By Jim Brumm
NEW YORK, April 2 (Reuters) - The merger that would have combined New Orleans-based Entergy Corp. with Florida's biggest electric utility, FPL Group Inc., to create the largest U.S. power distribution company came unraveled over the weekend.
The mutual agreement to end the deal was announced early Monday in what became the last joint action by the two companies for the foreseeable future.
Worth $6.4 billion when the deal was struck in late July, the transaction was worth nearly $7.9 billion based on Friday's closing prices.
The stocks showed little reaction to the breakup news, trading higher with other utility stocks in Monday morning and following the group lower in the afternoon and turning mixed by mid-afternoon when FPL was down 20 cents to $61.10 and Entergy was up 32 cents to $38.32.
In separate conference calls to discuss the breakup with investors, the two companies failed to see eye to eye on the reasons for the split.
FPL Chief Executive James Broadhead told analysts Entergy had provided inconsistent financial data, adding its failure to discuss differences in forecasts presented to FPL as part of last summer's merger talks and "significantly" lower projections made to Entergy's board "destroyed our confidence in (the company's) management."
Entergy Chief Executive Wayne Leonard however said this was a "totally manufactured" issue, adding Entergy had explained that a December presentation to directors included possibilities ranging from earnings per share of 47 cents or more above analysts' expectations to 42 cents or more below those figures.
In response to analysts' questions, Entergy officials said they are "confident we can meet or beat" the Thomson Financial/First Call consensus estimate which puts this year's earnings per share at $3.10 and next year's at $3.40.
In a statement before the conference call, the company said its most recent financial plan projects earnings per share in the $3.30 to $3.50 range for next year, adding this "is consistent with our long-term commitment of 8-10 percent (growth)."
Last year Entergy earned $3.12 per share, including 32 cents from weather related gains.
ROCKY ROAD
"We should have spent more time together as a team before we signed the agreement (in July)," Entergy's Leonard told investors.
He said the "first bump in the road" came in September when FPL's Broadhead demanded an Entergy management change.
In December, Broadhead ordered a cultural assessment and said later it showed problems with Entergy's corporate culture, Leonard continued.
At a March 22 meeting with outside directors of both companies, Broadhead said Entergy's senior management had to leave. This meeting followed a March 19 joint statement saying the deal had hit some significant snags including governance issues.
Leonard said Entergy's board took this as a "threat of corporate warfare" at all levels and took an indepth look at the transaction at a four day meeting that ended last Wednesday. At a meeting Sunday, directors decided to end the agreement.
Entergy's financial advisors advised the board "that with no premium to shareholders as part of the deal, and with a revised management structure, the transaction was equivalent to a takeover without a premium" instead of the merger of equals agreed to last July.
Broadhead told analysts governance "was not the reason this merger came apart," and repeated a comment in FPL's statement that "restrictions that appeared likely to be imposed by regulatory authorities on the ability to grow and operate the business of the combined companies" were a factor in the break up.
Leonard explained "regulators were likely to stop" the transaction if FPL insisted on central control over Entergy's five utility subsidiaries which serve about 2.5 million customers in Louisiana, Mississippi, Arkansas and Texas.
Broadhead also told analysts he expects FPL to achieve a 7 percent increase in earnings per share this year from the $4.38 reported for 2000, noting this excluded merger-related expenses, adding the company expects earnings per share to increase an average of 7 percent per year over the next several years.
Analysts are projecting $4.70 for this year and $5.07 for 2002.
PPL says power marketing unit being probed
By Jim Brumm
NEW YORK, Dec 7 (Reuters) - Pennsylvania regulars are probing possible market manipulation by the affiliate of PPL Corp. that trades wholesale power, the company acknowledged late Thursday.
Shares of PPL, which owns a regulated electric utility that distributes power to 1.3 million customers in eastern and central Pennsylvania, fell on Friday in heavy trading, extending a decline that began Wednesday when Wall Street first linked the company to the investigation.
PPL said its EnergyPlus subsidiary was the "Entity 1" mentioned in a report by the PJM Market Monitor, an office that watches trading in the mid-Atlantic power market.
The Market Monitor report triggered a Pennsylvania Public Utility Commission (PUC) investigation into possible manipulation by EnergyPlus in the buying and selling of electricity in the wholesale power market announced last Friday.
After dropping to $32.85, its lowest price in six weeks, PPL's stock began to gain as analysts said "any financial impact from the (commission's) review will be negligible."
The stock closed Friday at $34.03, down 61 cents, or 1.76 percent, for the day; and down $2.36, or 6.45 percent, from Tuesday's close of $36.39, before some on Wall street linked PPL to the investigation.