NRG rejects improved Exelon offer
Having said it would consider a revised offer from Exelon, the board of NRG Energy has determined that Exelon's revised proposal still significantly undervalues the company and is not in its shareholders' interest.
Having said it would consider a revised offer from Exelon, the board of NRG Energy has determined that Exelon's revised proposal still significantly undervalues the company and is not in its shareholders' interest.
On 2 July, Exelon increased its offer to acquire NRG Energy by 12.4%. 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.
However, in an 8 July letter to Exelon, NRG said that its board has "thoroughly reviewed and considered" Exelon's revised offer but "unanimously has rejected your proposal as it determined that the revised offer is not in the best interest of NRG stockholders in that it continues to substantially undervalue NRG."
NRG added, "Indeed, by any objective analysis, the increase in your offer fails to adequately compensate NRG stockholders even for the value created by NRG since your original offer was launched. The board also rejected this proposal due to the revised offer's extraordinary conditionality which remains unchanged from Exelon’s original offer."
"While your revised offer is not acceptable as it is, it certainly represents a step in the right direction," NRG told Exelon. It continued, "The fact that you were able to increase your offer largely through over $200 million per year of newfound synergies identified by your consultants leaves open the possibility that, if you would properly recognise the value created by NRG itself, you would be able to increase your current 0.545 offer by a substantial amount."
Exelon chairman and CEO John Rowe, when announcing the revised offer, had said: "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 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. Its original offer was for 0.545 of a share of Exelon common stock for each NRG share. NRG's board has consistently voiced its opposition to Exelon's bid on the grounds that Exelon's offer undervalues the company.
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.
