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British power firms unite
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June 29, 1998: 6:26 a.m. ET
PowerGen buys East Midlands Electricity for $3.15 billion
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NEW YORK (CNNfn) - British electricity producer PowerGen Plc said Monday it will acquire East Midlands Electricity from U.S.-based Dominion Resources Inc. in a cash and debt deal worth $3.15 billion.
East Midlands is the third-largest regional electricity company in England.
PowerGen will pay East Midlands $1.41 billion in cash and assume $1.73 million in debt. The company also said it has put in place a $3.98 billion loan facility to satisfy the cash element of the deal.
PowerGen, one of Britain's two main power producers, said it plans to close some plants to address competition concerns over the acquisition. The company expects the purchase will enhance earnings per share in the first full financial year following the acquisition.
"This transaction represents a significant step forward for PowerGen, providing it with distribution expertise and a broader customer base," said Ed Wallis, PowerGen chairman. "Structurally, the move creates a strong growth platform in the converging electricity and gas markets."
The deal ends weeks of speculation that PowerGen would attempt to buy a regional electricity company.
PowerGen's previous attempt to purchase a regional utility -- Midlands Electricity, now owned by GPU Inc. and Cinergy Corp. of the U.S. -- was blocked on competition grounds by the previous Conservative government.
Recent market speculation has also suggested that PowerGen may be interested in a merger with U.S. firm Houston Industries (HOU). The company declined to comment on the rumors but said it remained "determined" to get into the U.S. market.
Shares of Dominion Resources (D) closed at 40-5/8, down 1/16 in Friday trading. Houston industries closed down 3/16 at 30-1/4. 
-- from staff and wire reports
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