Entergy Corp. and FPL Group have parted ways on the merger set to create America’s largest energy distributor. The proposed transaction- which had a value range of $6 to $9 billion, depending on input factors-ground to a halt with April’s cusp.
Both companies agreed that no termination fee would be paid and that each individual company would be responsible for its own merger-related expenses.
Both Entergy and FPL Group offered up different reasons for the dissolution.
In a statement released within hours of the official termination announcement, Entergy claimed that “various positions taken by FPL” would have undermined the original merger-of-equals agreement between the two companies. Entergy also cited a belief that the merger wouldn’t manage to survive the gauntlet of regulatory approval as an additional reason for its dismissal.
Lining up the disagreements between the two companies, Entergy stated their opposition to FPL chairman and CEO James Broadhead’s changes to the corporate structure, the advice of its financial advisors Morgan Stanley Dean Witter and J.P. Morgan that the transaction was “equivalent to a takeover without a premium,” the changes that FPL wished to make with organizational structure and the opposing non-regulated business strategies as underlying factors to the final termination.
Moody’s Investors Service at least confirms that Entergy is not being tossed out along with the merger. While the company’s rating did slide from positive to stable after the announcement, Moody’s states simply that “the stable rating outlook for each of Entergy’s operating subsidiaries reflects the elimination of any benefits that may have resulted from the combination with a stronger entity.”
FPL Group also gave a litany of factors contributing to the merger’s belly-up status. In their follow-up statement to the dissolution announcement, FPL cited “discrepancies in Entergy’s financial forecasts” as being the major factor in FPL’s decision. They also claimed that Entergy repeatedly refused to provide financial documents and other information requested by FPL.
As Entergy had, FPL Group also included an extended list of mitigating factors: regulatory restrictions that they foresaw in the mix, tension between FPL and Entergy on operation and management styles, and varying visions of the future for the combined company.
Moody’s has also given FPL Group and its subsidiary Florida Power & Light Co. a stable rating, removing it from the possible downgrade that had been hanging over its collective head since the last August-just after the merger was initially announced.