DTE Energy knocked off more than $400 million from the cost ofacquiring MCN Energy Group last week, according to a revised mergeragreement approved by the boards of both companies.

The companies said the long delay in the regulatory approvalprocess and the likelihood the deal could remain uncompletedthrough the April 15 deadline were the major factors in theirdecision to revise the terms of the transaction. They also notedthey did not anticipate the unprecedented increases in gas pricessince the deal was announced in October 1999 or the Federal TradeCommission requiring MCN’s sale of a portion of its pipelinecapacity.

Under the revised terms, DTE will acquire the outstanding sharesof MCN for $24/share, or 0.715 shares of DTE stock, instead of$28.50, or 0.775 shares of DTE. The value of the revisedtransaction was about $2.2 billion last week. Including theassumption of debt, the value is $4.27 billion. The revision alsopostpones the possibility of either company opting out of thetransaction to the end of the year.

“Circumstances beyond the control of the management of eithercompany, notably the regulatory approval process, had brought intoquestion the probability of closing the transaction by the April 15opt out date,” said DTE Chairman Anthony F. Earley Jr. “While theprocess has taken longer than anticipated, we can now, with virtualcertainty, look forward to completing the merger and workingtogether as one management team.”

MCN CEO Alfred R. Glancy III said the MCN board and managementdecided that the uncertainty of closing by April 15 could result ina “significant reduction of shareholder value, well below the levelrepresented by this renegotiated price. We determined that the veryhigh degree of certainty of consummation represented by the amendedagreement warranted accepting the revised price. We believe thiswas the most prudent course of action under the circumstances.”

MCN’s board also received a fairness opinion from its financialadvisor, Merrill Lynch, Pierce, Fenner & Smith Inc. DTE Energyreceived a fairness opinion from UBS Warburg.

The companies originally filed for FTC and Securities andExchange Commission approvals in November 1999, and have sincesought to resolve anti-trust concerns. A special agreement approvedby the Michigan Public Service Commission on Feb. 14 is expected toresolve all material anti-trust concerns and pave the way for finalFTC approval within the next couple of weeks, the companies said.Revised proxy materials will be filed with the SEC shortly. Arevised Public Utility Holding Company Act application will befiled with the SEC. The companies estimate that all neededapprovals can be obtained and the merger can be closed within fourto five months.

DTE’s principal operating subsidiary is Detroit Edison, anelectric utility serving 2.1 million customers in SoutheasternMichigan. MCN primarily is involved in gas production, gathering,processing, transmission, storage, distribution and marketing inthe Midwest and Northeast corridor. Its largest subsidiary isMichigan Consolidated Gas Company, a gas utility serving 1.2million customers in Michigan.

Rocco Canonica

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