Dynegy (NYSE:DYN) entered into an agreement today to buy Ameren Energy Resources (AER) from Ameren (NYSE:AEE). According to Dynegy's most recent 10k, the company's Illinois Power Holdings (IPH) subsidiary will acquire AER and its subsidiaries, thereby adding 4,119 megawatts (MW) of generation to Dynegy's Illinois operations. The deal is subject to regulatory approval, and the companies expect the transaction to close in the fourth quarter of 2013.
The purchase involves no cash or stock issuance. Dynegy will take on $825 million of debt with its acquisition of AER subsidiary Ameren Energy Generating Company (Genco), according to Dynegy's press release. The company will gain five coal-fired power plants through this deal.
Dynegy sees several benefits to this acquisition. When the deal closes, the company will own more than 8,000 MW of generating capacity in Illinois, and nearly 14,000 MW nationally. The transaction creates synergies that Dynegy estimates will exceed $60 million by 2015, and supports Dynegy's strategy to become a retail energy supplier for large commercial and industrial customers in Illinois.
The deal allows Ameren to focus exclusively on its rate-regulated electric, natural gas, and transmission operations, according to the company's press release. "We expect that this transaction will reduce business risk and improve the predictability of our future earnings and cash flows, which is expected to strengthen Ameren's credit profile and support Ameren's dividend," said Thomas R. Voss, Ameren's CEO.
Sara E. Murphy has no position in any stocks mentioned. You can follow her on Twitter @SMurphSmiles. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.