Enron Corp., Houston, is already one of the world's largest marketers of electricity and natural gas and a pioneer of bandwidth trading, but it has decided to extend its reach to other markets. On Monday, Enron announced a $446 million cash offer to acquire all the shares of London-based MG PLC, a leading publicly traded metals marketer.
Enron has been monitoring the global metals market for several years and decided that "now is the time to enter this $120 billion market," says Kenneth L. Lay, Enron chairman and CEO. "Our business model, which we have proven in the natural gas and electricity markets, will give us a tremendous advantage in an industry that is undergoing fundamental change."
Enron's competitive advantage is its ability to deliver a physical commodity to customers at any time and at the best possible price, says Greg Whalley, CEO of Enron Net Works. Net Works is a business unit that identifies new opportunities for Enron to extend its network business model to wholesale commodity markets.
"In the metals market and other potential markets, we will deliver market-wide enhancements such as improved pricing, price risk-management services, cross-commodity transactions, and more-flexible transactions for a wider range of customers," Whalley says.
Enron Net Works also includes Enron's electronic trading platform, EnronOnline, launched in November 1999. Enron so far this year has participated as a principal in more than 110,000 transactions valued at more than $45 billion. Enron offers more than 800 products in numerous markets, including gas, electricity, bandwidth, coal, weather derivatives, clean air credits, plastics, and pulp and paper.
MG PLC's recognized marketmaking capabilities and excellent market knowledge "provide an immediate platform upon which to overlay Enron's proven ability to offer innovative e-commerce-enabled services to commodity-based industries," says Tom McKeever, MG PLC executive chairman.
MG PLC's board of directors has unanimously approved the offer. The deal is set to close by early third quarter 2000, pending shareholder and regulatory approval.
MG is owned 45.56% by Germany metals and engineering firm Metallgesellschaft AG, which became embroiled in a hedging scandal that nearly destroyed the company in 1993.
