Exelon increases offer to buy NRG
Exelon has today increased its offer to acquire NRG Energy by 12.4%. Yesterday, NRG had again recommended that its shareholders reject Exelon's original offer, saying that it undervalued the company, but said that it would consider an increased offer.
Exelon has today increased its offer to acquire NRG Energy by 12.4%. Yesterday, NRG had again recommended that its shareholders reject Exelon's original offer, saying that it undervalued the company, but said that it would consider an increased offer.
Exelon has now offered to buy all the outstanding NRG common stock in an all-stock transaction with a fixed exchange rate of 0.545 of a share of Exelon common stock for each NRG share. The company said that this increased offer represents value of over $3 billion to NRG shareholders.
The primary reason for the increased offer, Exelon said, was some "$1.5 billion of additional newly identified synergies." The company said it also reflects the value of NRG's recent acquisition of Reliant Energy's retail business.
John Rowe, chairman and CEO of Exelon, said: "We listened to NRG investors and balanced their views with the best interests of Exelon shareholders. An exhaustive analysis by our internal team, informed by the best third-party experts, resulted in additional synergies, allowing us to increase our offer to NRG shareholders."
He added, "Our track record of the Unicom-PECO merger, cost-cutting initiatives, and fleet optimization proves we can deliver this further value to Exelon and NRG shareholders. This is our best and final offer, and we will use the time leading up to the NRG annual meeting on July 21 to communicate the value of our new offer to NRG shareholders, encouraging them to vote for nine new independent directors who can unlock that value."
Exelon said that it continues to pursue NRG because of "the long-term value that can be created by industry consolidation." It said that it "believes that the scope, scale and diversified risk of the combined company will allow it not only to withstand the ever-changing forces of the markets and regulation but also to grow and create more value than each company could on its own."
"Together, the two companies would become the first national generation company," said Rowe. "There is no model that can do more for shareholders of both companies than an Exelon-NRG combination."
NRG's board has consistently voiced its opposition to Exelon's bid on the grounds that Exelon's offer undervalues the company. The third expiration date of Exelon's conditional offer was 26 June. On 1 July, NRG's board issued a presentation to its shareholders reiterating the reasons why the offer should be rejected. The presentation said that Exelon should either withdraw its offer or raise it. NRG said that it would consider an improved offer.
In mid-June, the US District Court for the Southern District of New York rejected NRG's claim that Exelon did not intend to complete the exchange offer and entered judgement in favour of Exelon, the company has said. The court ruled that the allegations in the suit filed by NRG in March 2009 were without merit.
Exelon initially placed its offer for NRG as NRG's stock slumped in October 2008, but its overtures have twice been rejected by NRG, prompting Exelon to make its offer directly to NRG shareholders. If successful, the takeover bid would result in the largest power firm in the USA with 47,000 MWe of generation capacity, including 18,000 MWe from nuclear power plants.
