Top energy officials confident of merger

By Juan A. Lozano The Associated Press
Tuesday November 13, 2001

HOUSTON — Executives of Dynegy Inc. and Enron Corp. believe their plan to merge the nation’s two dominant energy marketing companies will overcome federal antitrust scrutiny, leading to a completed deal by next summer. 

“We really are confident that up and down the line we will be able to convince (federal regulators) this is in the best interest of the energy industry and the two companies,” said Chuck Watson, chairman and chief executive officer of Dynegy. 

Investors pleased with the deal to bail out the once mighty but now troubled Enron sent the shares of both companies soaring Monday — in midday trading Enron shares were up 10.5 percent, and Dynegy shares rose 12 percent. 

Steve Bergstrom, Dynegy’s president, said the closest regulatory scrutiny would come from the Federal Energy Regulatory Commission, but that he expected all antitrust hurdles would be cleared within the next six to nine months. 

The deal, worth at least $9 billion, was announced Friday. Dynegy also will assume $13 billion of Enron debt. 

Enron became a takeover target after its stock plunged about 80 percent in recent weeks because of concerns that the nation’s top buyer and seller of natural gas wasn’t revealing serious financial problems to shareholders. 

Dynegy officials pledged Monday that they won’t tolerate the sort of financial practices that prompted Enron to acknowledge last week that it overstated earnings by about 20 percent since 1997 and kept more than half a billion dollars in debt off the company’s books. 

Those financial practices included business partnerships now under investigation by the Securities and Exchange Commission. 

“Dynegy will manage the new company in the way we’ve managed the old company. We will substantially simplify the balance sheet,” said Rob Doty, Dynegy’s chief financial officer. 

After the merger is completed, the Enron name will disappear. Watson will serve as chairman and chief executive of the combined company. Dynegy’s stockholders will own about 64 percent of the new company and Enron’s stockholders will hold the rest. 

Enron’s stock price began to free fall after Enron announced a $618 million third quarter loss on Oct. 16 and disclosed a $1.2 billion reduction in shareholder equity related to the partnerships. That was followed by news of the SEC investigation. 

Enron responded by firing its chief financial officer, Andrew Fastow, who ran the partnerships, and scrambled to get cash and increase credit lines to regain investor confidence. Investors didn’t respond and dumped Enron shares, sending its stock plummeting. 

The deal to merge the companies was announced after the stock markets closed on Friday, and investors reacted positively to the news Monday. 

In midday trading, Dynegy shares rose $4.63 to $43.39 on the New York Stock Exchange. Enron shares were up 91 cents to $9.54 on the NYSE — but still much lower than the 52-week high of $84.87.