Dynegy is having an incredibly strong day in the market today while Vistra Energy takes a bit of a dive. The movement in both stocks is related to the same story. Early this morning, it was announced that the two companies had entered into a definitive merger agreement. Of course our partners at Trade Ideas were the first to alert us to the movement. Today, we’ll talk about what we’re seeing from DYN and VST, why, and what we’ll be watching for ahead.
What We’re Seeing From DYN And VST
As mentioned above, Dynegy is having a relatively strong day in the market today while Vistra Energy is having a rough one, both as the result of a merger agreement signed by the two. Following the announcement of the agreement, DYN shares rallied, and continue to hold strong gains while VST is seeing the exact opposite. Currently (11:39), the stocks are trading at $12.39 per share after a gain of $1.16 per share or 10.33% and $19.45 per share after a loss of $0.85 per share or 4.19% respectively.
The movement that we’re seeing out of DYN and VST is the result of a merger agreement between the two companies. Under the terms of the agreement, Dnegy will merge with and into Vistra Energy. The transaction will be a tax-free, all-stock transaction with the goal of creating a leading integrated power company that will tackle high value, competitive markets across the United States. It is expected that the combined market capitalization of these two companies will come in in excess of $10 billion with a combined enterprise value of more than $20 billion.
According to the agreement, DYN shareholders will be presented with 0.652 shares of VST for every share of the stock owned. As a result, Dynegy shareholders will own approximately 21% of the combined company with Vistra Energy holders owning about 79%. Based on the ratios and current market prices, DYN Shareholders will receive a total value of $13.24 per share. In a statement, Curt Morgan, President and CEO at VST, had the following to offer:
“This combination represents a transformative opportunity to create the leading integrated power company in the United States. Combining Vistra Energy’s leading retail and commercial operations with Dynegy’s leading CCGT fleet and geographically diverse portfolio is expected to create a company with significant earning, diversification and scale. The resulting combined enterprise is projected to have the lowest-cost structure in the industry and will benefit from weather and market diversification that, when combined with Vistra Energy’s balance sheet strength, will provide a platform for future growth. The result will be a leading integrated power company with significant scale in the key U.S. competitive markets. WE look forward to building on Vistra Energy and Dynegy’s highly attractive business mix and asset quality to deliver enhanced value to current shareholders of both companies and attract and retain new investors on a long-term, sustainable basis.”
The above statement was followed up by Bob Flexon, President and CEO of DYN. Here’s what he had to offer:
“Our combination with Vistra Energy accelerates Dynegy’s strategic initiatives of strengthening our balance sheet while creating the preeminent integrated power company. Vistra Energy’s strength in retail combined with Dynegy’s infrastructure and generation capabilities will provide an unmatched, highly efficient integrated business in key competitive markets. The premium offered to Dynegy shareholders reflects the quality of our generation assets and the retail business we have built over the past five years. In addition, with the all-stock transaction, shareholders of both companies will benefit from the significant projected synergies and financial flexibility enabled by the combined company’s strong balance sheet and cash flow profile. We at Dynegy are proud of what we have accomplished and we look forwad to this exciting next step in the company’s evolution.”
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on DYN and VST. In particular, we’re interested in following the story of the merger as it is still subject to customary closing conditions. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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