Orion Power's sale is expected

Baltimore company to be acquired by Reliant, of Houston

September 27, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Orion Power Holdings Inc., a Baltimore company that buys and operates power plants nationwide, is near agreement to be acquired by Houston-based electricity company Reliant Resources Inc., sources close to the transaction said yesterday.

The deal could be announced as early as this morning, they said.

Reliant would pay $2.9 billion in cash and assume $1.8 billion of debt in the transaction.

The acquisition values Orion at about $26.80 a share, which represents a 40 percent premium over Orion's $19.20-a-share close on the New York Stock Exchange yesterday.

The energy company's headquarters most likely would no longer be based in Baltimore, but it was unclear last night whether Orion's employees and business operations would be merged or relocated to Houston. Reliant Resources, a publicly traded company that is majority-owned by Reliant Energy Inc., also has wholesale trading and marketing operations.

Orion would become part of Reliant's Northeast wholesale group.

"A number of companies expressed interest in merging with Orion," a source close to the transaction said. "It was a competitive process."

With 98.2 million shares outstanding, Orion has a market capitalization of $1.9 billion - less than half the $4.9 billion market value of Reliant, which has 292 million shares outstanding. Reliant's shares closed down 37 cents yesterday at $16.68.

Orion was started in March 1998 as a joint venture between the New York investment firm Goldman Sachs Group Inc. and an affiliate of Constellation Energy Group Inc., parent of Baltimore Gas and Electric Co.

Constellation retains just over an 18 percent stake in Orion.

As of March 31, Goldman Sachs and its affiliates owned 37 percent of Orion, according to an Orion filing with the Securities and Exchange Commission.

Both Constellation and Goldman Sachs' stock would be purchased by Reliant, the source said.

The Orion-Reliant deal, expected to be completed early next year, is subject to Justice Department and Federal Energy Regulatory Commission approval.

While most energy company stocks have taken a beating recently because of the ailing economy and terrorist attacks, Orion has grown rapidly and performed well since its inception.

In November, Orion went public and issued 27.5 million shares at $20 each.

Chief Executive Officer Jack Fusco told shareholders at its annual meeting in June that Orion had more than doubled in size and far exceeded earnings expectations in the past year.

Fusco said at the time, "It was a banner year in the development of Orion Power, which was built solely on acquisitions and turned into a mature, nationwide power generation and marketing company."

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