NRG Energy turns down Exelon's takeover bid

Independent power producer NRG Energy Inc. of Princeton yesterday rejected Exelon Corp.'s improved hostile-merger offer as inadequate, but left open the door to negotiate for a higher price.

Exelon, the Chicago parent of Philadelphia utility Peco Energy Co., last week raised its bid for NRG by 12 percent. Exelon called its sweetened price, which values NRG at about $7 billion, its "best and final offer."

NRG said its board rejected the Exelon bid because "it continues to substantially undervalue NRG." NRG owns and operates power plants in Texas and elsewhere.

In a conference call, NRG chief executive David Crane called the Exelon bid "a welcome step in the right direction, but there still is a lot of distance to cover both in terms of the price and the terms of the offer."

Exelon yesterday said the rejection by NRG's "entrenched" management and board was unsurprising. It repeated calls for investors to back its slate of directors for NRG's board at the annual meeting July 21. Analysts say the success of the merger bid will likely turn on the board vote.

Exelon initiated the hostile bid in October, when NRG's stock price was at a low point. In a statement yesterday, Exelon said, "NRG would likely trade below its current share price because the market would recognize that there is no other way that a stand-alone, highly leveraged, sub-investment-grade niche player like NRG can generate the kind of immediate value that would be created by a combination with Exelon."

The Princeton company argued that Exelon underestimated the value of NRG's recent acquisition of a Texas retail power business, which NRG said yesterday would increase annual earnings by $325 million, to $2.5 billion.

Shares of NRG yesterday rose $1.27, or 5.5 percent, to $23.35. Exelon shares rose $0.46, or 1 percent to $48.21.