What’s Moving These Hot Stocks: Chesapeake, Genworth, Catalyst Health, Knology, SXC Health

Chesapeake Energy Corporation (NYSE:CHK) could be the target of a conflict of interest inquiry, as it is alleged that CEO Aubrey McClendon took out as much as $1.1 billion in unreported loans over the last three years, according to a Reuters report. Both the company and McClendon contend that the loans were legitimate, as the proceeds were used to fund the CEO’s operating costs for a perk, under which he is permitted a 2.5 percent stake in every well that Chesapeake drills. Chesapeake CEO Under Fire for Unreported Loans>>

Genworth Financial Inc. (NYSE:GNW) shares are decidedly down, following a Tuesday night announcement that the company will postpone the initial public offering of its Australian mortgage insurance unit until early 2013, as opposed to the earlier expected date during the second quarter of 2012. An increase of losses in Australia was given as the paramount reason for the delay; the first quarter loss, however, is expected to be modest, resulting from an acceleration in foreclosures and insurance claims.

Catalyst Health Solutions, Inc. (NASDAQ:CHSI) and SXC Health Solutions (NASDAQ:SXCI) and Catalyst Health Solutions (NASDAQ:CHSI) report that a definitive merger agreement has been unanimously approved by their Boards. Terms include a cash and stock transaction, with the value amounting to around $4.4 billion; and Catalyst shareholders receiving $28.00 in cash and 0.6606 shares of SXC stock for each Catalyst share, which represents a purchase price of $81.02 per share plus a windfall of about 28 percent based on the closing stock prices of SXC and Catalyst on April 17. After closing, the new company (with $1 billion in revenue) will headquarter in Lisle, Illinois and will maintain premises in Rockville, Maryland. It’s projected that the merger will be quite lucrative to SXC’s non-GAAP earnings in 2013, excluding the
transaction-related amortization expected to be approximately $200 million during the first year after closing. The post-merger company expects to obtain approximately $125 million of yearly cost synergies during the first 18 to 24 months after closing through improved scale and operating leverage, though around $40 million to $45 million in transition costs are also forecast. Additionally, annual interest expenditures of around $70 million from financing the deal with $1.7 billion in debt, is forecast. It is reported that after closing, the new company will ‘have a strong balance sheet and attractive cash flow, giving it substantial financial flexibility to pursue continued growth initiatives while paying down debt’.

Knology, Inc. (NASDAQ:KNOL) announces a definitive merger agreement with a subsidiary of WOW! Internet, Cable & Phone, which is controlled by Avista Capital Partners. WOW! will purchase all outstanding shares (at $19.75) of Knology in an all cash deal, which represents a windfall of around 34 percent over its average closing price during the 3-month period prior to word being revealed regarding the acquisition process. There will be no financing terms in the transaction, which is valued at approximately $1.5 billion.

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