Exelon's Bid Goes Bust

• Email
• Share
• Print

And so another takeover battle ends not with a bang, but with a whimper.

With NRG Energy (NYSE: NRG) shareholders rejecting both Exelon's (NYSE: EXC) board nominees and board expansion proposal at NRG's annual meeting yesterday, the message was clear. Exelon had won few converts with its hostile takeover tactics and underwhelming exchange offer.

In case shareholders were on the fence, a slew of proxy advisory firms made the case against Exelon's bid. RiskMetrics found the bid uncompelling, while Proxy Governance rejected the notion that NRG has an entrenched board closed to the possibility of value-enhancing transactions.

Without the added board influence it sought, Exelon was left with two options: Put up or shut up. As I predicted earlier this month, Exelon chose to walk rather than increase its offer. In that way, the company acted more akin to Fresnillo PLC in its aborted MAG Silver (AMEX: MVG) grab than to Agrium (NYSE: AGU), which continues to sweeten and extend its bid for fellow fertilizer firm CF Industries (NYSE: CF).

So what lies ahead for the stand-alone firms?

Well, when NRG rejected Exelon's raised bid earlier this month, the company boosted both its EBITDA guidance and its share buyback program. With the flexibility to repurchase an additional $500 million of its own shares before the end of the year, NRG appears to be very comfortably positioned.

As for Exelon, the company noted in its press release yesterday that its "long-term growth proposition remains the best in the industry." The emphasis certainly goes on long-term, considering that the Obama administration showed no love for Exelon's proposed new plant in last month's allocation of federal loan guarantees. That said, Exelon is certainly well-equipped to excel under whatever cap-and-trade structure Congress cobbles together. You could do much worse than Exelon in the utility space.