Exelon bids $6.2B for NRG Energy

— -- NRG-EXELON/SHARES (UPDATE 4):UPDATE 4-Exelon won't rule out hostile bid for NRG

In a deal that would create the USA's No. 1 power company, nuclear power giant and utility Exelon exc is offering to buy NRG Energy nrg for $6.2 billion in stock.

The all-stock bid, presented to NRG late Sunday, shows that even the typically stable power industry is feeling the effects of the credit crisis and falling commodity prices.

The merger would forge a giant with 47,000 megawatts of generating capacity — enough to serve 45 million homes. It would let Exelon grow revenue without building costly power plants and would strengthen NRG's tenuous balance sheet.

"There is simply no doubt that scale is important in turbulent times and it's important as the cost of growth continues to rise," Exelon CEO John Rowe said on a conference call with investors.

Exelon would exchange 0.485 shares for each NRG share. That's about $26.43 for each NRG share, based on Exelon's closing price Friday of $54.50, or a 37% premium. NRG shares soared $5.67, or nearly 30%, Monday to close at $25. Exelon shares closed up 9 cents at $54.59.

Shares of NRG, a wholesale power provider, have plunged more than 50% since July. The culprit: a poor credit rating that makes it tougher to raise capital, says analyst Gordon Howald of Calyon Securities. It has more than $8 billion in debt.

NRG, which plans to build a nuclear reactor in Texas, would benefit from Exelon's stronger balance sheet and nuclear expertise, Howald says.

Exelon is a utility with 5.2 million customers in Illinois and Pennsylvania, and a wholesale electricity supplier. It's the USA's top nuclear power operator, with 17 reactors. The deal would let it diversify its generation mix with more coal and expand from its Midwest stronghold into Texas and the Northeast, company President Chris Crane says.

Howald says the offer undervalues NRG, noting Warren Buffett's Berkshire Hathaway took a big stake in the company in the second quarter when its share prices were much higher. But Angie Storozynski of Macquarie Research says the offer is fair.

Exelon says it could make a hostile bid if NRG nixes its offer. "We intend to go all the way," Crane says.