Calpine Corp. on Friday rejected an unsolicited takeover bid from rival power wholesaler NRG Energy Inc. as too low, but left the door open to a possible combination.
Calpine said its board unanimously determined that NRG's offer was "inadequate and materially undervalues [Calpine's] unique asset portfolio and future prospects."
The San Jose-based company, however, is examining whether "there is a basis for discussions between the two companies to explore a business combination." It is uncertain whether any deal would come from talks between the companies, Calpine said.
The all-stock bid was initially valued at $11.5 billion, but its value has fallen since the offer was made this month.
NRG Chief Executive David Crane said he respected the Calpine board's decision but was "disappointed that they have decided not to move quickly to deliver the benefits of our proposal to Calpine's shareholders."
Crane added: "We continue to believe that our proposal offers significant strategic and financial benefits and we remain interested in a combination with Calpine on the terms we have proposed."
Princeton, N.J.-based NRG made its offer May 14, but the bid only became public last week. The company is offering to swap 0.534 shares of its stock for each of about 500 million Calpine shares. That makes the offer worth $10.9 billion, or $21.79 a share.
Citi Investment Research analyst Brian Chin said he believed that NRG was likely to raise its offer, noting that a sale price of more than $24 a share would still benefit shareholders. Competing offers are unlikely, he added.
NRG's offer comes about four months after Calpine emerged from a two-year reorganization under bankruptcy protection that cost more than 1,000 employees their jobs. NRG itself left Chapter 11 bankruptcy protection in 2003.
Calpine continues to operate in a state of transition. A search is underway for a replacement for CEO Robert P. May, the turnaround specialist who said in February that he would step down once a successor was in place. An interim chief operating officer was named this month.
NRG has said it believes it can wring at least $100 million in annual cost savings from a deal with Calpine, suggesting more job cuts would be likely.
Calpine operates 60 power plants that can produce as much as 23,000 megawatts of electricity, or enough to power more than 17 million homes. NRG has 49 plants with a total capacity of 24,120 megawatts.