UPDATE: Exelon Extends Exchange Offer For NRG Energy To Aug 21
18 June 2009 - 2:37AM
Dow Jones News
Support for Exelon Corp.'s (EXC) hostile bid for NRG Energy Inc.
(NRG) slipped among NRG shareholders, with only 12% tendering their
shares as of Tuesday evening.
Exelon reported the new figure Wednesday as it announced it
would extend its exchange offer for NRG Energy shares to Aug. 21
from June 26. Exelon is extending the offer after NRG Energy's
annual meeting scheduled for July 21, which is seen as a key event
in its $6.2 billion takeover bid.
While a deadline extension was expected, the size of the drop
off in NRG Energy shareholder support was surprising, said Brandon
Blossman, an analyst at Tudor, Pickering, Holt & Co.
Exelon had won the support of more than 51% of NRG Energy's
shareholders by a February deadline. The company attributed the
pullback in support to timing, with Exelon extending the offer
ahead of next week's deadline.
"Investors typically withdraw tendered shares between expiration
dates, and do not re-tender until very close to the next scheduled
expiration date," William Von Hoene, executive vice president and
general counsel at Exelon, said in a statement. "Because the
exchange offer was extended early due to NRG's delay in setting its
annual meeting, that cycle could not play out here."
NRG Energy had no immediate comment on the announcement.
Exelon last fall launched an exchange offer to pay a fixed ratio
of 0.485 Exelon share for each NRG share in a bid to create the
largest power generator in the U.S. by output. NRG Energy's board
has stiffly resisted the bid, saying it undervalues the Princeton,
N.J., power plant operator.
The Chicago power company is facing growing pressure to raise
its offer as shares of NRG Energy trade near the exchange offer. As
of Tuesday's market close, the proposed deal represented less than
a 4% premium for NRG Energy shareholders. The spread has narrowed
considerably in recent weeks, with the premium standing at more
than 15% a month ago. The exchange offer represented a 37% premium
for NRG Energy shareholders when Exelon announced its bid in
October.
Analysts have said a variety of factors, including NRG Energy's
progress on a new nuclear project and its acquisition of Reliant
Energy Inc.'s (RRI) retail business, require a higher offer. But
the likelihood Exelon will have to raise new equity as part of deal
limits how high it can go.
"How much [Exelon] might raise its offer is likely limited by
the potential need to issue new equity to placate rating agencies
and our sense that [Exelon] shareholders remain less than
overwhelmed by the acquisition," analysts at Wachovia Capital
Markets wrote in a note to clients earlier this week.
Exelon's board is scheduled to meet on June 30 to discuss the
hostile bid. Then at NRG Energy's annual meeting on July 21, Exelon
is proposing expanding NRG's board and adding its own members as it
tries to complete the deal amid the resistance of NRG's current
board.
NRG Energy shares were recently down 1.8% to $22.50, while
Exelon shares were down 1.5% to $48.21.
-By Mark Peters, Dow Jones Newswires; 212-416-2457;
mark.peters@dowjones.com