FW: Enron Said To Be Takeover Target, Shell Tipped As Possible

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Enron Said To Be Takeover Target, Shell Tipped As Possible Bidder
< Oct. 28 (Power Finance & Risk)
< Enron, which 12 months ago was the darling of the energy markets, has
< become increasingly vulnerable to a takeover bid following the recent
< collapse of its share price, according to bankers and analysts. Royal
< Dutch/Shell is one likely bidder, they say, noting that Enron's relatively
< modest market capitalization--down to $11.5 billion late last week from a
< high of more than $55 billion--means that Shell and other potential
< acquirers would have little trouble digesting it whole. Cerris Tavinor, a
< spokeswoman for Shell, declined to comment. Calls to Enron were not
< returned.
< An M&A banker in London says the Anglo-Dutch oil giant was rumored to have
< approached Enron unsuccessfully in August. An analyst in New York adds
< Shell has courted Enron for more than three years. "[Shell]'s downstream
< power business InterGen has not been as successful as it and its partner
< Bechtel hoped, especially in the U.S., and this would be a great fit," he
< continues.
< While many energy concerns would love to get their hands on Enron's hugely
< successful gas and electricity trading business, its forays into water,
< broadband and pulp and paper, might prove less attractive. Bidders may
< want to cherry pick the best parts of the business, reasons Peter Fusaro,
< president of Global Change Associates in New York. Still, he says "there
< is a distinct possibility that it could be bought outright."
< Another obstacle to any sale is believed to be CEO Kenneth Lay's
< unwillingness to sell the company at such a low stock price. Still, Lay
< has already given up the executive reins once, and at 61, he would
< probably be willing to sell if the premium was significantly rich, argues
< one New York based banker. Another adds that Lay will probably wait for
< the share price to recover before he would even consider talking to
< bidders.
< Bankers argue that potential bidders would be unwilling to ride roughshod
< over Lay's wishes through a hostile bid as most of Enron's value is tied
< up in intellectual capital. Hostile bidders run the risk that senior staff
< will jump ship, argues a London banker.
< Another obstacle to any bid is concern that Enron may have additional
< skeletons in its financial closet. Last week's stock market selloff was
< prompted by Enron unexpectedly writing off some $1.2 billion in equity
< resulting from the termination of contracts with a special purpose vehicle
< linked to Peter Fastow, cfo. Analysts fear that Enron may have to
< terminate similar contracts over the next quarters.
<