CORRECT: UPDATE: NRG Board Expansion Rejected, Ends Exelon Bid
July 21 2009 - 4:06PM
Dow Jones News
Exelon Corp. (EXC) ended its $7.5 billion hostile bid for NRG
Energy Inc. (NRG) Tuesday after NRG shareholders soundly rejected
Exelon's board nominees.
In the end, the nine-month push by Exelon to create the
country's largest power producer came down to price. Although
Exelon raised its offer weeks before the meeting, NRG shareholders
still felt they weren't being compensated enough for the Princeton,
N.J., power-plant operator.
The collapse of the deal highlights the continued difficulty of
consolidation in the U.S. power industry. Even before the current
proxy battle, Exelon and NRG Energy had failed separately in recent
years to acquire rivals. After not being able to force NRG's board
to the negotiating table, Exelon went directly to NRG shareholders,
proposing a slate of directors and an expansion of the board to 19
directors from 14. Of the 87% of shareholder votes that had been
tallied at NRG's annual meeting Tuesday, 75% backed NRG's board
members, while also rejecting the proposed expansion.
Shortly after the announcement, Exelon terminated its takeover
offer of 0.545 of an Exelon share for each NRG share.
"The NRG shareholders have spoken, and Exelon will move on,"
said John Rowe, Exelon's chairman and chief executive, in a press
release.
The termination ends what Exelon Executive Vice President
William Von Hoene described as a "roller-coaster process." Exelon
made its bid for NRG amid the global financial crisis. NRG's board
swiftly rejected it, saying it grossly undervalued the power
producer, which has most of its operations in the eastern U.S. and
Texas.
NRG shareholders initially showed support for the deal at the
original exchange offer of 0.485, with more than 51% tendering of
them tendering their shares by a February deadline. That, however,
represented the high point for Exelon. Several factors, including
NRG's acquisition of Reliant Energy Inc.'s (RRI) Texas retail-power
business and advancements in its plan for new nuclear reactors,
also in Texas, would sway shareholders away from Exelon's offer as
the rise in NRG's share price wiped out any premium. An overall
rebound in the stock market and improved credit market also
helped.
At the shareholder meeting, NRG Chief Executive David Crane said
that, at first, investors favored Exelon's bid because of the
upheaval across the economy, but as markets improved, a deal became
less attractive to them. Crane added that about 10 to 15 companies
took a look at NRG, including foreign utilities, large U.S. power
companies and firms looking to take NRG private. All of the
scenarios, however, faced problems.
"Deals have to be done in a cooperative fashion," Crane
said.
Shares of NRG were recently up 72 cents, or 3.1%, at $24.27,
while Exelon shares were up 1.8% at $52.97.
- By Mark Peters, Dow Jones Newswires; (212) 416-2457;
mark.peters@dowjones.com