In some late Friday news, NRG Energy, Inc. (NRG) said that it has agreed to pay $2.635 billion in cash and stock to acquire bankrupt Edison Mission Energy, a division of Edison International (EIX) . NRG’s payment will consist of 12.7 million shares of NRG common stock worth about $350 million based upon a 20-day volume weighted average price with the balance to be paid in cash on hand.
As part of the deal, NRG will assume non-recourse debt of about $1.55 billion, of which $273 million is associated with assets designated as non-core assets pursuant to the asset purchase agreement. The agreement also includes $1.1 billion in cash that remains on Edison Mission’s books.
On December 17, 2012, Edison Mission Energy filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Northern District of Illinois. EME’s major stakeholders are in favor of the transaction and agreed to support a Chapter 11 plan sponsored by NRG.
Pending all necessary approvals, the transaction is expected to close in the first quarter of 2014.
NRG, the U.S.’s largest competitive-rate power company after buying GenOn Energy in 2012 for $1.7 billion, will be getting EME’s generation portfolio, consisting of almost 8,000 net megawatts of generation capacity throughout the country. It also will take control of Edison Mission Marketing and Trading, a proprietary trading and asset management platform.
The acquisition will make NRG and its affiliates the third biggest U.S.-based renewable energy generator with nearly 3,000 net megawatts of wind and solar capacity in operation or under construction. It also gives NRG a wider footprint in traditional energy generation and increases its coal-fired capacity by 4,300 MW and gas-fired capacity by 1,600 MW.
“Edison Mission Energy is a great fit with NRG, as virtually 100% of their assets, their particular expertises and the balance of their technologies deployed complement NRG’s own assets, personnel and businesses,” said David Crane, president and chief executive of NRG Energy, in today’s statement.
The move to sell its unit to NRG should alleviate some potential future legal pressures for Edison International as unsecured creditors of EME were looking to sue the parent company. EME intends to file a motion to seek approval of the plan sponsor agreement with the bankruptcy court today and anticipates a decision within a week.
Shares of NRG had risen about 25 percent so far in 2013 going into Friday and got another lift to their highest level since September 2008 upon the news. Shares printed as high as $30.17 before closing at $29.31, for gains of 4.8 percent on the day. Shares of EIX appreciated almost 1 percent on Friday to be up about 9 percent in 2013.