Utilities Merger Looks More Promising (EXC, NRG)

In mid-October, Exelon Corporation (NYSE:EXC) offered to acquire NRG Energy, Inc. (NYSE:NRG) in an all-stock deal at a fixed exchange ratio of 0.485 shares of Exelon stock for each share of NRG stock. The deal was worth about $6.2 billion at the time.

NRG executives rejected the deal, so Exelon went straight to shareholders. Yesterday, Exelon announced that it had received tenders for 51% of NRG shares. Exelon had received over 45% of NRG shares by the original deadline of January 6th, and has now extended the tender offer until June 26th. NRG’s board and management have not changed their tune: they are willing to consider a merger with Exelon, but that the current price is too low.

Exelon is now in the driver’s seat. According to Exelon’s announcement, the extended expiration date on the offer “enables Exelon to focus on seeking regulatory approvals for the transaction and the solicitation of proxies for the election of NRG directors at the NRG annual meeting of shareholders.” NRG has not yet scheduled its annual meeting, but Exelon is clearly ready to play hardball the minute NRG announces a date. Maybe that’s why no meeting is scheduled yet.

Paul Ausick
February 27, 2009