NRG rejects $6.08 bln Exelon bid

By Jui Chakravorty Das

NEW YORK (Reuters) - Power producer NRG Energy Inc (NRG.N) on Sunday rejected an unsolicited $6.08 billion takeover offer from utility owner Exelon Corp (EXC.N), saying the offer "significantly undervalues" the company.

NRG also said that despite its current rejection, it was ready to do a deal under more favorable terms. Such a merger would create the largest U.S. power producer.

The offer "significantly undervalues NRG and is not in the best interests of NRG's shareholders," NRG said in a statement. "The board thoroughly reviewed Exelon's proposal and reached its decision after careful consideration with its independent financial and legal advisers."

Exelon unveiled its all-stock bid on October 19, offering to pay 0.485 Exelon share for each NRG share, equal to about $27.82 a share at current prices.

The offer, which came after NRG lost half its market value in two months, reflected a 37-percent premium over NRG's closing share price on the day before the bid was made public.

A combination of NRG and Exelon, which is the largest nuclear operator in the U.S., would create a company with market value of about $40 billion, and 47,000 megawatts of generating capacity.

NRG said the offer was too low because it would contribute 30 percent of the combined entity's cash flow and its shareholders would own only 17 percent of the equity.

In an interview with Reuters on Sunday, NRG Chief Executive David Crane called the exchange ratio "a lowball offer."

In a conversation with NRG on September 30, Exelon had discussed a price range "substantially above what they came forward with," Crane said.

"I have no problem with someone being opportunistic but that doesn't mean we have to hit the bid," he said.

In a letter to Exelon Chief Executive John Rowe, NRG's Crane and Chairman Howard Cosgrove cited a lack of secured financing as another reason for the rejection, posing "real risk of non-consummation to NRG's shareholders."

Additionally, NRG has $7 billion of debt that would have to be refinanced in the case of a takeover -- a difficult task for any company in this market and even harder for Exelon, whose credit rating was recently lowered.

The difficulty to refinance debt would make any such deal unlikely, Crane told Reuters.

STILL OPEN TO DEAL

But the company remains open to a deal at the right price.