Tide turns on NRG hostile takeover

NRG has been under pressure for months now from a $6.2bn hostile takeover attempt by Exelon, which has been moving since last year to form a merged group to become the largest US power producer. But the tide is starting to turn for the company.

Not only was NRG shortlisted in May by the Department of Energy to receive loan guarantees for its new nuclear plant, but it seems support for Exelon’s purchase of NRG is shrinking. Exelon said in a lettter to NRG shareholders that as of June 16, 12 per cent of NRG’s outstanding shares had been tendered under its offer. That was sharply down from the 51 per cent it had received in February.

Exelon has not given up the fight. It once more told shareholders today it was offering them the opportunity to realise an immediate premium for their NRG shares.

Yet, based on yesterday’s closing price for both stocks, Exelon’s offer represents a premium of only 3.6 per cent to NRG stockholders. When Exelon made the offer, back in October, the premium was 37 per cent.

Exelon said in a statement that investors typically withdraw tendered shares and do not re-tender until the next expiration date. Exelon extended its offer to August 21.

But the key date to watch is July 21, which is when NRG holds its annual meeting of stockholders. That is when the gloves will come off, and the fight for control will move to the centre ring. NRG has asked stockholders to re-elect its four directors and support its efforts to create value by voting the white proxy card sent them this week.

Exelon wants shareholders to elect nine new, independent NRG directors, and a new direction by voting the blue proxy card.

Certainly the winds of change have been whipping through the US energy industry. But, for now, at least, it looks as if enough NRG shareholders want to ride out the rest of the economic storm in their own dingy rather than change to a bigger but untested boat amid the swirling tides. After all, NRG has been arguing that Exelon’s takeover plan is inadequate because it does not come with a big enough premium and still needs committed financing. Seems NRG shareholders are listening.

Related links:

Nuclear finance race heats up (FT Energy Source, 17/06/09)
NRG argues Exelon takeover is not a done deal (FT Energy Source, 26/05/09)

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