Entergy and FPL Group merger hits a snag

FPL Group Inc. and Entergy Corp. Monday indicated their proposed merger has hit a snag. In a statement, the two companies said issues concerning �governance, value, and integration� had surfaced to interrupt progress on the merger. This is the third major merger among utilities to run into trouble within the past 2 months. FPL and Entergy said they would have no further comment.


By Ann de Rouffignac
OGJ Online

HOUSTON, Mar. 19�FPL Group Inc. and Entergy Corp. Monday said their proposed merger has hit a snag.

In a statement, the two companies said issues concerning �governance, value, and integration� had surfaced to interrupt progress on the merger. This is the third major merger among utilities to run into trouble within the past 2 months.

The proposed merger of DTE Energy and MCN Energy Group Inc. was recently revised. In new revised terms, DTE will pay $24/share for MCN, down 16% from the previous $28.50/share set in October 1999, analysts said.

Consolidated Edison Inc.'s acquisition of Northeast Utilities Inc. has wound up in court. The companies have filed a slew of lawsuits each accusing the other of bad faith.

�Going back to the table in this market makes sense,� said Fred Schultz, utilities analyst with Raymond James and Associates, Houston. �I�m on the sidelines with these companies now.�

The $6.4 billion FPL-Entergy merger was considered a good fit for both companies. The stock-for-stock deal was announced in July and would have created the nation's biggest utility. Shareholders of both companies have already approved the deal.

Analysts said FPL needed the marketing and trading organization which Entergy had in its partnership with Koch Industries Inc., and Entergy needed the 70 new combustion turbines FPL had on order to build new power plants.

Entergy also has a joint venture with the Shaw Group Inc. to construct power plants. With the turbines from FPL and Shaw's engineering experience, the merged company was poised to grow rapidly in the independent power business in the US, analysts said.

The �power menage a trois� created by the three companies' expertise is in trouble with this hiatus, said Schultz.

Indeed, in just 1 hour of early Monday trading on the New York Stock Exchange, the Shaw Group was off by $4/share, or 8%, Entergy was off $1.24 to $36.26/share, and FPL was down $2.75 to $61.50/share.

The companies said they would have no further comment. Analysts were not sure when or if the companies' differences will be worked out. They said today�s stock market conditions are probably driving the reevaluation of the various power company mergers.

Contact annd@ogjonline.com

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