Helen Power
Weil Gotshal & Manges and Baker Botts have taken the lion's share of the legal advice on the $7.8bn (£5.51bn) merger between Enron, the world's largest energy trader, and its rival Dynegy.
Enron's core product is a wholesale merchant business for natural gas and power, but it has strayed into a myriad of global energy and commodity investments. Some initiatives, such as its failed power public-private partnership in India, have been unmitigated disasters. Against this backdrop, it has failed to make disclosures, and in the ensuing loss of market confidence the company's liquidity looked increasingly suspect.
Enron usually uses Vinson & Elkins for US corporate work, but in crisis its general counsel called on Weil Gotshal for additional advice. When Weil Gotshal received the call, Enron was unsure whether it needed advice on M&A or restructuring.
Weil Gotshal New York partner Thomas Roberts led the team, alongside Dallas partner Glen West. According to Roberts, the firm's dual expertise in M&A and restructuring gave it a critical advantage. Weil Gotshal managed to avoid a potential conflict of interest coming out of its work on the Chevron Texaco merger. Chevron Texaco owns 27 per cent of Dynegy, but Weil Gotshal deemed there to be no conflict.
Dynegy, seeing an opportunity to get Enron at a bargain price, drafted in Baker Botts to advise on a possible merger. The Baker Botts team, led by corporate partners Joel Swanson and David Kirkland, has worked with Dynegy in the past.
Under the terms announced on 9 November, Dynergy will exchange 0.2685 shares for each share in Enron. Crucially, Dynegy also provided an immediate $1.5bn (£1.06bn) cash injection to the troubled energy trader. The money will be bankrolled partly by Chevron Texaco, and as a result the company's long-term advisers Akin Gump Strauss Hauer & Feld were involved with this element of the deal.
The deal has yet to secure approval from the US energy regulator and the antitrust authorities. The material adverse change clause in the contract, which has been drafted within definite financial parameters, may also allow Dynegy an exit strategy if the deal becomes commercially unviable.
