Shares of independent power producer Dynegy Inc. (NYSE: DYN) jumped more than 17% in late Wednesday trading after reports surfaced that the company is in "advanced talks" to merge with peer power producer Vistra Energy Corp. (NYSE: VST).
Continue Reading Below
As The Wall Street Journal reported yesterday evening, the two Texas-based power companies have been discussing a potential merger since "at least the spring." (Indeed, we've been hearing such rumors ourselves). Any such merger, if one happens, would almost certainly put Vistra in the driver's seat.
Valued on market capitalization alone, Vistra's $8.4 billion valuation is seven times that of Dynegy. Dynegy also carries some $8.9 billion in net debt, while Vistra is significantly less laden with debt -- less than $3.6 billion net of cash on hand.
WSJ postulates that a deal could be inked as early as next week -- or not, if the merger talks fall apart. In the latter case, Dynegy shareholders stand to lose much of the increase in their stock price sparked by news of the potential merger. On the other hand, if a merger should be in the offing, they stand to gain either significant profits from the run up, or part ownership in a much stronger combined company.
If I were a shareholder in Dynegy, I'm pretty sure I know how I would hope this one plays out.
10 stocks we like better than DynegyWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Dynegy wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of October 9, 2017