UPDATE 2-NRG rejects $6.08 bln Exelon bid

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By Jui Chakravorty Das

NEW YORK, Nov 9 (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 Oct. 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.

NRG said that the offer is 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 a letter to Exelon Chief Executive John Rowe, NRG CEO David 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."

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

"Please be assured that NRG is a believer in industry consolidation and has and always will be a willing seller or buyer when genuine value can be created for both parties," NRG said in the letter.

Investors have moved away from energy stocks, in part from worries that frozen credit markets could restrain growth at unregulated companies, particularly as some of them have very high debt burdens.

Shares of the largest independent power producers, which sell electricity to the grid at market rates, fell between 40 percent and 70 percent over the three-month period before Exelon made its unsolicited bid for NRG.

The drop in share prices is expected to lead to more consolidation in the industry as utility companies seize the opportunity to add higher-growth assets at attractively low prices.

Billionaire investor Warren Buffett recently disclosed that he had acquired an additional 3.2 million shares in NRG. His holding company, Berkshire Hathaway Inc., is also in the process of acquiring Constellation Energy Group Inc.

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