NRG rejects increased Exelon bid as too low
NEW YORK (Reuters) - Independent power producer NRG Energy Inc (NRG.N) rejected Exelon Corp's (EXC.N) sweetened hostile bid on Wednesday, saying the $7 billion stock offer was still too low.
But NRG left the door open for talks if Exelon improves its bid, even though the power company has said its current bid is its best and final offer. Shares of NRG rose 4.6 percent in afternoon trading on the New York Stock Exchange, indicating some investors believe the companies can still reach a deal.
NRG said its board had unanimously rejected the Exelon bid, arguing that "it continues to substantially undervalue NRG."
"Their increase very clearly was a welcome step in the right direction, but there still is a lot of distance to cover both in terms of the price and the terms of the offer," NRG Chief Executive David Crane said on a conference call.
Exelon raised its all-stock offer for NRG more than 12 percent last week, citing increased cost savings and NRG's May acquisition of Reliant Energy's (RRI.N) Texas retail power business for the higher value.
It is offering NRG shareholders 0.545 of its shares for every NRG share, representing a current premium of around 13 percent.
"What NRG is doing is leaving itself open to continue to negotiate," said RBC Capital Markets analyst Lasan Johong.
"Crane wants to see Exelon step up to the plate one more time, preferably closer to 0.6 (Exelon shares for every NRG share), before he makes any move toward a final conciliatory gesture," Johong said.
Still, Johong pointed out that Exelon has said that its previous bid was as high as it will go, so there is quite a bit of uncertainty regarding whether it will consider another raised bid.
FACE OFF AT ANNUAL MEETING
Exelon has put a slate of directors up for election at NRG's board at the annual meeting on July 21, which could serve as an endgame for the bid, analysts said.
"Since we find it unlikely that Exelon will raise its offer ... we think the fate of the deal now rests in the hands of NRG shareholders," Wells Fargo analyst Michael Bolte said in a research note.
Bolte said he was skeptical NRG shareholders will elect the Exelon slate.
"If Exelon loses that vote and truly has no intention to raise its offer, we think it might finally decide to give up," he said.
Both parties have argued that the election will be a referendum on the bid, and Exelon is meeting with NRG shareholders this week in an effort to build support. Continued...
