Analyst predicts Exelon will up NRG bid; senator promises review of Terra Industries takeover offer

By Cristal Cody

New York, Jan. 20 - Exelon Corp. should increase its offer for NRG Energy, Inc. slightly to half of a share, a market analyst told Prospect News on Tuesday.

In other activity, CF Industries Holdings Inc.'s takeover attempt of Terra Industries Inc. will be under review by the chairman of the Senate Agriculture Committee, fulfilling a market observer's view that the deal faces regulatory risks.

Meanwhile Tuesday, deal-making slowed as the nation focused on President Obama's inauguration. But the promise of change did not stop a stock selloff that sent indexes down as much as 5.78% on banking fears.

The Dow Jones Industrial Average fell 332.13 points, or 4.01%, to close Tuesday at 7,949.09.

The broader indexes declined even further. The S&P 500 index lost 44.90 points, or 5.28%, to finish at 805.22, while the Nasdaq Composite index fell 88.47 points, or 5.78%, to 1,440.86.

Exelon could offer goodwill with upped bid

NRG's management remains unconvinced of a combination with Exelon and is exploring other potential bidders, the company said in a filing with the Securities and Exchange Commission on Tuesday.

Exelon's chief executive officer, John Rowe, met with NRG's CEO, David Crane, on Monday to discuss the takeover attempt, according to the filing. No decision was reached in the meeting.

Rowe said the bid may be raised slightly if Exelon is allowed to conduct due diligence.

Exelon has offered to buy the company at a fixed price of 0.485 of a share of Exelon for each NRG share.

About 45.6% of NRG shares have been tendered in the offer that expires Feb. 25.

"It's up to shareholders to say yea or nay," said an analyst who follows the company. "They've pretty much spoken."

NRG's board of directors will probably have to say yes to Exelon in the end, he said.

"If Exelon is smart about it and they really believe in all the things they talked about, they will probably increase the offer just to save face and make the transition a smooth one," he said. "I think it will go from 0.485 [of a share] to 0.5 for the token increase."

NRG shares fell $1.46, or 6.12%, to close at $22.40 Tuesday.

Exelon's stock dropped $2.15, or 3.92%, to $52.65 in trading.

Terra offer already under review

The chairman of the Senate Agriculture Committee, Sen. Tom Harkin, D-Iowa, plans to review CF Industries' bid for Terra Industries.

Analysts said Friday after the offer was announced that the deal would face regulatory scrutiny over concerns of a monopoly on the nitrogen market.

Representatives of CF Industries were not immediately available for additional information Tuesday on the regulatory approvals needed for the deal.

Terra Industries said it received the unsolicited proposal from CF Industries for 0.4235 of a share of CF Industries for each Terra common share, a 22.8% premium over Terra's closing stock price of $16.29 on Thursday.

Terra's board said on Friday that the company will consider the offer.

Shares of Terra fell $1.22, or 5.95%, to close at $19.27 on Tuesday.

CF Industries' stock lost $2.78, or 5.73%, to finish at $45.74.

Mentioned in this article:

CF Industries Holdings Inc. NYSE: CF

Exelon Corp. NYSE: EXC

NRG Energy, Inc. NYSE: NRG

Terra Industries Inc. NYSE: TRA

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