Word: merger
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...industry's problems are roughly the same as they were at the turn of the century when Carnegie Steel, Federal Steel and eight other steel companies formed the behemoth U.S. Steel: Excess capacity, slumping prices and profit margins squeezed by too much competition. (The pension problem came later.) That merger helped, but debt-ridden, none-too-efficient U.S. Steel steadily shed market share over the next century - especially to an explosion of foreign competitors after WWII - and today produces only marginally more steel than...
...News of the merger leaked out Nov. 9, when Enron was valued around $9 billion. By Nov. 28th, when the S&P downgraded Enron to junk status, it was worth $2 to $3 billion at most, says Watson, but none of Enron's bankers were willing to put up enough money to soothe his fears about $18 billion in debt coming due in the next few years. In an attempt to keep the deal going, Watson had pulled three all-nighters in the last week of negotiations -something he hadn't done since his college days...
...debt, triggered by Enron's troublesome partnerships, had not been in the original merger documents and Watson thinks it was a rude surprise for Enron head Ken Lay and the Enron team as well as Dynegy and its 30-percent owner, Chevron. Enron, he says, had not envisioned all of the possibilities that could trip them up. Operating in "panic mode," Watson's team began trying to sort out the details of the100-page SEC filing the next day, on Nov. 20th, but with a sinking feeling. A week later, on Nov. 27th, after renegotiating the deal almost daily, Watson...
...When Enron was relegated to junk bond status the next morning, he opted out. "If there was any hope of the merger, that put a nail in the coffin," he says. As part of the agreement, he exercised Dynegy's option to take Enron's 16,500-mile pipeline in return for its investment of $1.5 billion plus assumption of $950 million in debt on the Northern Natural Gas system. Watson told TIME that he is confident the deal was "very carefully crafted" to avoid any risk. "It is an entity immune from bankruptcy proceedings. I expect...
...more mergers a sign of fair weather ahead? Fred Green thinks so. Expecting a revival in corporate takeovers, Green, co-manager of the Merger Fund, has begun accepting new money from investors for the first time in two years. And his timing looks good. Last week Phillips Petroleum agreed to acquire Conoco for $15 billion in stock, followed swiftly by carpetmaker Mohawk Industries' $1.4 billion deal to buy flooring company Dal-Tile and the announcement of a $3 billion cruise-line merger of Royal Caribbean with Princess. There was even talk that cruise-line heavy Carnival might pre-empt that...