DOW JONES NEWSWIRES
NRG Energy Inc.'s (NRG) board and management asked Exelon Corp.
(EXC) to withdraw its proposal to expand NRG's board, saying
changes could cause the acceleration of the company's debt.
NRG, which has been fending off a $5.15 billion hostile-takeover
effort from Exelon, also said a larger board would be unwieldy and
inconsistent with best corporate practices.
Most troubling, such a restructuring of the board could
accelerate about $8 billion of outstanding corporate-level debt
under the terms of its debt facilities, NRG said, adding that
refinancing would be very expensive or even impossible with the
credit crisis. If NRG directors won even a one-vote majority, the
debt-acceleration provision could be triggered by the departure of
one NRG director, the company said.
Last month, Exelon, the largest nuclear power operator in the
U.S., said more than 51% of NRG shareholders had tendered their
shares. Exelon took its bid directly to shareholders in November,
after NRG's board rejected the same offer, saying it undervalued
the company.
Exelon announced its bid in October, offering to pay a
fixed-exchange ratio of 0.485 Exelon share for each NRG share,
equal to about $26.43 a share, based on Oct. 17 closing price.
NRG's shares recently traded at $17.36, up 1.3%, while Exelon's
were at $45.51, up 2%.
NRG Chairman Howard Cosgrove said Thursday that if Exelon does
not withdraw the proposal, the board will add another director.
In its preliminary proxy materials filed last week, Exelon again
proposed expanding the board to up to 19 directors from 12, with
elections for nine seats.
Exelon has nominated four people to replace four of NRG's
incumbent directors who are up for re-election, including the
chairman. It also wants to put five more nominees on the board at
NRG's annual meeting.
If NRG's stockholders approve the board expansion and all of its
nominees are elected to the board, Exelon's nominees would hold 50%
of the seats on the expanded board.
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975;
Kathy.Shwiff@dowjones.com
