bidder must only hold open its offer for a minimum time period and make prompt payments to an investor accepting the terms, but doesn’t have to notify the target company.

Earlier in 2019, TRC has made similar below-market offers to Entergy competitor, Edison International, Visa Inc., 3M Company, Biogen Inc., Nvidia, and Northrop Grumman. All those companies also urged their shareholders to reject TRC’s offer.

In Thursday session on the New York Stock Exchange, Entergy’s shares were up 76 cents at $103.21, which is $5.73 or 5.9% above TRC’s mini offer.