NRG Energy Trades Above Exelon Offer In Ongoing Hostile Bid
June 02 2009 - 3:20PM
Dow Jones News
Shares of NRG Energy Inc. (NRG) climbed Tuesday above what
Exelon Corp. (EXC) is offering for the power company, as some
investors speculate Exelon may need to raise its bid.
Exelon last fall launched an exchange offer to pay a fixed ratio
of 0.485 Exelon share for each NRG share in a bid to create the
largest power generator in the U.S. by output. NRG Energy's board
has stiffly resisted the bid, saying it undervalues the Princeton,
N.J., power plant operator.
NRG shares climbed as high as $24.14 Tuesday before falling to
trade recently down 1% to $23.48. Exelon shares traded down 1.1% to
$48.75 recently.
Shares are trading as if the market expects Exelon to raise its
offer for NRG, said Les Levy, a merger and arbitrage analyst for
ICAP Corporates.
Levy said several issues appear to be coming to a head,
including an approval of the deal by the Federal Energy Regulatory
Commission late last month and the opening of a trial in which NRG
is challenging certain aspects of Exelon's hostile bid.
NRG's annual shareholders meeting has become a key event in the
takeover battle as well. Exelon has proposed expanding NRG's board
and adding its own members as it tries to complete the deal amid
the resistance of NRG's current board. But no date has been set for
the annual meeting. NRG held its last annual shareholders meeting
on May 14, 2008.
Last week, Macquarie Capital analyst Angie Storozynski in a note
to client wrote that recent developments at NRG requires Exelon to
raise its offer for the company. This includes NRG having a leading
proposal to build new nuclear reactors, and improved earnings
following the acquisition of Reliant Energy Inc.'s (RRI) retail
business in Texas.
"Exelon needs to substantially up its merger offer for NRG to
close the deal, in our view," she wrote.
Shares of the two power companies have erased a spread of more
than $3.50 in late May, or around a 15% premium for NRG
shareholders. The offer when it first became public last fall
represented a 37% premium over NRG's closing price at the time.
Neither company had an immediate comment Tuesday.
Exelon owns and operates electric utilities in Illinois and
Pennsylvania, and power plants throughout the U.S., including the
nation's largest fleet of nuclear power plants. NRG owns power
plants with more than 24,000 MW of generation.
-By Mark Peters, Dow Jones Newswires; 201-938-4604;
mark.peters@dowjones.com