Allegheny Energy Inc. said it signed a $490 million definitive agreement to acquire Merrill Lynch & Co.'s energy commodity marketing and trading unit.
Under the deal, Merrill Lynch will get 2% equity interest in Allegheny Energy Supply Co., which is Allegheny's generation subsidiary. The generation unit will have capacity of 13,000 Mw when recent acquisitions and expansion plans are put in place.
Allegheny said the transaction will be accounted for as a purchase and is expected to add to earnings per share in the first year after closing. Allegheny Energy Chairman Alan J. Noia said the acquisition will support Allegheny's efforts to grow earnings by more than 10%/year and the transaction can be completed in the first quarter of 2001.
Noia said growth is expected from both in-house marketing activities and from a referral agreement that Allegheny Energy Supply has with Merrill Lynch.
The purchase "will complement our existing skills and help to extract maximum value from our low-cost generating fleet,'' Noia said. Our generating fleet is one of our most valuable assets, and this acquisition is a significant step toward unlocking its full value."
Allegheny said the combined trades are expected to place Allegheny Energy Supply in the top 10 of all power marketers in the nation, based on volume of trades. Under the agreement, Merrill Lynch will refer its clients with energy trading needs to Allegheny Energy Supply. GEM will continue to operate out of New York, NY.
The acquisition is conditioned upon approvals of the Federal Energy Regulatory Commission, the US Department of Justice, and Federal Trade Commission.
