Exelon Applies Full Court Press on NRG
The battle to subsume the target and create the country’s biggest power generation company hinges on whether NRG shareholders are willing to put Exelon picks on their board.
June 25, 2009
The battle to buy NRG Energy Inc.—and the subsequent struggle by the company to maintain independence—is coming to a head as Exelon Inc. will take to NRG’s shareholders a pitch to overthrow some of the target’s directors and install its own picks.
Earlier today, NRG issued a lengthy statement decrying the potential benefits touted by its potential buyer and promising stockholders the company's viability remains cemented in its long-term independence.
The move represents what could be an increase in unsolicited offers directed at financially hobbled targets. Hostile offers have accounted for 47% of the M&A transactions that took place in the United States during the first few months of 2009, compared with 24% in all of 2008 and 7 percent in 2004, according to a study by the Conference Board Governance Center issued earlier today.
The road to this vote has gone through unsolicited bid rejections and NRG’s acquisition of a division of Reliant Energy, which did little to thwart the potential acquirer.
Exelon successfully fended off earlier this week a lawsuit by NRG that claimed the potential buyer had no intent to complete the proposed exchange according to its stated terms, that it was revising conditions. Next, it will propose to its target’s board members that nine directors be replaced with Exelon picks; just the vote itself is seemingly providing them with a clear-cut option as to whether to keep the company independent or sell it.
After seeing its stock price sliced by about two-thirds during the precipitous decline in late 2008, NRG got in October, and turned down, a $6.1 billion offer from Exelon Corp. that offered a premium of about 37% on the hobbled power generation company. NRG Energy has continually rejected the advances of its potential acquirer since then; Exelon has sought to tuck in the listed, New Jersey-based company and build the biggest power generation company in the US.
In the last year, NRG’s stock have gone from a high of around $44 per share to a low closer to $14 per share, and Exelon, listed, based in Illinois, has sought aggressively to capitalize on it. As of late June, NRG scored some small victories, including its stock’s appreciation of about 60% at press time, and since Exelon’s knock at its door successfully completed a deal to buy Reliant Energy’s Texas retail business for $287.5 million.
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