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By Jason Simpkins
Princeton, NJ- based NRG Energy Inc. (NRG) has publicly acknowledged its estimated $11.3 billion takeover bid for Calpine Corp. (CPN) – a wholesale provider of electricity emerging from chapter 11 bankruptcy protection.
NRG. NRG said the deal assumes Calpine had 500 million fully diluted shares outstanding as of May 13. That calculation would value all of Calpine at $11.35 billion.
NRG offered to pay 0.534 shares for each share of Calpine, the company said in a statement. Based on NRG's Wednesday closing price of $42.51, the deal values each Calpine share at $22.70, a 6.7% premium to Calpine's closing price of $21.20.
"This is quite simply, the right deal, at the right point in time, between the right partners,", NRG’s chief executive officer said in a statement.
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After over-expanding during a period of high electricity prices, the company was unable to carry its heavy debt load as prices began to drop in 2002 and was forced into bankruptcy in 2005.
Calpine laid off more than 1,000 employees – a third of its workforce at the time – and restructured more than $20 billion in debt. Analysts anticipate a buyout will result in more job cuts as NRG aims to lower annual expenses by eliminating overlapping positions.
NRG spent seven months operating under Chapter 11 bankruptcy itself in 2003. NRG said that it is "becoming a full taxpayer four years out" of its own troubles, and the combined company will be able to make the best use of Calpine's $5.1 billion of net-operating-loss carry-forwards, Dow Jones reported. While Calpine is still putting together its post-Chapter 11 team, NRG says it has strong management immediately available.
"We believe Calpine's lack of a management team, plus NRG's established (and in, our view, well-regarded) management team, will likely weigh heavily on Calpine's board as it deliberates negotiations," NRG said.
Right now, Calpine has 60 power plants capable of producing 23,000 megawatts of electricity, while NRG maintains 49 plants with a total capacity of 24,120 megawatts.
The takeover would double NRG's capacity in the United States to about 45,000 megawatts, enough to power 36 million homes.
NRG would also benefit from Calpine's focus on cleaner natural gas fuel, as lawmakers seek to reduce carbon-dioxide emissions. Calpine is the largest U.S. producer of electricity from gas-fired plants, Bloomberg News reported.
The Lieberman-Warner climate security act, a bill proposed by senators Joseph Lieberman and John Warner aims to reduce emissions by 66% from 2005 levels by 2050. The Senate is scheduled to begin debate on the measure next month.
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