Exelon raises bid for NRG Energy to $8 billion
COLUMBUS, Ohio -- Exelon Corp. on Thursday sweetened its hostile takeover bid for rival power generator NRG Energy Inc. by 12 percent to $8 billion in stock, citing newly identified cost savings along with NRG's recent deal for Reliant Energy's Texas retail business.
NRG Chairman and CEO John Rowe said that the new proposal is Exelon's "best and final offer." The former offer has a current value of about $7 billion.
"Together the two company's shareholders get something very rare, a truly effective combination in an industry in which significant profitable growth is very hard to come by," Rowe said in a morning conference call.
NRG rejected Exelon's previous offer, saying it undervalued the company.
If NRG combines with Chicago-based Exelon, the new company would be the largest U.S. power generator, providing energy to about 45 million homes. Exelon is the nation's largest nuclear power company.
Exelon is now offering 0.545 shares of its stock for each NRG share. The old offer had been 0.485 shares.
Exelon said the increased offer represents value of more than $3 billion to NRG shareholders.
Exelon said it increased the bid because it found an additional $1.5 billion in potential savings from the tie-up, and because of NRG's acquisition of Reliant Energy's retail business in May.
Both Exelon and NRG Energy have nominated a slate of directors for shareholders to vote on at NRG's annual meeting on July 21. The outcome of that vote could ultimately determine if the sale goes through.
Chicago-based Exelon is urging NRG shareholders to vote to expand the board and for nine new independent directors.
Exelon said Thursday that its is "confident" the company can meet all financing needs associated with the transaction, including refinancing of $4.7 billion of NRG's senior notes and other NRG debt, while maintaining its investment-grade credit ratings.
Last month, Exelon said it would to lay off 500 employees and would take a $40 million severance charge in the second quarter as part of a massive cost-cutting program. Those cuts are expected to save Exelon about $350 million.
Exelon shares fell a penny to $51.55 in premarket trading, while NRG shares slipped 11 cents to $25.94.
Exelon has nearly $19 billion in annual revenue and 5.4 million electric customers in northern Illinois and Pennsylvania. It also has 480,000 natural gas customers in the Philadelphia area.
Its 10 nuclear stations, with 17 reactors, represent approximately 20 percent of the U.S. nuclear industry's power capacity, and about 3 percent of all U.S. power generation.
NRG's power plants has 24,000 megawatts of generation capacityenough to supply more than 20 million homes. Its retail business, Reliant Energy, serves more than 1.7 million residential, business, commercial and industrial customers in Texas.