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FirstEnergy announced plans Thursday to acquire electric utility company Allegheny Energy in an all-stock deal valued at $4.7 billion.

The proposed merger, which is subject to shareholder and regulatory approval, would create one of the largest U.S. electricity providers with an estimated $16 billion in annual revenue and $1.4 billion in annual net income.

Under the terms of the agreement, Allegheny shareholders would receive 0.667 of a share of FirstEnergy common stock in exchange for each share of Allegheny they own. Based on Wednesday’s closing stock prices for both companies, Allegheny shareholders would receive a value of $27.65 per share, a 31.6% premium, the companies said.

FirstEnergy will also assume roughly $3.8 billion in Allegheny net debt. The deal is expected to close in about 12 to 14 months business card.

"This combination supports our strategy of being a leading regional energy provider, focused on both regulated utility operations and our competitive generation business," said Anthony Alexander, chief executive officer of FirstEnergy, in a statement.

Akron, Ohio-based FirstEnergy (FE, Fortune 500) owns seven electric utility operating companies that serve 4.5 million customers in Ohio, Pennsylvania, New Jersey and New York.

Allegheny (AYE) is an electric utility based in Greensburg, Pa., servicing 1.6 million customers in Pennsylvania, West Virginia, Maryland and Virginia. 

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St. John’s Mercy Foundation recently appointed George Roman chairman of its board of directors. Roman is vice president of government operations and regional executive for Boeing’s St. Louis-based defense unit.

He takes the place of former foundation board Chairman Tom Gunn.

Roman is also a member of the board for hospital parent St. John’s Mercy Health Care.

St. John’s Mercy Foundation is a non-profit that supports St. John’s Mercy Medical Center, the second-largest hospital in St. Louis and a member of St. John’s Mercy Health Care and the Sisters of Mercy Health System. Denny DeNarvaez is chief executive of St. John’s.

St. John’s Mercy Health Care also operates St. John’s Mercy Hospital in Washington, Mo., St. John’s Mercy Medical Group, St. John’s Mercy Health Services and St. John’s Mercy Affiliated Physicians.

Chicago-based Boeing Co.’s (NYSE: BA) defense unit, Boeing Defense, Space & Security, is the second-largest employer in St. Louis with $32.4 billion in revenue in 2008 and 16,000 local workers.

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The Cleveland Indians’ annual press tour will take the team to Columbus this month for an event set to benefit the cancer research fund started by the late Stefanie Spielman.

The Indians’ tour runs from Jan. 26-28 and consists of three buses visiting sites in Ohio and Pennsylvania with players, Manager Manny Acta, coaching staff and broadcasters.

The team’s Lou Doby bus is arriving at the Gameworks at Easton Town Center Jan. 26 for a press conference at 4:30 p.m. with the main event set for 6 p.m. Tickets are $5 and available only at the door, the team said. For details on scheduled appearances along with other stops and dates, click here http://cleveland small personal loans.indians.mlb.com/cle/fan_forum/presstour.jsp.

The charity set to benefit from proceeds is the Stefanie Spielman Fund at the James Cancer Hospital and Solove Research Institute. Spielman, wife of former National Football League and Ohio State University star Chris Spielman, died in November at the age of 42 following a years-long battle with breast cancer.

The regular season for the Indians, the parent club of the AAA Columbus Clippers, begins April 5 against the Chicago White Sox at Wrigley Field.

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More details of a bitter dispute between the publisher of Canada’s largest metropolitan newspaper chain and its lenders, mainly Canada’s big banks, have emerged in court documents.

The documents filed in Ontario Superior Court of Justice provide an unusual glimpse into the infighting that went on before CanWest Limited Partnership filed for bankruptcy protection last Friday, owing $1.5 billion.

In a frank exchange of letters, Leonard Asper, chief executive officer of CanWest Global Communications Corp. and CanWest Media Inc., accuses the newspaper group’s secured lenders of putting their interests ahead of other creditors.

Asper also pleads for more time, noting improving economic conditions can only benefit everyone involved.

Asper, whose late father Israel (Izzy) Asper founded CanWest Global, says in a Jan. 4 letter to the lenders that he "profoundly disagrees" with their decision to push the newspaper chain into an "early filing." He says the move could result in "undue and unnecessary harm" to some of the company’s long-time suppliers.

Asper said the court filing could end up costing CanWest LP (the entity that holds the company’s major newspapers) as much as $45 million in fees.

Those fees will go to the same "advisory groups that are driving the process," Asper says in the letter addressed to the Bank of Nova Scotia, which is acting as the agent for the secured creditors.

While Asper acknowledged that the newspaper chain ran into trouble last May and is in default on certain principal payments, he said the company has since "stabilized."

He asked for six months to come up with a plan "that is fair to all parties," citing employees, suppliers and other unsecured lenders.

"For the first time in 14 months, revenue for the most recent month was ahead of the same month last year," Asper noted.

In a sharply worded response, the Bank of Nova Scotia’s executive vice-president Jane Rowe questions Asper’s authority as chief executive at CanWest Media, owner of the Global TV network, to act on behalf of CanWest Limited Partnership, which owns the newspapers.

Rowe also points out that CanWest LP is behind on at least $100 million in payments on various loans since last May and that the secured lenders, which have the right to recall their loans at any time, have been more than patient.

"LP is insolvent," says the Jan. 6 letter signed by Rowe. "It is plain and obvious that it can not support its massive debt, and that a transaction will have to occur that fundamentally alters the balance sheet of the newspaper business."

The argument between the two parties became moot once CanWest LP filed for bankruptcy court protection two days later, a spokesperson for the company said. However, the exchange provides a glimpse into the factors that went into that decision.

CanWest Limited Partnership, which owns a string of 10 major dailies, plus the National Post, owes its lenders $1.5 billion, according to Dominion Bond Rating Services.

As part of the court filing, the newspaper company, whose papers include the Ottawa Citizen, Montreal’s The Gazette and the Calgary Herald, was put up for sale.

At current valuations it could fetch between $1 billion and $1.5 billion, DBRS analyst Chris Diceman estimates. But it has only one offer in hand, from the secured lenders, for $950 million, the amount those lenders are owed.

Other media and financial companies are expected to take a closer look at CanWest LP.

That could leave the unsecured lenders, such as the holders of CanWest’s 9 3/4 per cent bonds, out in the cold, Diceman said Monday.

"If you get to $1.5 billion, all the creditors get 100 cents on the dollar. But if it’s only worth a billion the banks have the secured debt, the banks get paid first. Anything that’s left over, assuming it’s being sold for cash, they would get very little," Diceman said. "I think that’s what he’s trying to say in his letter."

Diceman noted the secured lenders, a group made up of 184 different entities, was able to get agreement on the bankruptcy court filing from only 48 per cent of its members.

However, Diceman also noted the secured lenders have the right to demand repayment and may be under pressure to reinvest that money where it will generate a better return.

"This is a time where the banks are looking at their capital structures, and the value of their loans, given what’s happening in the financial world," he said, referring to the recent credit crunch. "They’ve got to make sure they can get their capital out."

Other industry insiders say a court-supervised sale process mitigates the risk the secured lenders may be sued by the bondholders.

In his letter, Asper estimates both the newspaper chain and CanWest’s broadcast assets, chiefly Global TV, could suffer combined revenue losses of $40 million due to the perception in advertisers’ minds that the two entities will no longer be doing business together.

The company that holds Global TV, CanWest Media Inc., entered bankruptcy protection last October.

The secured lenders reject Asper’s claim the business will be damaged by the process, with Rowe calling the assertion "unsupported."

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Biotech stocks took a turn for the worse in 2009 as the major players dealt with regulatory, manufacturing and political issues as well as a deep recession, but their fortunes could turn in the new year if they get added patent protection.

They were the exception in what was otherwise a bullish year for health care stocks, which benefited as investors sought defensive plays in a turbulent market.

Biotech stocks were the laggards of the Standard & Poor’s 500 Health Care index, on track to post a nearly 8 percent loss for the year, while the rest of the health care sector has logged gains of up to 66 percent, according to FactSet.

The decline in bellwethers such as Amgen and Genzyme was a key factor in weighing down the overall sector. On a broader scale, concerns included a backlog of drug approvals at the Food and Drug Administration, a decline in buyout activity, and fears over health care reform.

While the S&P 500 index is on track to gain about 25 percent in 2009, its large biotech components are down about 7.8 percent. The Nasdaq Biotechnology Index, with a broader array of biotech companies, rose 17 percent, but that pales in comparison with the broader Nasdaq composite, which is set to gain about 45 percent.

Pharmaceutical companies, which saw a flurry of buyout and merger activity, are among the strongest performers with a 25 percent boost, a reversal from a lackluster 2008. But the lines between pharmaceutical and biotech companies are diminishing through a range of buyout and development deals. Traditional pharmaceuticals are made by synthesizing chemicals, while biotech-based drugs are made using living cells.

Meanwhile, hospital operators and insurers are on track to rally 62 percent, despite the recession, on hopes that health care reform in Washington could result in more insured patients and revenue in the future.

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The Bank of Montreal is predicting Canada and the United States will post gross domestic product growth of 2.5 per cent next year.

The growth essentially reverses a similar decline this year.

The bank is also predicting that the era of zero interest rates will come to an end just after mid-year in Canada and not soon afterwards in the U.S.

However, borrowing costs are expected to remain exceptionally low as central banks will wait until they are absolutely certain the recovery has taken root before hiking aggressively wired payday loan.

Despite the growth, the Bank of Montreal is predicting the jobless rate will still average 10 per cent in the United States and 8.5 per cent in Canada next year.

Inflation, however, is expected to remain subdued, averaging 1.5 per cent in Canada and about two per cent in the United States.

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Gary Rodrigues, the former longtime Hawaii director of the United Public Workers Local 646, has paid the labor union $378,103 in restitution as part of a court order resulting from his 2002 embezzlement conviction, the U.S. Attorney’s office said Monday.

A federal jury convicted Rodrigues and his daughter, Robin Haunani Rodrigues Sabatini, of embezzling money from the union and taking kickbacks in connection with an employee welfare benefit plan in November 2002.

Both were also found guilty of mail fraud, health-care fraud, money laundering and conspiracy.

In 2003, Rodrigues was sentenced to more than five years in prison and Sabatini was sentenced to nearly four years but both remained free on bail while they appealed their convictions guaranteed payday loan.

Their appeals were denied by the 9th Circuit Court of Appeals in San Francisco in 2007. They tried to appeal to the U.S. Supreme Court but the appeals were declined in 2008.

Rodrigues is serving his sentence in a federal prison in Taft, Calif. and his daughter is imprisoned at a federal facility in Dublin, Calif.

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Visa and MasterCard now have prepaid cards, which provide enhanced security for online shopping. They’re issued by Canadian financial institutions and sold in large retail chains, such as Shoppers Drug Mart.

But when buying prepaid cards, you have to beware of hidden baggage they carry – such as monthly fees, activation fees and expiry dates.

Mary Vandersteen ran into problems trying to use her Vanilla Prepaid MasterCard with her PayPal account.

"I only use prepaid cards for online transactions with companies I don’t know," she says, "because once the funds have been used up, the companies cannot add any more service fees or charges without my knowledge."

Needing help with a severance package, she did a Google search and found FairSeverancePay.ca. She agreed to make three deposits of $100 each with the prepaid MasterCard, which she linked to her PayPal account.

PayPal rejected the first deposit, but later accepted it when she found a staff member to help her. Then it rejected her other attempts to make a $100 payment using the same card.

"So far, I have paid $4.36 to PayPal and I can’t complete the transaction," she says.

The problem is that prepaid Visa and MasterCard gift cards can be purchased anonymously, says Darrell MacMullin, general manager of PayPal Canada.

"Whenever you add a financial instrument to PayPal, we like to make sure you are who you say you are. In this case, there was no user information associated with the prepaid card. When we check and no information comes back, it throws up a red flag in our system."

PayPal charges $1 for each attempt to authorize a payment card and refunds the fees once the card is authorized. (Vandersteen got a refund once I contacted the company.) But PayPal won’t authorize a card unless it can identify the user, MacMullin emphasizes.

Hal Whitcomb ran into problems trying to use his My Treat Visa prepaid cards, issued by Citizens Bank in Vancouver.

"These were gifts from the parents of the softball team I coach. They are advertised as just like cash," he says. "However, there’s an activation fee. There’s also a monthly administration fee after a few months. I’ve also found they have expiry dates, despite the laws that prevent expiry dates on gift cards."

Citizens Bank spokesman David Chong said Visa and MasterCard gift cards can be used anywhere that Visa and MasterCard credit cards are accepted.

"They are what we call `open network’ cards. As a result, issuers like us have to give 24/7 access to cardholders. There are significant costs to ensuring this occurs flawlessly."

Activation fees are a common industry practice to cover the expense of printing and packaging the cards, as well as to reimburse merchants, he explains.

The monthly administration fee kicks in after the first few months of ownership. However, most cardholders use up their entire card balances in one transaction or within a month or two after receiving their cards, Chong says.

As for expiry dates, Ontario and other provinces do have laws banning expiry dates on gift cards. But Visa and MasterCard fall under federal law and don’t have to abide by the provincial rules.

So, if you get a prepaid Visa or MasterCard card, try to make a major purchase right away. Don’t let them linger in your wallet, piling up fees.

Next week, we’ll dig into those online offers of "free samples," which end up enrolling you in expensive monthly plans.

eroseman@thestar.ca

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Goldman Sachs Group Inc could have suffered dramatic losses if the federal government had not intervened to prop up American International Group Inc, according to a government report.

The report by the special inspector general for the government bailout program raises doubts about Goldman’s previous claims that it was hedged against potential AIG losses.

Last fall, as the financial services industry stood on the brink of collapse, the government stepped in with an unprecedented effort to rescue the system. AIG was among the companies that received billions of dollars from the U.S. Treasury’s Troubled Asset Relief Program.

If AIG had collapsed, it would have made it difficult for Goldman to liquidate its trading positions with AIG, even at discounts, the report said. It also would have put pressure on other counterparties that “might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default.”

Finally, the report said, an AIG default would have forced Goldman Sachs to bear the risk of declines in the value of billions of dollars in collateralized debt obligations bad credit cash loans.

A Goldman spokesman called the risks discussed in the report a “moot point.”

“Goldman Sachs has consistently said its exposure with AIG was collateralized and hedged and therefore we had no direct credit exposure,” Goldman Spokesman Michael DuVally said. “Given the hedges, collateral, and government backing as a result of the bailout, the additional risks of declining market values in the event of an AIG default are a moot point.”

AIG has received pledges of up to $180 billion in taxpayer aid since last fall to help save it from collapse. It was revealed in March that Goldman received $12.9 billion in payments and collateral from AIG.

David Viniar, Goldman’s chief financial officer, in March told reporters that the Wall Street bank did nothing wrong when it accepted payments to close out trades with AIG.

The full report can be viewed at: here

(Reporting by Steve Eder; editing by John Wallace and Tim Dobbyn)

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Hitachi Ltd, Japan’s biggest electronics firm by sales, will raise up to $4.6 billion to shore up its capital, joining a scrum of Japanese firms tapping equity markets before a possible economic slowdown.

Hitachi, which is headed for its fourth straight annual loss, said it will raise up to 416 billion yen after fees, issuing 318 billion yen worth of shares and convertible bonds worth 100 billion yen.

The Monday announcement came as its shares headed for their biggest single-day slide in six months after sources told Reuters about the public stock issue, Hitachi’s first in 27 years.

Hitachi, which has a joint venture with General Electric in nuclear power, will invest in its nuclear power, software services and lithium-ion batteries operations, while trimming losses.

But Hitachi has been forced to seek money before it could form a realistic plan for recovery, some analysts said.

“This amount is the absolute limit that Hitachi can seek from markets, but this may not be enough even to cover restructuring costs at such a mammoth firm, let alone invest in growth,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.

“I don’t think investors will want to put their money in. There are so many more deserving companies that need funds.”

The share issue would boost Hitachi’s shares outstanding by more than 30 percent.

Hitachi, like many of its once high-flying peers, has lost market share in flat TVs and digital devices to rivals from South Korea and Taiwan, and is eager to focus its sprawling operations in growth such as in lithium-ion batteries and smart grids.

A sprawling conglomerate with more than 900 group firms, Hitachi has repeatedly said it will trim losses and focus on growth areas.

It said it will use the funds it raises to boost production capacity of nuclear reactors and lithium-ion batteries, to expand its software services operations and to spend more on research on its train systems.

But Hitachi, which supplies lithium-ion batteries to General Motors, remains weighed down by losses on its flat TVs and microchips.

It must shoulder an investment of about 80 billion yen to pave the way for a merger of Renesas Technology — its chip venture with Mitsubishi Electric — and chipmaker NEC Electronics next year.

Battered by deep losses, Hitachi’s shareholders’ equity ratio has slipped to just below 11 percent, roughly half that of rival NEC Corp, which earlier this month announced it would raise up to $1.5 billion.

The ratio is calculated by dividing shareholders’ equity by total assets and is a measure of financial strength. 

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