Calpine said Friday that its board had rejected a $9.2 billion takeover offer from NRG Energy as too low, but indicated it would be open to a higher bid from the rival power company.
Calpine, which emerged from bankruptcy protection earlier this year, said in a statement that its board had unanimously determined the NRG offer was "inadequate and materially undervalues the company's unique asset portfolio and future prospects." But it authorized its advisors to contact NRG to determine whether there was a basis for future discussions, saying there was no assurance that a transaction would result from any talks.
NRG , which made its all-stock offer to buy Calpine last week, said it was disappointed with Calpine's rejection, but added that it was still interested in a combination of the two companies.
"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," NRG Chief Executive David Crane said in a statement.
Under its offer, NRG would pay 0.534 of its shares for each one of Calpine.
Analysts had widely expected Calpine to reject the bid, but the company could be vulnerable to a hostile takeover because it lacks typical corporate defenses such as a shareholder rights plan.
A link-up of the two companies would probably require the divestment of between 3,000 and 5,000 megawatts of power generation in Texas to gain regulatory approval, NRG has said.
Hedge fund Harbinger Capital Partners, which owns more than 24 percent of Calpine, has said the unsolicited NRG offer represented a good starting point for discussions and urged the company to enter into negotiations.
Calpine sought bankruptcy protection in December 2005, reeling from the weight of $22 billion in debt that was largely accumulated through the rapid growth of its gas-fired power generation fleet.
Princeton, New Jersey-based NRG has said a deal would create a multi-fuel power producer with four regional generation businesses in all the major competitive U.S. markets.
Shares of Calpine, which is based in Houston and San Jose, California, rose 1.3 percent to $22.99 on the New York Stock Exchange, while NRG climbed 0.7 percent to $41.10.