(Adds NRG comment in paragraph 4)
By Jessica Hall
PHILADELPHIA Oct 19 Exelon Corp (EXC.N), the
largest nuclear power operator in the United States, made an
unsolicited offer to acquire NRG Energy Inc (NRG.N) for $6.2
billion in stock, in a move to expand geographically and boost
earnings and cash flow.
The combined company would be the No. 1 U.S. power company,
with generating capacity of around 47,000 megawatts, or enough
electricity to serve nearly 45 million homes, Exelon said in a
statement on Sunday.
The company would have a presence in the uranium, natural
gas, coal and oil sectors. Buying NRG, an independent power
producer, would expand Exelon's unregulated energy business.
In a statement early on Monday, NRG said its board would
review the offer and advised its stockholders not to take action
pending the review.
The merger would mark a change in strategy for NRG, which
does not face the same regulatory structure as typical
Exelon, which operates ComEd and Peco utilities in Illinois
and Pennsylvania, said it offered to pay a fixed exchange ratio
of 0.485 Exelon shares for each share of NRG outstanding, which
represents $26.43 a share based on Friday's closing prices.
The offer represents a 37 percent premium over NRG's closing
price on Friday of $19.33, which was a 6.3 percent gain on the
Exelon said it would also "appropriately address the
interests of the holders of NRG preferred stock," but additional
details were not immediately available.
"I know that you are committed to realizing the upside
potential embedded in NRG's stock, which we agree is not fully
reflected in its current stock price. We believe our proposal
fully addresses that concern," Exelon's Chairman and Chief
Executive John Rowe said in a letter to NRG executives.
Exelon asked NRG to hold discussions immediately to forge a
definitive agreement. In the letter, Exelon said executives from
both companies met on September 30.
The letter was delivered on Sunday to NRG President and CEO
David Crane and Chairman Howard Cosgrove, Exelon said.
The unsolicited offer for NRG comes less than five months
after NRG saw its unsolicited offer to buy Calpine (CPN.N) for
$9.2 billion fail. Calpine rejected NRG's bid as too low.
Exelon has its own rocky merger history. In 2006, it walked away
from a $17.7 billion takeover of Public Service Enterprises
Group Inc after failing to reach an agreement with regulators
looking for concessions from the utilities.
Although the deal would immediately boost earnings and cash
flow, the combination is expected to reduce Exelon's credit
ratings, Exelon said. It said it would be committed to restoring
the ratings of the combined company to Exelon's current level.
Exelon said it believes "a substantial amount" of NRG debt
may need to be refinanced on a change of control of the company.
Based on discussions with its financial advisors, Exelon said it
believes it could arrange for the refinancing of NRG debt and
address an NRG lien facility with trading counterparties.
As of June 30, NRG had $8.1 billion in long-term debt,
according to Reuters data.
Exelon also said it believes that "modest divestitures of
some assets" of the combined company would need to be made to
gain approval from regulatory authorities. It said it was
confident its divestment strategy would allow the deal to gain
The offer is subject to due diligence and review of the
companies' proprietary financial records, Exelon said.
(Additional reporting by Michael Erman in New York and Savio
D'Souza in Bangalore; Editing by Anshuman Daga and Chris
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