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Technology Stocks : John, Mike & Tom's Wild World of Stocks -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (2592)	11/13/2001 1:16:30 PM
From: John Pitera	Read Replies (1) \| Respond to of 2850

Dynegy Buy Of Enron Valued At $23B-$24B With Debt By MICHAEL RIEKE and ERWIN SEBA November 12, 2001 Of DOW JONES NEWSWIRES (This was originally published late Friday.) HOUSTON -- Asked what kind of bargain Dynegy Inc. (DYN) got in buying Enron Corp. (ENE), Enron Chairman and Chief Executive Ken Lay said told a Friday evening press conference, "A big one." Dynegy will convert 850 million shares of Enron stock to its own shares in a deal valued at $23 billion-$24 billion with assumption of debt. Dynegy Chairman Chuck Watson told the media that the deal wasn't something that was "stitched together" in the last two weeks. Watson had called Lay on Oct. 24 to tell him that Dynegy didn't have any qualms about being a counterparty in energy deals with Enron and to ask if there was anything Dynegy could do to help. At the time, Enron's share price was under pressure due transactions it had done with its former chief financial officer Andrew Fastow. The company had just taken a $1.2 billion reduction in shareholder equity when it closed out transactions and the Securities and Exchange Commission had just launched an investigation of the deals. The next Saturday Lay invited Watson to his home and they started discussing a merger, Watson said. Three or four weeks ago he didn't expect such a transaction to occur, Lay said. But he began to realize that Enron needed to strengthen its balance sheet quickly, improve liquidity and focus on its core businesses. Enron was in control of its destiny until the merger was done, Lay said. Enron could have stayed independent and revitalized the balance sheet with private investments, but Dynegy was showing interest in a merger. "As we looked at the alternatives, it fairly quickly became apparent to us to do this deal with Dynegy was the best option," he said. Enron looked at the shareholder lawsuits filed against the company and at the exposure from the SEC investigation, he said. It then determined a worst-case scenario, which was then built into the economics of the deal. Neither Watson nor Lay wanted to get into specifics involving the transactions Enron done with the partnerships run by Fastow. Enron will discuss those deals more thoroughly in a conference call in the middle of next week. In explaining his company's demise, Lay blamed a series of negative news stories, combined with management's ignorance of the facts concerning the partnership transactions. "You can always second-guess everything, but it has been a fairly consistent barrage of really negative articles that's been very tough to beat...back," he said. Due diligence for the deal was relatively easy to do because the two companies already knew each other so well, said Watson. The two Houston-based companies have been competing in the energy business for about 15 years. After examining Enron's books and businesses, "it became clear the value degradation in Enron had nothing to do with the core businesses," said Watson. Watson said it is too soon to think about the possibility of layoffs resulting from the merger. Enron has more than 7,000 employees in Houston compared with 1,600 Dynegy employees. Worldwide Enron has 20,000 employees and Dynegy has 6,000 employees. Watson has asked Lay to join Dynegy's board of directors. Lay said he would decide whether to accept that spot as the deal gets close to closing. Watson doesn't expect any regulatory problems associated with the merger. The deal must be approved by regulators in the U.S. and in Europe, where both companies have operations. Regulatory approval should take six to nine months. There is an escape clause in the merger deal. Dynegy will get $350 million if the deal falls apart. Although the combined companies will be a huge player in the energy business, Watson doesn't expect regulators to require any sale of assets. Enron will go ahead with its plans to sell $4 billion in assets. It has a deal to sell its electric utility, Portland General Electric, for $3 billion including assumption of debt. The deal with Northwest Natural Gas Co. (NWN) will include $1.55 billion in cash, $200 million in Northwest Natural preferred stock and $50 million in common stock. Enron is also planning to sell another $850 million-$900 million in foreign assets. Each company will continue to operate its own electronic energy trading platform. Enron operates EnronOnline and Dynegy operates DynegyDirect. EnronOnline is the most successful online business, doing $3 billion-$4 billion a day in energy transactions in the last 30 days. Dynegy started its online trading platform last year. It did $10 billion of business in the third quarter of this year. "This is a financial bonanza for both companies," Watson said. "This is good for Dynegy. This is good for Enron. It's also good for our employees and it's good for our stockholders." -By Michael Rieke, Dow Jones Newswires, 713-547-9207; michael.rieke@wsj.com; and Erwin Seba, 713-547-9214, erwin.seba@dowjones.com