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22 May 2008 -- NRG Energy Inc. has offered to buy hobbled rival Calpine Corp. for about $11.3 billion in stock. If successful, the acquisition would double NRG's electricity capacity.
Calpine revealed details of the unsolicited bid Wednesday after one of its shareholders released a letter stating that an offer had been made last week.
The terms of NRG's proposal included an all stock merger transaction at a fixed exchange ratio of 0.534x, which implies a premium of 6.7 percent based on the closing prices of both companies' stocks as of May 21, 2008. Calpine advised shareholders not to take any action at this time.
The takeover attempt comes less than four months after Calpine emerged from a two-year stint operating under Chapter 11 bankruptcy protection. During its stay in bankruptcy court, Calpine cut more than 1,000 employees, or one-third of its work force, while reorganizing more than $20 billion in debt.
More layoffs are likely if NRG's offer is accepted, according to the Associated Press. In a letter detailing the rationale for combining companies, NRG said it believes it can lower annual expenses by about $100 million by eliminating duplicative jobs and other overlapping operations.
NRG spent seven months operating under Chapter 11 protection in 2003.
Calpine has placed a nearly $19 billion value on its business, which consists primarily of 60 power plants that can produce up 23,000 MW. NRG has 49 plants with a total capacity of 24,120 MW.
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