If anyone has a steady enough business to fund a deal in these uncertain times, it’s a utility. Exelon‘s $6.2 billion bid for NRG is two-thirds the size of NRG’s bid last May for energy provider Calpine. That probably says more about how cheap assets are today than whether an Exelon-NRG deal makes more sense.
Calpine rejected NRG’s $9.2 billion all-stock offer, calling it too low, but said it might be willing to talk later. Now it is later, and NRG is the target. Calpine would have received a premium of about 7 percent from NRG — a far cry from the 27 percent Exelon is offering to NRG.
NRG’s share price, at $19.33, is less than half what the stock was trading for when the company bid for Calpine, making Exelon’s offer an attractive exit for anyone unconvinced by NRG’s standalone business model.
The stodgy utility sector is heavily regulated, boosting its appeal to investors in a time of economic and market stress. But what makes NRG’s business attractive is its non-regulated direct-to-grid power supply income. Government regulation of business is winning new fans every day in the United States, but Exelon has other ideas.
Deals of the day:
* Dutch financial group ING says it will sell its Taiwan life insurance unit to Fubon Financial for $600 million, a day after securing a 10 billion euro ($13.5 billion) government cash injection.
* SanDisk of the United States said it would sell 30 percent of NAND memory chip production capacity at joint ventures with Toshiba to the Japanese partner, in a deal worth about $1 billion.
* The chief executive of Merrill Lynch says that emergency measures by U.S. authorities had solved concerns about liquidity problems and that his bank’s merger with Bank of America was on track.
* India’s Reliance Anil Dhirubhai Ambani Group is looking at the Asian insurance business of American International Group outside of India, the Economic Times reported citing unnamed sources.