Exelon could go hostile for NRG
NEW YORK (Reuters) - Exelon Corp (EXC.N) could make a hostile bid for NRG Energy Inc (NRG.N) if the independent power producer rebuffs its unsolicited $6.2 billion takeover offer, Exelon's chief executive said on Monday.
Exelon, the largest nuclear power operator in the United States, unveiled its bid for NRG late on Sunday night, boosting NRGs shares nearly 30 percent.
"We hope this turns out to be friendly rather than hostile, but we are committed to pursuing this offer and we shall do so," Exelon Chief Executive John Rowe said on a conference call with investors.
"We did not do this lightly and we were very well advised about what it might take to get this done," Rowe said.
Exelon offered to pay a fixed exchange ratio of 0.485 Exelon share for each NRG share, equal to about $26.48 a share at current prices, in a deal that would create the nation's largest power producer.
NRG Energy was one of the top gainers on the New York Stock Exchange, jumping $5.67 to close at $25 a share. Exelon rose 9 cents to $54.59 a share, also on the NYSE.
Many analysts felt the offer undervalued NRG. RBC Capital Markets analyst Lasan Johong said an offer closer to $33 per share was probably needed to sway NRG shareholders.
"Whichever way you slice it, dice it, crush it, smoosh it, or chop it, this thing ain't a good deal for NRG shareholders," said Johong.
Rowe said management of the two companies had a held a "very professional, very cordial" conference call prior to the unsolicited bid, but said the two companies were not close enough to negotiate a deal.
NRG has said its board will review the offer and make a response "in due course."
TAKE THE TOP SPOT
With the acquisition of NRG, Exelon would expand its unregulated energy business. The combined company would have a power generating capacity of 47,000 megawatts, or enough to supply nearly 45 million homes, surpassing the current No. 1 power company, Southern Co (SO.N).
Exelon said the deal could add between $1 billion and $3 billion for its shareholders and could increase its annual cash flow by more than 20 percent a year over the next five years.
But the company also suspended its $1.5 billion share buyback program announced in September, saying it may not be able to complete it due to current market conditions, even if the NRG deal fell through.
Rowe expected the companies would need to sell power plants with about 3,000 megawatts of capacity to win approval from regulators, most likely in the Texas market and the wholesale market centered in Pennsylvania, New Jersey and Maryland. Continued...
