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Excelon (EXC)
The Shareholders are Favoring Exelon
It seems that shareholders of NRG Energy (NRG: Charts, News, Offers) are in favor of a merger with Exelon. Announced this morning, they were able to garner a majority of the common stock outstanding in a hostile bid for the New Jersey-based power generation company. The current offer followed two proposals that were rejected by NRG's management team. At that time, CEO David Crane said that the deal favored Exelon's shareholders. Given today's turn of events, it seems shareholders feel otherwise. Will this third attempt be the one that pays off, or will it be strike three for the company?
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All things considered, it will probably result in a payoff, even though this deal is no different than the previous one that was rejected by NRG's management. It still offers a fixed 0.485 shares of Exelon for every one of NRG's, regardless of what happens to stock prices. This values the acquisition at $5.8 billion, down from $6.1 billion back in November when it was originally declined. The main difference here is that the Chicago-based power generation company took the offer straight to stockholders. As a result, they have tendered 125.4 million shares or 51 percent of common stock. Earlier in January when the first tender offer deadline was reached, this figure was only at 45.6 percent. While executives of both companies ended up meeting as a result of this figure, no agreement was made. Since then, the deadline was extended until February 25. However, Exelon has decided to prolong things further by extending the offer through June 26. They are also fighting to have the number of board members for NRG increased. Specifically, they are aiming for 19 individuals on the target company's board. They even publicly nominated 9 people to fulfill some of those positions. There are only 12 members serving right now.
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Today's announcement of tendered common stock applies pressure to NRG and puts them right where Exelon wants them. The target company reiterated this morning that they would be open to a deal at a fair exchange built on reasonable terms, but that the current offer is unacceptable. Specifically, management feels that this deal undervalues the company's potential. Exelon wants a negotiated acquisition though, because this would allow them to look through the company's books. By contrast, owning the company through a proxy contest does not allow them to do so.
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Even if Exelon wins the tender, the deal is still subject to regulatory and shareholder approval. Regulators will probably allow this acquisition to go through because neither is a public utility, and there is little overlap with the two companies. However, as we have seen in the past with the Public Service Enterprise Group (PEG: Charts, News, Offers), concerned citizens in a local municipality can still successfully stop a merger. So even if the company is able to persuade regulators that being the largest power-generation company in the US is lawful, concerned citizens may still topple the agreement. Expecting a grand-slam deal where everything falls perfectly into place may be possible given that there are few obstacles. Even though, it is NRG's turn to make respond, they do not have many options.
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