FPL Acquires Entergy

    FPL Group will acquire Entergy for about $6.4 billion in stock in
a deal that will create the largest US power company. The news sent
FPLs shares lower because of disappointment that FPL was not the
takeover target. The combined company will have 6.3 million customers
and 48,000 MW of power generating capacity. FPL supplies electric
service to about 3.8 million customers throughout Florida. Entergy
delivers electricity to about 2.5 million customers in parts of
Texas, Arkansas, Louisiana and Mississippi. The deal, a $27 billion
merger, which included their combined market value of $16.4 billion,
$6.9 billion of Entergy debt and $3.8 billion of FPL debt. FPL
shareholders will own 57% of the new company and Entergys 43%. The
board of directors will be made up of 8 FPL members and 7 Entergy
members. To support the deal, FPL and Entergy plan to buy back a
total of $1 billion in stock, $570 million in FPL stock and $430
million in Entergy stock. FPL shareholders will receive one share in
the new company for each of FPLs 170.5 million diluted shares
outstanding. Entergy shareholders would receive 0.585 share in the
new company for each of their 228.1 million diluted shares
outstanding. Shares of FPL fell more than 8%, to 48-1/4 and Entergy
shares fell more than 10% to 27-1/4 yesterday afternoon. Based on
FPLs price on Monday morning, the deal values Entergy at about $28.33
per share. Many had speculated FPL was to be bought rather than be
involved in a merger. The merger agreement includes a $200 million
break-up fee in case either side terminates the deal. The merger of
FPL and Entergy must be cleared by shareholders as well as federal
regulators and was expected to close next year. The combined company
expects to pay a dividend that is consistent with FPLs current
dividend policy. Based on its current annual dividend of $2.16 per
share, Entergys shareholders would receive $1.26 per share compared
with its current dividend of $1.20 per share. FPLs Broadhead will
become the chairman and Entergy Chief Executive Leonard will become
chief executive of the new company. The expected annual cost savings
and increased revenues for both competitive and regulated businesses
may range from $150 million to $275 million, with about half the cost
savings to come from work force reductions, mainly through attrition,
growth and voluntary retirement.