Atlanta, GA, May 31, 2006 — Four months out of a three year bankruptcy, Mirant Corp. announced that it has made a proposal to acquire NRG Energy Inc. at a premium of approximately 33% to NRG’s share price as of May 30, 2006.
The proposal would be immediately accretive to the pro forma free cash flow per share of Mirant. Mirant has received a financing commitment from JPMorgan of approximately $11.5 billion for the transaction.
NRG flatly rejected the proposal last week without engaging in any discussions with Mirant. However, Mirant continues to believe that the proposal creates value for the owners of both companies and decided to make its proposal public in the form of a letter sent by chairman and CEO of Mirant, Edward R. Muller, to NRG’s board of directors.
In the letter, Muller said Mirant is “disappointed” the acquisition proposal was rejected outright.
“In the transaction we proposed, your shareholders would receive, at their election, $57.50 per share in cash or Mirant Corporation common stock at an exchange ratio of 2.25 Mirant shares for each share of NRG common stock, based upon our understanding that you have 137.5 million fully diluted shares outstanding. Your shareholders’ elections to receive the total of approximately $3.9 billion in cash (representing 50% of the total consideration) or Mirant common stock would be subject to proration to preserve the 50/50 cash/stock mix in the deal,” Muller said in the letter, adding that he thought an acquisition would be a benefit to all parties involved. He also called the proposal “the highest priority for us.”
NRG confirmed that it received an unsolicited proposal from Mirant in letters dated May 10 and 30, 2006. NRG’s board of directors reviewed the Mirant proposal and deemed it not in the best interests of NRG shareholders, the company said in a recent press release, adding that NRG shareholders do not need to take any action at this time.
NRG wrote a response letter to Muller saying the NRG board “thoroughly considered” the proposal and “unanimously rejected [the] proposal because it is not in the best interests of NRG shareholders.”
“The board has found your proposal deficient in at least three key respects: it significantly undervalues NRG; our concerns about Mirant’s value and your stock’s relative lack of liquidity and trading history makes Mirant’s stock an unacceptable currency; and, finally, having taken into account trends and developments in the wholesale power generation sector, we do not believe this is the appropriate time to engage in a sale process,” the letter read.
NRG, in the letter, said their analysis showed Mirant, after its three year bankruptcy, to be “a company and stock with flat earnings, little to no growth opportunity beyond 2007, substantial and imminent environmental capital expenditures, and significant EBITDA exposure to developing country risk.”
“Additionally, with only a four-month trading history and an average daily trading volume of 2.7 million shares during those four months, we believe that Mirant’s stock lacks a sufficient track record and liquidity for us to recommend to our shareholders that they accept over 150 million Mirant shares as you propose. These factors far outweigh any synergistic benefits that might come from a combination of the two companies,” the letter added.
The letter closed by saying, “Your proposal is simply the wrong deal at the wrong time.”
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