Exelon's NRGetic New Bid

When you pit two power players against one another, there are bound to be sparks.

I haven't had much comment on the drawn-out takeover tussle between Exelon (NYSE: EXC  ) and NRG Energy (NYSE: NRG  ) since the former launched its bid back in October. There have been several interesting developments in the interim, however.

At the time of the initial offer, which valued NRG at $6.2 billion, it looked like Constellation Energy was headed to the altar with Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) MidAmerican Energy. Then, in December, France's EDF stepped in with a richer bid and snapped up Constellation for itself.

Constellation's nuclear assets just proved irresistible to its suitors, and that's exactly what's driving Exelon's hot pursuit. And things have gotten heated -- Exelon has launched a proxy contest in order to shake up the Board of Directors of NRG, and the latter brought a lawsuit in federal court in an attempt to fend off Exelon's exchange offer. (The bid is an all-share offer, which requires NRG shareholders to tender into the exchange.) That suit was recently dismissed, but the proxy battle remains.

Another interesting twist of late is that Exelon was passed over in the government's recent allocation of $18.5 billion loan guarantees for the next generation of U.S. nuclear plants. Southern (NYSE: SO  ) appears to have made the cut, along with Scana (NYSE: SCG  ) , Constellation/EDF's UniStar venture, and most importantly, NRG.

It's not too surprising, then, that Exelon has now sweetened its bid, citing an additional $1.5 billion in synergies. Funny how you can find those in a pinch! My initial reaction was that the new bid, valuing NRG at around $7.7 billion, was probably insufficient to close the deal, given NRG's success in landing government largesse. The shares aren't reacting that way, however, as they're trading at a discount to the value implied by the exchange ratio.

Exelon says this is its final offer. As with the MAG Silver (AMEX: MVG  ) merger that recently melted away, this bidder may not be bluffing. In that case, this might be as good as it gets for NRG shareholders. We'll soon see.