DealZone

NRG Chief Executive David Crane, talking to Reuters after his company rejected Exelon’s latest hostile bid for the company, declined to specify how high Exelon would need to bid to bring NRG to the table. But he did say that his company has provided “a road map for 3 different ways they can get to double digit increases” in their bid.

Here are some other highlights from the interview that didn’t make it into the story:

ON EXELON’S NEW SYNERGY ESTIMATES

“If you’re only going to give our shareholders 18 percent of those synergies, that’s not so exciting. In most combinations, the synergies (are divided) more in the 50-50 range of whatever number… They claim there are like $3.2 billion of synergies. This is not a gotcha game. I’m not saying let me sit down with you and if you only prove $3 billion, I’ll say ‘Aha! You’re $200 million short.’ Fifty percent of $3 billion is much more than 18 percent of $3.2 billion.”

ON EXELON’S “BEST AND FINAL OFFER”

“What makes this deal unusual is that this is all a negotiation that is occurring in public. People making best and final offers and then coming back happens all the time in private negotiations.”

ON EXELON PLANS TO CUT NRG JOBS

“We have made it clear to every employee that this is a consolidating industry, we have a fiduciary duty to NRG shareholders, and that there is not a guarantee of permanent employment. Having said that … I definitely have concern about value creation tied with elimination of NRG jobs. People are not all fungible. The people that have created all this value at NRG and the people that are currently creating value in terms of the nuclear development and things like that are the very people that Exelon proposes to wipe out. You really can’t have it both ways. You can’t have full cost synergies by wiping out all of NRG’s corporate capabilities, but then say you’re going to take advantage of NRG’s growth opportunities. The people are the ones creating the growth opportunities and Exelon has a different type of person working there than the type of person working at NRG.”

‘Tis the season for unbridgeable gaps.

NRG Energy rejected Exelon’s sweetened (and hostile) bid on Wednesday, saying the $6.9 billion offer was still too low.   

Exelon raised its all-stock offer for NRG by more than 12 percent last week, but investors have not been swayed by the increased price. NRG shares have lost more than 15 percent of their value since Exelon bumped up its bid.   

Exelon has said its increased bid of 0.545 of its shares for every NRG share is its best and final offer. 
Still, NRG called the revised Exelon bid a step in the right direction.  “If you would properly recognize the value created by NRG itself, you would be able to increase your current 0.545 offer by a substantial amount,” NRG wrote in its letter.   

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.