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AES to Acquire DPL for $3.5B

AES Corporation announced Wednesday that it plans to acquire DPL Inc. in a $3.5 billion stock deal as it looks to strengthen its regional holdings.

Under the agreement, Arlington, VA-based AES will pay $30/share in cash to DPL shareholders for a total of $3.5 billion in equity, and will also assume $1.2 billion in net debt. AES said it has secured bridge financing for the deal through Bank of America Merrill Lynch, while permanent financing will include a combination of cash on hand, nonsecure debt, and the reissuance of AES corporate debt that was temporarily paid down in 2010.

Dayton, OH-based DPL -- the parent company of Dayton Power & Light Co. (DP&L) -- serves more than 500,000 customers in western central Ohio and operates more than 3,800 MW of power generation facilities. Once the deal is finalized, DPL will become a wholly owned subsidiary of AES but remain a standalone business, with local management and corporate functions headquartered in Dayton. Customers will continue to be served by DP&L and the company will continue to use the DP&L name.

"We are concentrating our growth efforts in a few key markets, including the U.S. utility sector, where we see opportunities to leverage our global platform of 40,500 MW and 11.5 million utility customers," Paul Hanrahan, CEO of AES, said Wednesday. "The DPL acquisition is expected to be value and earnings accretive, benefiting from the regional scale provided by our nearby utility business at Indianapolis Power & Light Co."

The deal must be approved by DPL shareholders, the Public Utilities Commission of Ohio and the Federal Energy Regulatory Commission. An antitrust review under the Hart-Scott-Rodino Act will also be performed. The approval process is expected to take six to nine months.

The AES-DPL proposal is the second major consolidation in the power sector to be announced this year. In January Duke Energy announced that it would acquire Progress Energy Inc. for $13.7 billion in stock, creating the nation's largest utility company and serving 7.1 million customers (see Daily GPI, Jan. 11).

Deal activity in the power sector has picked up as companies, hurt by falling electricity prices due to the economic downturn, eye assured returns from regulated power and brace for the huge costs facing the sector.

Shares of AES, a Fortune 500 global power company that operates in 28 countries, were at $13.05/share in midday trading Wednesday on the New York Stock Exchange (NYSE), up 57 cents (4.61%). Meanwhile midday trading of DPL shares on the NYSE reached $30.01/share, up $2.42 (8.77%).

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