Dynegy buying Illinova for $7.5B
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June 14, 1999: 6:14 p.m. ET
Combined U.S. energy firms will have $17B annual revenue; Chevron is major investor
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NEW YORK (CNNfn) - Texas utility company Dynegy Inc. said Monday it agreed to acquire Midwestern utility Illinova Corp. for about $7.5 billion in stock, cash and debt.
The deal, which is subject to regulatory approval, will create an electric and natural gas company with an estimated $17 billion in annual revenue.
The planned union between Illinova (ILN), a holding company for Illinois Power based in Decatur, Ill., and Houston-based Dynegy (DYN), was approved by both companies' boards and agreed to by Dynegy's industrial shareholders, who control about 76 percent of Dynegy's outstanding stock.
The merger will create a leading marketer of natural gas and energy services in the United States. After completion, the combined company will own more than 15,000 gross megawatts of domestic generating capacity.
Dynegy, the largest marketer of natural gas liquids in the United States, also will acquire the 650,000 customers of Illinova's regulated natural gas and electric utility subsidiary.
The deal, to be accounted for as a purchase of Illinova by Dynegy, is expected to be accretive to both companies' earnings by more than 10 percent in the first year and thereafter, the companies said Monday. The new entity will be called Dynegy.
Dynegy Chairman and CEO Chuck Watson will retain those titles in the new company.
Chevron (CHV), one of Dynegy's four principle shareholders along with British Gas parent BG (BG.), Nova Chemicals of Canada, and Dynegy's management, has agreed to invest up to $240 million in the new diversified energy company. Chevron holds a 29 interest in Dynegy.
The companies said they expect the deal to result in the elimination of 5 percent of their combined 6,500-person workforce "over time."
Under terms of the deal, BG and Nova Chemicals, which each currently own a roughly 24 percent stake in Dynegy, will receive 0.69 share in the new company for each Dynegy share, the companies said. Dynegy's shareholders will control just over half the capital of the combined entity.
Alternatively, Dynegy shareholders may elect to receive $16.50 per share. A spokeswoman for Dynegy said the deal also includes $4 billion in Illinova debt.
Illinova shares rose 5/16 to 25-5/8 Monday; shares of Dynegy fell 7/16 to 18-1/4.
-- from staff and wire reports
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