UPDATE 2-RiskMetrics: NRG holders should reject Exelon slate
* Proxy adviser recommends against Exelon directors
* NRG shares close up 1.7 pct, Exelon up 2.5 pct (Adds analyst quote, Exelon comment, background, byline)
NEW YORK, July 13 (Reuters) - RiskMetrics Group, which advises shareholders on votes, recommended that NRG Energy Inc (NRG.N) shareholders vote against the slate of directors Exelon Corp (EXC.N) has put up for election, saying that Exelon's takeover bid was not high enough to justify support.
As part of its hostile offer for NRG, Exelon has proposed to expand NRG's board to 19 seats from 14 and elect nine new directors into those seats. In a report obtained by Reuters on Monday, RiskMetrics said shareholders should vote against both the expansion of the board and the Exelon directors.
"We conclude that Exelon's current bid is not compelling enough to support splitting the board with nine dissident nominees," the report said.
Exelon, the largest U.S. nuclear power company, made its initial hostile bid for the independent power producer in October.
The company, which raised its bid for NRG earlier this month, is currently offering 0.545 of a share -- or about $26.99 at Monday's close -- for each NRG share.
NRG shares closed at $23.63 on the New York Stock Exchange, well below the Exelon bid, suggesting investor skepticism that the deal will close.
RiskMetrics, the top U.S. proxy advisory firm, said that "virtually all" of the NRG shareholders it spoke with believed that Exelon should raise its bid again.
"Based on our conversations with these NRG shareholders, it appears that a market clearing price is likely to lie closer to 0.60 x exchange ratio, or approximately $30 per share," the report said.
Exelon said it was surprised by the RiskMetrics recommendation.
"The bottom line is that NRG's shareholders represent a sophisticated cross-section of utility investors who will review the transaction and make their own independent decision of its merits," the company said in a statement.
Shareholders are set to vote on the proposals at NRG's annual meeting on July 21.
ADVISERS SAY "NO"
RiskMetrics' recommendation follows similar advice by three other shareholder advisers -- Proxy Governance, Glass Lewis and Egan Jones.
RiskMetrics' recommendations have had a strong role in deciding which deals win investor approval and, in some cases, has been influential in getting higher deal prices for shareholders.
RBC Capital Markets analyst Lasan Johong said RiskMetrics' advice would have a marginal impact. Investors, he said, had already made up their mind to vote against the Exelon slate, unless the power company again boosts their bid.
But the recommendation "will put a little bit of pressure on Exelon to do something on the deal price, and I think they will," Johong said.
"It gives NRG a little more ammunition, and it gives Exelon an excuse. It makes it easier for them to find some sort of a middle ground," he said. (Reporting by Michael Erman; Editing by Richard Chang, Leslie Gevirtz)
