NRG Energy Rejects $6.1 Billion Offer From Exelon

NRG Energy Rejects $6.1 Billion Offer From Exelon

Nov. 9 (Bloomberg) -- NRG Energy Inc., the second-largest power producer in Texas, rejected an unsolicited $6.1 billion takeover offer from Exelon Corp., the largest U.S. utility owner.

The offer ``significantly undervalues NRG and is not in the best interests of NRG's shareholders,'' Princeton, New Jersey- based NRG said in a statement today. ``The Board thoroughly reviewed Exelon's proposal and reached its decision after careful consideration with its independent financial and legal advisers.''

Exelon's all-stock bid came Oct. 19 after NRG lost half of its market value in two months. The acquisition would have made Exelon the largest U.S. power producer, ahead of Atlanta-based Southern Co. and Columbus, Ohio-based American Electric Power Co.

In a letter to Exelon Chief Executive Officer John Rowe, NRG CEO David Crane and Chairman Howard Cosgrove cited lack of secured financing as one reason for the rejection, posing ``real risk of non consummation to NRG's shareholders.''

``Under your proposal, NRG shareholders would own only 17 percent of the combined company while contributing over 30 percent of a combined NRG-Exelon free cash flow in 2008,'' they said in the letter, made public today by NRG.

Exelon offered NRG owners 0.485 share of Exelon for each of their 233 million shares outstanding. That valued the company at $26.10 a share as of the Nov. 7 close. That was a 35 percent premium over NRG's closing price on Oct. 17, before the offer was made, and 9.4 percent above the close on Nov. 7.

Exelon spokeswoman Judy Rader didn't immediately respond to e-mail messages and telephone calls seeking comment.

Refinancing

NRG would consider higher offers that also include arrangements for refinancing the company's more than $7 billion in debt, Crane, 49, said today in interview.

``It's not the nature of the consideration, it's the amount,'' Crane said. ``Their credit rating gives us pause. It's not that common for people to go forward at this point with no debt financing in place.''

Standard & Poor's on Oct. 21 cut Exelon's credit rating by one grade to BBB, the second-lowest investment grade, citing the company's ``willingness to pursue an aggressive growth at the detriment of creditworthiness.''

The acquisition would have expanded Exelon's fleet of 17 cheaply fueled nuclear generators, the nation's largest. NRG operates and is 44 percent owner of the South Texas Project, a two-reactor plant southwest of Houston. It's seeking a federal license to add two more reactors there.

Constellation Energy

The Exelon bid followed acceptance by Constellation Energy Group Inc., the largest U.S. power marketer, of a $4.7 billion cash offer from Warren Buffett's MidAmerican Holdings Co. Constellation's shares had dropped by half in a week amid investor concern that it would be short of cash to back energy contracts.

MidAmerican parent, Berkshire Hathaway Inc., based in Omaha, Nebraska, acquired 3.24 million NRG shares in the second quarter, according to a public filing.

(NRG will conduct a conference call with analysts and investors tomorrow at 9 a.m. New York time, accessible on the company's Web site at http://www.nrgenergy.com.)

BLOOMBERG