Duke Energy to Buy Cinergy
Duke Energy Corp. has agreed to buy rival power company Cinergy Corp. in a stock deal worth $9 billion that would create one of the nation’s largest power generators.
The deal, announced Monday after being unanimously approved by both companies’ boards, would create an energy company with 5.4 million retail customers, more than $70 billion in assets and about $1.9 billion in annual profit on $27 billion in revenue.
The combined company would own or operate 54,000 megawatts of electric generation with operations in two-thirds of the United States, as well as in Canada and internationally, primarily Latin America.
Based on market capitalization, the combination’s electric operations would be in the top five in the U.S. and the natural gas operations would be the largest in North America, said Paul Anderson, Duke Energy’s chairman and chief executive.
The company would have 3.7 million retail electric customers and 1.7 million retail gas customers in Ohio, Kentucky, Indiana, North Carolina, South Carolina and Ontario, Canada.
The deal allows Duke to complement its gas-fired operations in the Midwest with Cinergy’s coal-fired plants, Anderson said.
Cinergy Chairman and Chief Executive James Rogers said the merger would help Cinergy meet its need for generating capacity in the Midwest and would allow Cinergy to join with a leader in the operation of nuclear plants.
“Over time, Duke’s Midwest plants would allow us to modernize our fleet faster as environmental regulations become more stringent on coal plants,” Rogers said.
Duke Energy, based in Charlotte, N.C., is a diversified energy company with natural gas and electric businesses and a real estate portfolio. Cinergy, based in Cincinnati, operates Cincinnati Gas & Electric Co., Union Light, Heat & Power and PSI Energy.
Under the agreement, each Cinergy common share would be converted into 1.56 shares of Duke Energy. At Friday’s closing prices, that would represent a 13.4% premium over Cinergy’s closing price of $40.38.
Duke and Cinergy believe it will take at least a year for regulators to approve the deal.
After the merger, Cinergy shareholders would own 24%, or 310 million shares, of the combined company, and Duke Energy shareholders would own 76% of the total 1.3 billion shares.
Anderson would become chairman, and Rogers would become president and CEO.
Duke expects the deal to add to earnings in the first full year of operation.
The combined company would be based in Charlotte. Headquarters of the operating utilities would remain the same.
Cinergy posted 2004 net income of $400.9 million on sales of $4.69 billion. Duke Energy reported earnings of $1.49 billion on revenue of $22.5 billion in 2004.
Cinergy shares rose $1.94 to $42.32 and Duke shares fell 54 cents to $28.82, both on the New York Stock Exchange.
