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Dynegy, Enron renegotiate
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November 27, 2001: 1:34 p.m. ET
Companies consider a sharp cut in deal's exchange ratio, sources say.
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NEW YORK (CNN/Money) - Shares of Enron Corp. surged nearly 6 percent on news that Dynegy Inc. is negotiating to restructure their pending $9 billion merger.
"We are in discussions with the parties involved in the transaction related to the structure of the deal," a Dynegy spokesman said.
Dynegy, whose shares climbed nearly 6 percent in late afternoon trading Tuesday, declined to comment further.
Dynegy (DYN: up $1.50 to $40.75, Research, Estimates) is in discussions with Enron for a possible reduction in the price of the takeover. The companies are considering cutting the exchange ratio to around 0.15 Dynegy share for each Enron share from the original 0.27 Dynegy share, a source familiar with the situation told CNN/Money.
CNN/Money reported Monday that the two firms were looking at renegotiating the deal.
Enron (ENE: up $0.12 to $4.13, Research, Estimates) still is looking to finalize a $500 million investment from J.P. Morgan and Salomon Smith Barney, the source said. Unnamed equity partners also are expected to invest in the troubled energy company.
Dynegy completed its due diligence on the transaction prior to announcing its more than $9 billion offer for Enron Nov. 9, but Dynegy's behavior since the announcement has been "bizarre," the source said.
The Houston-based energy company, which is much smaller than Enron, has been engaged in supplemental due diligence since the announcement but has declined to support the deal publicly.
"But privately they have indicated that they are still committed," the source said.
As of late Tuesday, the companies had yet to issue a final restructured merger agreement and timing of an announcement was unknown. Terms of the revised transaction are "a moving target," the source said.
An Enron spokeswoman declined to comment.
Enron is discussing an extension of the maturity dates on its debt so the company would not have to pay down the principal until after the deal is closed, a source told CNNfn Tuesday.
Dynegy also is in talks to provide at least $500 million in capital to beleaguered Enron, the source said.
The price cut would lower the deal's value to about $5 billion from more than $9 billion, the Wall Street Journal reported Tuesday. Enron had hoped to make an announcement on the renegotiated deal Monday but didn't reach an agreement in time, the Journal said.
Since Dynegy offered to acquire Enron, Enron shares have dropped nearly 53 percent and the company revealed last week that a $690 million debt would come due soon. Enron then received a reprieve on paying the note until mid-December. 
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