Calpine Turns Down NRG's $11B Buyout Offer; NRG Still Interested

May 30, 2008 9:49 p.m. EST

New York, NY (AHN) - Calpine Corp. rejected a buyout offer by NRG Energy Inc. of around $23 a share on Friday, but NRG says it is interested in continuing negotiations.

The board of the U.S. power producer unanimously decided that NRG's unsolicited takeover bid iwas"inadequate and materially undervalues the company's unique asset portfolio and future prospects," according to a statement issued by by Calpine.

NRG, which had offered the company $11 billion, said it was still interested in a merger with Calpine on the same terms as proposed earlier.

"We respect the Calpine Board's decision but are disappointed that they have decided not to move quickly to deliver the benefits of our proposal to Calpine's shareholders," David Crane, NRG's president and chief executive officer, said in a statement released Friday.

"We continue to believe that our proposal offers significant strategic and financial benefits and we remain interested in a combination with Calpine on the terms we have proposed," he continued.

According to the Princeton, NJ-based NRG's proposal, which was revealed on May 21, the deal would combine the two largest independent power producers leading to the creation of 45,000 megawatts of capacity.

In the unsolicited stock-for-stock proposal, NRG had offered 0.534 share for each Calpine share, which was valued at $22.70 per share at the time of NRG's proposal.

The per-share-price equivalent exchange ratio was a 16 percent premium to Calpine's stock priced on May 13.

News of the takeover offer boosted the shares of Calpine by as much as 8.1 percent on May 22, while dropping NRG's stocks by 5.1 percent.

The escalation in the share prices exceeded the offer price, thus reducing the takeover bid's total value for Calpine.

Even though Calpine rejected the bid, company officials said they will get in touch with their counterparts at NRG to explore a possible business combination, but that the developments of any such discussions will not be made public.

Both the companies have gone into bankruptcy. NRG emerged in late 2003 and Calpine, which filed two years later, emerged in February.

On Wall Street, shares of NRG gained by 24 cents to $41.05, while Calpine stocks went up by 26 cents to $22.95, on Friday.

On Thursday, Calpine shares ended at $22.69 and NRG's closed at $40.81.