About three weeks ago, NRG Energy Inc. (NYSE: NRG) received a buyout offer from Exelon Corporation (NYSE: EXC). The deal would have exchanged one share of NRG stock for 0.485 shares of Exelon. On Sunday, NRG told Exelon that the offer was "not in the best interests of NRG shareholders as it manifestly undervalues NRG both on an absolute basis and relative to your own share value."
NRG also pointed out that Exelon has not yet received any committedfunding, and that Exelon’s credit rating had fallen since the offer.Then NRG schooled Exelon: "It would seem that your own experience overthe past two weeks would have caused you to conclude that this creditenvironment is not the most opportune time to refinance all or a majorportion of NRG’s long-term debt. Nor is it the best time to seek theindulgence of the credit rating agencies in support of the transactioncontemplated by your proposal."
NRG is a wholesale power provider with a market cap of about $5.5billion. Exelon is trying to take advantage of low wholesale prices forelectricity (off between 50-75% since July in some areas) to snag somevaluable properties. NRG doesn’t slam the door to a possible deal, butthe company thinks it is worth more. NRG is worth more, but it doesn’thave any other offers. Falling wholesale prices may change thearithmetic.
Paul Ausick
November 10, 2008
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