RiskMetrics: NRG holders should reject Exelon proposal

RiskMetrics Group Inc., a proxy adviser, recommended that NRG Energy Inc. shareholders reject Exelon Corp.'s proposal to expand the company's board and elect nine new independent directors to help win approval of Exelon's $7 billion hostile takeover bid.

"Exelon's current bid is not compelling enough to support splitting the board with nine dissident nominees," RiskMetrics said today in a report. "We do not believe that directors should be granted unfettered discretion to determine whether a hostile offer should proceed, yet we also believe that target boards do not have an obligation to enter into negotiations with any and all parties that make an unsolicited offer."

Proxy Governance, another proxy adviser, made a similar recommendation on July 10.

Exelon, the largest U.S. utility owner by market value, urged NRG shareholders in a June 17 solicitation to elect four new board members and expand the board by five additional members after NRG repeatedly rejected its overtures.

Princeton, New Jersey-based NRG, the second-largest electricity producer in Texas, turned down on July 8 a sweetened offer from Exelon to swap 0.545 share for each NRG share. Exelon, based in Chicago, had proposed an exchange ratio of 0.485 in October.

Based on conversations with NRG shareholders, RiskMetrics said, "it appears that a market-clearing price is likely to lie closer to 0.60x exchange ratio, or approximately $30 per share."

NRG rose 39 cents, or 1.7 percent, to $23.63 in New York Stock Exchange composite trading. Exelon gained $1.19, or 2.5 percent, to $49.35.