Off-balance-sheet financing is a nice, gentlemanly lable given to misrepresentation

Shyam Sunder Yale University professor of accountancy

The deal marks a dramatic turnaround in fortunes for Enron, which only a few months ago was one of Wall Street's best performers.

But in the past few months its share price has slumped following disclosures of off-balance sheet deals allegedly made by senior executives.

These deals are now under investigation by the US Securities and Exchange Commission.

On Thursday the company admitted that its profits between 1997 and 2001 were nearly $600m lower than it said at the time, and it has sacked its treasurer and the general council of one of its divisions.

Some observers pointed out that Enron only had itself to blame for the rapid sale, at a knock-down price, given its indiscretions.

"Off-balance-sheet financing is a nice, gentlemanly lable given to misrepresentation," Shyam Sunder, professor of accountancy at Yale University, told Reuters.

Tough terms

Under the terms of the merger agreement, Enron shareholders will receive 0.2685 Dynegy shares for each share they own.

Enron is the ideal strategic partner for Dynegy

Chuck Watson, Dynegy's chairman and chief executive

ChevronTexaco, which owns about 26% of Dynegy, has agreed to invest $2.5bn into the new company. $1.5bn will be invested immediately with the rest following on completion of the deal.

Dynegy's shareholders will end up with approximately 64% of the new company, with Enron's shareholders holding the rest.

The combined company will have annual revenues of more than $200bn, and assets of about $90bn.

Both Dynegy and Enron offer a sophisticated electronic trading platform for oil, natural gas and other commodities.

'Strategic combination'

Chuck Watson, Dynegy's chairman and chief executive will keep these positions in the new company.

"This strategic combination strengthens the value of our existing core business franchises by uniting the two companies' diversified global energy delivery networks, complementary wholesale strategies and strong marketing, trading and risk management capabilities," Mr Watson said in a statement.

"With its market-making capabilities, earnings power and proven strategic approach to wholesale markets, Enron is the ideal strategic partner for Dynegy."

Dynegy said it expected the deal to be "strongly accretive" to its earnings in the first year and thereafter.

Analysts approved. "It is a great deal for Dynegy, and under the circumstances as good a deal as Enron could get," said Ron Barone, at UBS Warburg.