Calpine's stock jumps on hopes for higher NRG bid

By Jessica Hall

PHILADELPHIA (Reuters) - The shares of power company Calpine Corp (CPN.N: Quote, Profile, Research, Stock Buzz) jumped more than 8 percent on Thursday after rival NRG Energy Inc (NRG.N: Quote, Profile, Research, Stock Buzz) made a $9.07 billion takeover offer that Calpine investors hope could lead to an even richer merger agreement.

Shares of Calpine, which emerged from bankruptcy earlier this year, gained $1.72, or 8.08 percent, to close at $23 on the New York Stock Exchange. NRG shares fell $2.16, or about 5.1 percent, to close at $40.35, also on the NYSE.

NRG offered 0.534 share of its stock for each Calpine share. Based on NRG's closing price on Thursday, the offer values Calpine at $21.55 per share, or $9.07 billion, considering Calpine's 421 million shares outstanding as of May 5.

Calpine said it would review the unsolicited bid, disclosed late on Wednesday. A deal would be the fourth largest U.S. merger this year and the largest acquisition in the energy sector since last year's $32 billion buyout of TXU Corp, according to data from Thomson Reuters.

"We are confident a higher bid will be needed to consummate this deal," Calyon Securities analyst Gordon Howald said in a research report. "NRG has a favorable track record with fiscal discipline and successful merger integration.

"Investors will view this proposed transaction favorably from an industry standpoint, which could raise the bar for valuations across the industry," he said.

New Jersey-based NRG said a deal would create a multi-fuel power company with four regional generation businesses in all the major competitive power markets in the United States. It said each of the businesses would have at least 8 gigawatts of generating capacity.

Hedge fund Harbinger Capital Partners, which owns more than 24 percent of Calpine's shares, said the offer represents a good starting point and Calpine's board should immediately negotiate with NRG over terms.