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It took less than five months for NRG to go from being the hunter to the hunted. Utility Exelon now seeks to acquire it and become the largest US power producer.

In May, NRG tried and failed to buy gas-fired giant Calpine in an audacious bid for dominance in wholesale power. Much has changed since then and little of it has been good for NRG, helping to slice 55 per cent off of its value and make its assets, particularly coal and nuclear plants, ripe for the picking by less-leveraged Exelon.

But it looks unlikely that NRG’s board will roll over, despite the proposed 37 per cent premium to Friday’s close. Unless NRG faces the same type of problems financing collateral that pushed Constellation Energy into the arms of Berkshire Hathaway at a bargain price last month, it is better-served toughing out the nasty period that has seen weak wholesale power prices crush its margins. Future projects will be harder to finance for the junk-rated company, but this is no reason to sell.

If Exelon must mount a hostile bid, one problem it faces is that a recovery in natural gas prices this winter would embolden NRG shareholders to vote against a deal as power margins recover. This might happen months before affected states grant regulatory approval.

Another problem is that the new company would have to divest about 6 per cent of their combined capacity in a weak market and that a change of control would force Exelon to repurchase several billion dollars of NRG’s debt. Exelon has not yet secured financing and a deal would dent its own credit rating.

Even with these headaches, Exelon reckons the all-share deal is an attractive one and they are probably right. NRG’s shareholders, though, would be selling out below fair value and would likely opt to stay independent.

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