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Investment Firm Makes Lowball Offer for PSEG Stock

Can TRC Capital pick up PSEG shares at $1.00 off their closing price?

Public Service Enterprise Group (PSEG) shareholders are being offered a deal they probably will find easy to resist.

The Newark company yesterday announced it had been notified of an unsolicited "mini-tender offer," by TRC Capital Corp., a Toronto-based investment firm that seeks to acquire up to 3 million shares of PSEG common stock, or less than 1 percent of its outstanding shares.

The catch: TRC’s Capital’s offer price is $29.75 per share, more than a buck below PSEG's closing price yesterday of $30.90 and a 3.44 percent discount below the company’s closing price of $30.81 per share on the New York Stock Exchange on April 5, 2011, the day before the offer was tendered.

The quirky offer is a trademark of TRC Capital, a one-man operation run by a securities lawyer named Lorne Albaum. He has made similar below-market offers for many other blue-chip stocks, including GE, Monsanto and Chubb, to name just a few.

PSEG issued a press release advising shareholders it does not endorse the offer and "strongly urges" investors to obtain current market quotes for the company’s common stock and consult with their financial advisors in evaluating the offer.

Mini-tender offers such as this one, the company noted, seek less than 5 percent of a company’s outstanding shares, which would require the filing of disclosure and tender offer documents with the Securities and Exchange Commission (SEC).

The federal agency offers investors tips about mini-tender offers. "Some bidders make mini-tender offers at below-market prices, hoping they will catch investors off guard if the investors do not compare the offer price to the current market conditions," the agency advised.

In the past, Albaum has defended the mini-tender offers as good for investors with a small number of shares who want to avoid steep brokerage fees associated with sales. The company could not be reached for comment.

PSEG urged shareholders who have not responded to the offer to do nothing. Those who have, the company said, should consider taking action to withdraw the shares by providing the written notice described in the TRC Capital offering documents.

Kathleen Lally, vice president of investor relations, said she did not believe the offer was in any way related to the company’s fundamentals, a view that was endorsed by energy analysts.

PSEG is often viewed as a company worth acquiring in the energy business. In 2006, it sought to merge with Exelon, the nation’s biggest operator of nuclear power plants. That deal succumbed to concessions sought by the state Board of Public Utilities (BPU) to address concerns that the merged company would exercise market power over the wholesale energy markets.

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