DealZone

‘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.   

Next stop on this long road: NRG’s annual meeting on July 21. Exelon has nominated a slate of directors to stand for election; shareholders will vote.

The two companies are part of a long list of running hostiles, including Broadcom/Emulex, Agirum/CF/Terra, Xstrata/Anglo American, Validus/IPC and EMC/Data Domain. Some of those offers are “unsolicited” and not “hostile” yet. But let’s face it — a bid that is unsolicited and perceived to be undervalued might not be “hostile,” but it isn’t considered particularly friendly.

Broadcom extended its tender offer for Emulex shares yet again this morning, after less than 3 percent of shareholders turned in their shares to avail of the hostile, $764 million buyout offer. If anyone’s wondering which way this deal is headed, maybe a look at the fate of unwelcome tech bids in recent memory will provide a clue. In no particular order: Microsoft-Yahoo: Microsoft kicked off 2008 with one of the tech industry’s biggest buyout offers — its unsolicited $44.6 billion bid for Yahoo. It even raised it to $47.5 billion before pulling away because Yahoo just didn’t want to sell. Electronic Arts-Take Two: EA offered about $2 billion to buy its rival, Grand Theft Auto videogame publisher Take Two and made a tender offer that it extended a few times before dropping the bid. Cadence-Mentor: Cadence offered $1.5 billion, unsolicited, to buy Mentor Graphics, and then withdrew its bid citing difficulty in financing. Vishay-IRF: Vishay Intertechnology withdrew its $1.7 billion bid for International Rectifier in October, saying the pursuit was futile given IRF’s refusal to engage in talks. Samsung Electronics-SanDisk: The Korean electronics giant offered $5.9 billion to buy SanDisk, but the flash memory maker wanted much more. Samsung eventually dropped its pursuit, citing the economy. Microchip and ON Semiconductor-Atmel: Chipmakers Microchip and ON Semi made a joint $2.3 billion bid for Atmel, which it rejected. ON Semi had trouble securing financing to fund its part of the deal. Eventually, the two companies dropped their bid. United Technologies-Diebold: United Techologies offered $2.6 billion for Diebold and kept its unsolicited offer on the table for eight months before giving up.

I might have missed a couple more, but you get the idea. Hostile deals don’t seem to work in tech, despite all that people said when Oracle succeeded in buying BEA two years ago. Does the adage about assets, i.e. engineers, walking out the door in hostile situations still apply? Or are there other reasons, such as cultural fit, that cause a lot of resistance among target companies in techland?

(Photo: Reuters)