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Dynegy to buy Enron for $9.5B
graphic November 9, 2001: 6:22 p.m. ET

Rival energy company to acquire larger, troubled rival in stock swap.
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  • Dynegy, Enron confirm talks; Enron restates earnings - Nov. 8, 2001
  • Enron clinches $1B financing - Nov. 1, 2001
    NEW YORK (CNN/Money) - Dynegy Inc. agreed Friday to acquire larger rival Enron Corp. in a $9.5 billion stock swap, ending weeks of speculation as to the troubled energy company's future.

    Terms of the transaction call for Dynegy (DYN: up $2.26 to $38.76, Research, Estimates) to swap 0.2685 a share for each Enron share. The transaction would value Houston-based Enron (ENE: up $0.22 to $8.63, Research, Estimates) at about $10.41 a share, a near 21 percent premium to Enron's closing share price of $8.63 Friday.

    The boards of both companies have approved the merger, which is expected to boost Dynegy's earnings in the first year and thereafter, the companies said. Dynegy will own 64 percent of the combined company, which will be called Dynegy Inc., while Enron will have 36 percent.

    Chevron/Texaco, which owns a 27 percent stake in Dynegy, has agreed to invest $2.5 billion in Dynegy. Of the investment, $1.5 billion will used to finance Dynegy's equity infusion into Enron.

    "The merger also validates Enron's core franchise and underscores Dynegy's ongoing strategy to pursue transactions that accelerate our growth, while enabling our shareholders, partners and customers to realize immediate and long-term benefits," said Dynegy Chairman and CEO Chuck Watson, who will remain in those positions in the combined company.

    In case the merger doesn't go through, Dynegy will have the right to acquire 100 percent of the equity in the Northern Natural Gas subsidiary. ChevronTexaco will be given the right to buy an additional $1.5 billion in Dynegy common stock up to three years from completion of the merger.

    Dynegy issued guidance for the combined company in 2002 and expects $3.40-to-$3.50 a share for 2002. Dynegy expects $400 million-to-$500 million in savings as result of the merger.

    The Enron takeover, which is expected to close in third quarter 2002, must still receive shareholder approval of both companies as well as regulatory approval.

    Lehman Brothers advised Dynegy while J.P. Morgan and Salomon Smith Barney advised Enron.

    A troubled time

    News of the takeover caps a troubled time for Enron which is currently the subject of an investigation by the Securities and Exchange Commission (SEC) regarding its transactions with a partnership created by its former chief financial officer, Andrew Fastow, which resulted in a $1.2 billion reduction in shareholder equity.

    "Dynegy is aware of Enron's announcements with regard to related party transactions and accounting restatements," Dynegy president Steve Bergstrom said. "We believe Enron has begun to address these issues in a responsible manner and that they will not detract from the value of Enron's core business."

    Enron Thursday restated its earnings for 1997 through the third quarter of 2001, slashing millions of dollars from most reporting periods to reflect retroactive accounting measures taken to address government and shareholder concerns.

    Enron also fired its treasurer, Ben Glisan, General Counsel Kristina Mordaunt, Vice President Kathy Lynn, and employee Anne Yeager, the company revealed in a filing with the SEC.  graphic


    Dynegy, Enron confirm talks; Enron restates earnings - Nov. 8, 2001

    Enron clinches $1B financing - Nov. 1, 2001