NRG Energy (NRG) To Exelon (EXC): No Deal

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08:38:57 am on July 8, 2009

NRG Energy just announced that its Board of Directors has rejected Exelon’s revised offer for the company. The vote was unanimous and was based on the belief that Exelon is undervaluing NRG, even with its revised offer, with was equivalent to $27 per share. NRG’s Board sent a letter to Exelon calling the revised offer a “step in the right direction” and explaining the specific areas in which the company believes it is being undervalued, which include its purchase of Reliant Energy, its nuclear capabilities and its green energy capabilities.

The letter closed with a strong message to Exelon: If you want a deal, you’ll make us an offer we can’t refuse. Here’s an excerpt from the letter, which is available here as part of press release: 

“These value enhancing developments add to NRG’s financial strength which your revised offer does not yet appreciate or properly value. NRG is a Company that is on track to produce annual EBITDA for 2009 of $2.5 billion, which represents a compound annual growth rate in EBITDA over the past six years of 21% with a recurring free cash flow yield of 23%. It is the unanimously held view of NRG’s Board of Directors that such a company is worth significantly more than the $27 per share that your July 2nd offer represents.

As we told you when we first met last September, NRG is open to any proposal that properly reflects NRG’s fundamental value and extraordinary growth prospects. If you wish to pursue a possible combination with NRG in a more cooperative fashion, you should increase your July 2nd offer by an amount that properly reflects the specific value of the NRG initiatives, especially in light of the additional information provided today. Our management team then would be pleased to sit down with you or your economists and consultants to validate and quantify the combination synergies summarized in your July 2nd presentation and to demonstrate further the full value of NRG’s exceptional operating franchise and its unique growth initiatives so that Exelon could provide a reasonable measure of that value to NRG’s stockholders. “


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