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Chicago-based Exelon has said the deal would have enough support to move forward if 30 percent to 40 percent of NRG shareholders tendered their stock. In order to get a majority of NRG shareholders to back the deal, analysts say the value of the offer will need to be raised.
Exelon said Monday it is premature to say what outcome it expects by 4 p.m. CST Tuesday, when the offer officially expires. It has already announced plans to extend the time period for tendering shares. NRG declined to comment.
"If we have a strong showing in the tender, that will have a domino effect," Chris Crane, Exelon's president and chief operating officer, said in an earlier interview outlining the company's merger strategy.
The dominoes could tip in several directions. Exelon could decide to scrap the bid or, contradicting its initial statements, improve the mergers terms, depending on what percentage of NRG shareholders agree to exchange their shares.
"They have a foundation to make more intelligent decisions about whether to increase the price" following Tuesday, said David Stowell, a finance professor at Northwestern University's Kellogg School of Management.
Exelon approached shareholders after the NRG board snubbed its offer of 0.485 shares for each NRG share as being too low.
The NRG board said the deal gave its shareholders too little equity for the cash flow its holdings would produce for a combined company.
Exelon hopes to control a majority of NRG stock before the May annual meeting of the Princeton, N.J., company, which owns 44 power plants and is ahead of Exelon in preparations to build a nuclear reactor in Texas.
With 54 percent of NRG controlled by its 10 largest shareholders, the deal hangs on getting support from a relatively small cluster of investors and mutual funds.
Exelon scheduled drop-in visits with NRG shareholders in December, yet no major shareholder has publicly endorsed the merger. Shareholders contacted Monday declined to say which side they favor.
The decision will be based on a variety of factors, including the growth potential of shares in a combined company and at what price investors bought NRG.
NRG shares closed down slightly Monday, at $23.56. Exelon closed up, at $53.74.
Exelon would be paying a 17 percent premium to buy NRG, a percentage too low to entice much activity from investors specializing in merger arbitrage, said one analyst.
Investors who would buy NRG stock in hopes of a merger going through need a higher return, the analyst said.
The majority of Exelon shareholders oppose increasing the offer, Crane said. Because the deal would likely involve more than 20 percent of Exelon shares, shareholders will have to vote on the deal.
jboak@tribune.com
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