Vistra to Buy Dynegy in $1.7bln Deal

Vistra Energy Corp said on Monday it would buy Dynegy Inc in an all-stock deal worth $1.74 billion, combining two Texas-based power producers in the latest merger in an industry dealing with shrinking profit margins.

Debt-laden power producers such as Dynegy have seen their margins fall, as cheap natural gas from shale fields drives electricity prices lower, leading a handful of power companies to merge to cut costs and streamline operations.

Earlier this year, utility Sempra Energy (SRE) agreed to buy power transmission company Oncor for $9.45 billion, while Vistra's rival, Calpine Corp, is selling itself to investors led by Energy Capital Partners in a $5.6 billion deal.

Vistra, the largest retailer and generator of electricity in Texas, is based in Irving, while Dynegy is headquartered in Houston.

"Regional diversification is a big discussion point for Vistra, but it's also about combining assets, getting economies of scale and being able to extrapolate operating efficiencies," said analyst Shahriar Pourreza of Guggenheim Partners.

Vistra said it would seek to keep costs in check by streamlining operations and creating leaner management teams.

"The resulting combined enterprise is projected to have the lowest-cost structure in the industry," Vistra Chief Executive Curt Morgan said on call with analysts.

Dynegy shareholders will receive 0.652 shares of Vistra for each share of Dynegy they own, translating to a price of $13.24 per share. The deal is valued at $1.74 billion, based on Dynegy's 131.37 million shares outstanding, according to Thomson Reuters data.

The combined company will have a market value of more than $10 billion and annual earnings before interest, tax, depreciation and amortization (EBITDA) of about $3 billion, Vistra said.

Vistra generated adjusted EBITDA of $1.6 billion in 2016. The company employs more than 4,000 workers, and operates TXU Energy and Luminant in Texas. Dynegy has about 2,500 employees.

Vistra's shares fell 2.6 percent to $19.78 in morning trading on Monday. Shares of Dynegy rose 11.3 percent to $12.49.

Reporting by Taenaz Shakir and John Benny in Bengaluru