Exelon increases offer by 12 % but is still rejected by NRG management
- By Thomas Cheplick -
NRG Energy Inc. (NRG), a wholesale power generation company in Princeton, New Jersey, in a stunning move rejected on Wednesday a second takeover offer from Exelon Corporation of Chicago.
NRG Energy's Chief Executive David Crane announced that Exelon's second bid was only slightly better than the previous offer.
Exelon is an electricity generating and distributing company and serves 5.2 million electricity customers and 460,000 natural gas customers. It is also the nation's largest operator of nuclear power plants
NRG Energy's decision to reject Exelon's second takeover offer is seen by analysts as a prelude to an ugly proxy battle at NRG's annual meeting that is set to take place on July 21st. Already, Exelon has nominated four directors to be elected to NRG's Board of Directors and proposed a motion to NRG's stockholders to expand NRG's Board to 19 directors from the current 14.
Exelon Corporation believes its bid for NRG is fair and disagrees with Crane's assertion that its second offer "is not a lot there to get you excited". Exelon's second offer is 12 percent higher than the first offer. Exelon believes NRG's management and board are "entrenched" and asserts that if NRG's Board manages to thwart Exelon's takeover, NRG's stock price will likely fall dramatically as the company is highly-leveraged with a sub-investment-grade credit rating.
The 12 percent increase offer came after Exelon conducted a new study of the merger. The study indicated that taking over NRG would result in another $1.5 billion in additional cost savings and other synergies for Exelon. Crane, however, believes those projections are not likely and thinks Exelon will most likely have to issue more equity if the two companies are combined.
NRG also believes that Exelon's second bid remains too low because of the company's recent acquisition of Reliant Energy, a Texas-based energy company that services nearly 1.8 million retail electricity customers.