What Does the Deal Between Ameren Corp. (AEE) and Dynegy Inc. (DYN) Mean for Them

Page 1 of 2

Recently, Dynegy Inc. (NYSE:DYN) agreed to buy the merchant generation business Ameren (NYSE:AEE) Energy Resources (AER), from the power company Ameren Corp (NYSE:AEE) for around $900 million, including around $180 million in tax benefits. Interestingly, the deal does not involve any cash or stock issuance, as Dynegy will undertake around $825 million in debt with the acquisition of Genco, AER’s subsidiary. Is the deal better off for both Dynegy and Ameren? Let’s find out.

Dynegy and Ameren

Dynegy Inc. (NYSE:DYN) is involved in the business of production and sale of electric energy, capacity, and ancillary services to RTOs and ISOs, integrated utilities, electric cooperatives, and industrial customers, from twelve operating power plants in six U.S. states with a total capacity of 9,800 MW. The company has two main segments: the Coal segment and the Gas segment. The majority of its fleet capacity, 6,771 MW or 69.4% of total fleet capacity, was from the Gas segment, while the Coal segment has a capacity of around 2,980 MW.

Ameren Corp (NYSE:AEE) is a public utility holding company operating in three business segments: Ameren Missouri, Ameren Illinois and Merchant Generation. The majority of its 2012 revenue, $3.25 billion or 47.6% of total revenue, was generated from the Ameren Missouri segment, while the Merchant Generation segment contributed more than $1 billion in revenue in 2012.

The Merchant Generation segment is the only loss-making segment among the three, with more than $1.5 billion in 2012 net loss, while the Ameren Corp (NYSE:AEE) Missouri and the Ameren Illinois segments generated profits of $416 million and $141 million, respectively. In 2012, the Merchant Generation had more than $1 billion in income tax benefit.


Dynegy’s benefits

Dynegy Inc. (NYSE:DYN) believes that the acquisition of AER would deliver significant shareholder benefits in the most capital efficient manner. By combining AER, its annual adjusted EBITDA would increase from $150 million to $332 million, or from $1.50 per share to $3.32 per share, a growth of 121%. In order to achieve that growth alone, Dynegy would have had to commit more than $1 billion of capital to repurchase around 55 million shares. Dynegy commented that the deal would be much better off for the company in terms of operational, commercial, and financial perspective.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!