Davenport Downgrades Exelon (EXC) to Neutral; Citing Management's Revised Offer For NRG

July 2, 2009 2:27 PM EDT

Davenport downgrades Exelon Corp. (NYSE: EXC) from Buy to Neutral

Davenport analyst says, "We are lowering our rating on Exelon to Neutral in the wake of the company’s announcement this morning that it was raising the exchange ratio in its unsolicited offer to acquire NRG Energy (NYSE: NRG) from 0.485 EXC shares to 0.545 EXC shares for each NRG share...Notwithstanding Exelon’s discussion of newly discovered synergies, that it indicated was the basis of its higher offer, we still believe the new transaction to be EPS dilutive to EXC, and not in the best interest of its shareholders... Our pro-forma numbers, which assume $200 million of annualized cost synergies, offset by $87 million in added annual finance costs, as well as $1.1 billion of new common equity, but does not reflect any reduction of margin from assets to be divested, show the new transaction as being EPS dilutive, with our 2010 estimate of $4.14 being reduced to $3.94 on a pro-forma basis, and our 2011 estimate of $4.55 lowered to $4.24 on a pro-forma basis."

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Exelon Corporation (Exelon) is a utility services holding company. It operates through its principal subsidiaries Exelon Generation Company, LLC (Generation), Commonwealth Edison Company (ComEd) and PECO Energy Company (PECO).

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