Energy supplier Mirant Corp. said Monday it is rescinding its nearly $8 billion bid to acquire rival NRG Energy Inc., an about-face that analysts say was not surprising given NRG’s unwillingness to consider a deal. NRG shares fell more than 7 percent on the news.
Edward Muller, Mirant’s chief executive, said that while the company believes a combination of the two companies would be a good idea, Mirant acknowledges a long battle is not.
“We will continue our efforts to create value for Mirant’s shareholders,” Muller said.
In a statement on Mirant’s decision to withdraw its offer, Princeton, N.J.-based NRG said that over the past two years its stock has appreciated 120 percent.
“We are poised for further value creation and look forward to the continued execution of our strategic plan,” NRG said.
Mirant shares rose 34 cents, or 1.4 percent, to $24.79 in afternoon trading on the New York Stock Exchange, while NRG shares fell $3.96, or 7.8 percent, to $46.89 on the NYSE.
Atlanta-based Mirant’s withdrawal of its offer, which was made in late May, follows a decision by NRG’s board to rebuff the unsolicited offer, saying it significantly undervalued NRG.
Mirant then sued, charging that NRG was unfairly blocking the acquisition. But now it is pulling the offer altogether.
Despite the move, Goldman Sachs analyst Michael Lapides said in a research note that, “NRG represents one of the best risk/reward opportunities in the power sector.” Prudential Equity Group analyst Vikas Dwivedi said in a research note that Mirant’s decision was not surprising.
Although the firm thought Mirant might propose a higher bid before bowing out, Dwivedi said, “We did not believe a deal would ultimately be reached.”
Mirant proposed to buy NRG at about $57.16 a share. It said it had received a financing commitment of about $11.5 billion and proposed to buy NRG at a premium of about 33 percent to NRG’s share price at the time the offer was disclosed.
A Mirant-NRG combination would have made it among the largest U.S. power producers. The pending acquisition of Newark, N.J.-based Public Service Enterprise Group Inc. by Chicago-based Exelon Corp. would give that entity a nation-leading capacity.
In January, Mirant emerged from Chapter 11 bankruptcy — the 11th largest in U.S. history at the time of the filing in July 2003. Mirant reduced its work force and shaved billions in debt from its balance sheet as part of its return to the public markets.