Thursday, October 14, 2010

Allegheny (NYSE:AYE), FirstEnergy (NYSE:FE) Merger Opposed by PA Lawmakers

Opposition to the merger of FirstEnergy Corp (NYSE:FE) Allegheny Energy, Inc. (NYSE:AYE) from Pennsylvania lawmakers, especially Gov. Ed Rendell, who has, without proof, asserted the deal would be a killer of jobs in the state.

That's after FirstEnergy said there will be no jobs lost because of layoffs. There could be transfer of some jobs or workers may retire, but losses wouldn't come from company actions.

"Pennsylvania Gov. Ed Rendell called on the Public Utility Commission to deny the merger request with Allegheny Energy (NYSE:AYE) (Equalweight rating). In a release, Gov Rendell said the proposed deal could kill 980 good-paying jobs in southwestern PA. Gov. Rendell also stated concerns around increasing consumer costs and the lack of positive environmental effects, energy efficiency incentives, or increases in renewable energy. FE and AYE committed to work through the regulatory process in a response. To secure approval in Pennsylvania, a merger is required to show benefits...AYE is 9% undervalued including the 6% deal arbitrage and the dividend yield, but we see downside to $19 in a break," said Barclays (NYSE:BCS).

The deal is an $8.5 billion acquisition offer for Allegheny Energy Inc by FirstEnergy.

Allegheny closed Wednesday at $24.55, gaining $0.35, or 1.45 percent. First Energy ended the session at $38.89, gaining $0.54, or 1.41 percent Barclays had a price target of $38 on FirstEnergy.

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