The word "opportunistic" has become synonymous with the credit crunch as yet another deal is rejected on the grounds that it's too low. Everyone wants more money, but with so many depressed stock prices and earnings, targets are ever more cautious when considering deals. The latest comes from power generation company NRG Energy Inc., which
rejected an unsolicited $6.1 billion bid from Chicago's Exelon Corp. NRG noted that Exelon, the largest nuclear power operator in the U.S., didn't even get financing for the deal, its credit rating was just downgraded and that the bid is opportunistic since broader market turmoil has weighed on its stock price.
The AP reported that
buyouts and attempted mergers in the industry have begun to accelerate just three years after the repeal of the Public Utility Holding Company Act of 1935, which strictly regulated utilities. It noted a unit of Warren Buffett's Berkshire Hathaway Inc. is buying wholesale power generator Constellation Energy Group Inc. of Baltimore for the bargain price of $4.7 billion. One analyst said as time goes by some companies will see their stock prices rebound -- others will continue to lag, making them
more likely to entertain buyout offers.
It took Princeton, N.J.-based NRG, which sees the Exelon deal as risky, three weeks to reject the bid. NRG wrote in a lengthy letter to Exelon's board that "while NRG announced a 2009 share buyback program, Exelon has 'indefinitely suspended' its program in order to conserve cash, highlighting the potential impact of the continued uncertainty in capital and credit markets on Exelon's future cash needs."
NRG is still open to dealmaking, though. It said "please be assured that NRG is a believer in industry consolidation and has and always will be a willing seller or buyer when genuine value can be created for both parties."
After all, NRG is a bargain hunter, too. Earlier this year, it offered to buy Houston rival Calpine Corp. for almost $9.6 billion. The bid was rejected as too low. -
Baz Hiralal
NRG Energy rejects Exelon bid
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