Duke Power Merger Case Study

In 1997, Duke Power made its first big merger that would set the future of Duke Energy. Duke Power purchased PanEnergy Corp for $7.4 billion in order to help the utility company branch out nationally. After this buyout Duke Power changed its name to Duke Energy Corporation in order to set a new platform for expansion and growth. At the time Duke Energy had net assets of $13.5 billion while PanEnergy had $7.6 billion. The merger was a necessity for both companies because the gas and electricity markets were moving together. The markets were beginning to overlap, and they were serving the same customer base. This was a simple merger because both companies saw the need and felt like it was a good purchase price. With the merger it enabled the corporation to become one of the top three marketers for both electricity and natural gas (Graczyk, Duke Power to buy). In 2005, Duke Energy announced that it would buy Cinergy in an all stock deal that was valued at $9 million. The purpose of buying Cinergy was to expand its businesses in power and gas in the Midwest. This buyout created a company with $5.4 million customers and the company began operating in two-thirds of the United States. Duke Energy …show more content…
Prior to the buyout Duke Energy had an operating loss of $35 million in their first quarter report. However, with the purchase of Cinergy Duke Energy was able to improve the weakest aspect in the Portfolio which was the Midwest region. The combination of the two companies brought Duke's gas position together with the Cinergy coal position in the region. This was cost efficient and was expected to help Duke Energy save $400 million a year. Furthermore, this purchase enabled Duke Energy to offset its reliance on gas- powered electrical plants costing $48.00 an hour by using Cinergy's cheaper to operate coal fired assets costing only $19.00 an