Exelon-NRG fight comes to head, maybe
COLUMBUS, Ohio -- After a nine-month fight, Exelon's $7.4 billion, all-stock bid to create the nation's largest power generator by buying NRG Energy is coming to a head, maybe.
NRG shareholders on Tuesday will vote on Exelon's proposal to increase the size of NRG's board and with it, a group that would be more open to a deal. NRG has rejected two previous offers.
NRG repeatedly has said a deal isn't being ruled out, but that Exelon has to bring more to the table. Many industry experts agree.
This month, Exelon raised its offer 12 percent to .545 shares for each NRG share from its initial offer in October of .485 shares.
Chicago-based Exelon wants NRG shareholders not only to expand the board from 14 to 19 seats, but to fill nearly half of those seats, including four that are up for election, with its supporters.
Princeton, N.J.-based NRG, combined with Exelon, would provide energy to about 45 million homes. Exelon is already the nation's largest nuclear power company.
Exelon's initial proposal last October came as the declining stock market had whacked NRG's stock price. Since then, the companies have been trading barbs as shares in both companies recover.
Exelon said it will walk away if NRG shareholders vote against the board proposals Tuesday, but also said it may sweeten the offer yet again.
John Rowe, Exelon's chairman and CEO, has called the proposed deal a rare opportunity to expand in a crowded sector and in a letter he told NRG shareholders that their vote on the additional seats would be the "ultimate judgment" on the value of what could be the country's biggest power company.
NRG's top executives say Exelon doesn't need more board seats, just a better offer.
The four leading proxy advisory firms have come out against the current proposal, and several analysts are cool to it as well.
"Exelon's current bid is not compelling enough to support splitting the board with nine dissident nominees," according to RiskMetrics. "Virtually all of the NRG shareholders to whom we spoke expressed a belief that Exelon should sweeten its offer."
There are also some who do not believe Exelon will walk away Tuesday without at least one last bid.
Exelon, with nearly $19 billion in annual revenue, has 5.4 million electric customers in northern Illinois and Pennsylvania. It also has 480,000 natural gas customers in the Philadelphia area.
NRG's power plants have 24,000 megawatts of generation capacity, enough 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.
NRG's stock fell 84 cents to close at $23.55 in trading Monday afternoon. The shares have traded between $14.39 and $39.24 over the past year.
Exelon stock shares rose 63 cents to $52.05. Its shares have traded between $38.41 and $86.63 over the past year.