Waiting for merger fallout -- Enron and Dynegy

Energy trading giant Enron has said nothing so far about an imminent sale of subsidiary Enron Wind following its announcement of a merger with competitor Dynegy, both headquartered in Houston, Texas. Enron, which previously said it wants to divest its non-core businesses, such as Enron Wind, stepped up its divestiture activity in mid-November by putting some losing ventures up for sale. Those include a high-speed Internet company and power operations in India and Brazil. It is also in the process of selling retail utility Portland General Electric, which it bought just three years ago.

The merger announcement came following disclosures by Enron last month that it had inflated profit figures and had not revealed to shareholders the huge amount of debt on its books. Enron stock has fallen 94% this year from $80 a share to $4.71 on November 23, half the $10.85 Dynegy is slated to pay in the acquisition. Enron posted a $618 million third quarter loss and a $1.2 billion reduction in shareholder equity. That disclosure was related to partnerships run by company officers and being used to keep debt off the books.

Dynegy says it will pay $10.5 billion in a stock trade for Enron and assume $13 billion of debt. But that initial offer was based on higher stock and bond values. If the companies complete the merger, Enron shareholders will hold 36% of the combined company's stock. ChevronTexaco Corp, which now owns 26% of Dynegy stock, says it will pump $2.5 billion into the merged company. Dynegy says the new company is expected to generate as much as $200 billion in revenue on its $90 billion of assets. Some Enron officers will transfer to Dynegy, but Enron's name will be swallowed up and CEO Kenneth Lay will lose his job.