Will Enron, Americas largest trader of natural gas and
electricity, cease to exist? It seems so. That is, if the deal
between Dynegy Inc and Enron Corp goes through.
In a late
evening communication on 8 November, Dynegy said it is in talks
with Enron to buy it out in an $8-billion stock-and-cash deal and
would use $1.50 billion in capital to be infused by Chevron Texaco
Corporation. Chevron, which recently merged with Texaco, is Dynegys
founding investor and still owns a 26.50-per cent stake in the
deal would prove to be a big reliever for Enron, which has had a
terrible time in the last one year, during which period it
reported its first quarterly loss in four years. Its financial
transactions are also under the scrutiny of the US SEC, after the
company failed to explain off-balance sheet-transactions with
ousted CFO Andrew Fastow.
with its performance, investors have heavily sold Enron shares,
which have seen their values plummeting to a seven-year low of $7
on 7 November last in comparison to the $90 in August 2000.
However, after the news broke out, some buying happened, which
resulted in the scrip rising to close at $9.05 on the next day.
The buying out of Enron would catapult Dynegy to the No1 spot in
the world in the energy-trading segment. The revenues of the
merged entity would cross the $100-billion mark, considering that
last year while Dynegys revenues were placed at $29 billion,
those of Enron were $100 billion.
Enron, however, would also mean Dynegy
picking up a $12.80-billion debt. Reports say Enron had been
seeking buyers for quite some time now, which included investors
like Warren Buffett, the chairman of Berkshire Hathaway Inc.
However, the move proved unsuccessful, as none knew what could be
the exact amount of off-balance sheet liabilities for Enron.