With a reinvigorated stock price and electric deregulation under way in Ohio, Cinergy Corp. may be on the verge of finally finding a merger partner.

        The Cincinnati utility holding company, created by the 1994 merger of Cincinnati Gas & Electric Co. and PSI Energy Inc. of Indiana, is in discussions to be acquired by Public Service Enterprise Group Inc. of Newark, N.J., the Wall Street Journal reported Friday, citing unnamed sources.

CINERGY

History: Utility holding company created out of the 1994 merger of Cincinnati Gas & Electric Co. and PSI Energy Inc. of Indiana.    Customers: 1.4 million electric and 480,000 gas in Ohio, Indiana and Kentucky.     Employees: 8,950.     Financials: Record operating earnings last year of $861.6 million, or $2.61 a share, on revenues of $8.4 billion.     Chairman and CEO: James E. Rogers.

PSEG

History: Utility holding company for Public Service Electric and Gas Co. of Newark, N.J.     Customers: 1.9 million electric and 1.6 million gas, making it New Jersey's largest utility.     Employees: 11,000.     Financials: Earnings last year of $764 million, or $3.55 a share, on revenues of $6.8 billion.     Chairman and CEO: E. James Ferland.

        PSEG, which operates New Jersey's largest utility, would reportedly swap its shares for Cinergy's in a more than $5.6 billion deal. PSEG would also assume Cinergy's $2.9 billion in debt.

        The newspaper said that although the combination would be described as a merger, PSEG shareholders would probably have eight of the 14 seats on the board and its shareholders would own two-thirds of the combined company.

        The combined companies would have revenues of more than $15 billion, 19,000 employees, and 3.3 million electric and 2 million gas customers.

        Neither company would comment on the report.

        But Cinergy chairman James E. Rogers has made no secret of his desire to find a partner to create a larger company with the size and scope to compete in U.S. power markets that are opening to competition.

        “It's really not a surprise in the sense that both utilities have contemplated other mergers,” said David Burks, analyst with J.J.B. Hilliard, W.L. Lyons in Louisville., “But I never really thought these two would get together.”

        A number of the nation's largest utilities have combined in recent years to broaden their customer base and market areas.

        In late 1997, Columbus-based American Electric Power Co. announced a $4.4 billion acquisition of Central and South West Corp., which has 1.7 million customers in the Southwest.
       

Mergers galore
        A year ago, British-based Powergen Plc, once a rumored suitor of Cinergy, agreed to acquire Louisville's LG&E Energy Corp. for $5.4 billion in cash and debt.

        And last summer Arlington, Va.-based AES Corp. agreed to buy Ipalco Enterprises Inc. in Indianapolis for $3 billion in stock and debt.

        Shares of Cinergy and PSEG declined Friday. Cinergy shares declined 67 cents to $34.48, after gaining $1.45 on Thursday in very heavy trading. PSEG's shares closed at $41.61, down 84 cents on Friday after closing down $1.40 on Thursday.

        Analysts said PSEG, which has 1.9 million electric and 1.6 million gas customers in New Jersey, has been looking to expand in the Midwest.

        It already has plans to build several Midwest generating plants to sell electricity on the wholesale market, including a 1,150-megawatt plant just west of Cincinnati in Lawrenceburg.

        Cinergy has reportedly had merger talks with a number of potential partners over the past few years.

        “You dance with a lot of different people before you select a partner. We've been doing a lot of dancing,” Mr. Rogers told the Enquirer in April 1998.

        Last summer, he told Bloomberg Business News the utility was still seeking a merger partner and expected to be in a better position to complete a deal after Ohio's electric deregulation law took effect. The law, allowing customers to chose their electric supplier for the first time, took effect Jan. 1.

        Shares of both utilities have risen about 60 percent in the last year, increasing their ability to do a deal.

        Mr. Burks said the Standard & Poor's utility stock index increased 54 percent last year, while the S&P 500 declined 10 percent.
       

Shareholders might balk
        Both companies have been through restructuring, and Ohio's electric deregulation could make a merger more attractive by giving them more flexibility to operate, Linda Byus, an analyst with Dresdner Kleinwort Wasserstein in Chicago, told the Associated Press.

        “The transaction makes sense to me strategically. Both companies would be better positioned to move forward in the industry,” Ms. Byus said. “It's a good time for them to do something.”

        Analysts said Cinergy shareholders might balk at the deal as described because it offers little premium for their shares in a stock swap.

        “Typically in utility mergers you expect a 25 or 30 percent premium,” Mr. Burks said.

        In Powergen's acquisition of LG&E, for example, LG&E shareholders received $24.85 a share in cash, he said.

        “I'd be disappointed if I were a Cinergy shareholder,” Gregory Phelps, manager of John Hancock's Patriot group of funds, which owns preferred stock in both companies, told Bloomberg.

        The Journal said the small premium may invite rival bids.

        Another sticking point could be who manages the combined companies.

        Mr. Rogers has made it clear he expects to lead any company Cinergy combined with, and analysts say that may have unraveled some of the company's earlier merger talks.

        The Journal said the deal being contemplated would assure Mr. Rogers, 52, of being chief executive officer after PSEG chairman E. James Ferland, who is 57, retires in a few years. Mr. Rogers agreed to a secondary role in the Cinergy merger, serving as president and CEO but not being named chairman until last fall when Jackson Randolph, former chairman of CG&E, retired as Cinergy chairman.
       
Cinergy involved in Tristate
       

Cinergy in merger talks again
A new day at Hillenbrand
He wrote book on company's pre-arranged funerals
Laser surgery clinic on mend
Sears keeps moving upscale
Stocks plunge on warning
Delta on-time record still poor
HIGGINS: Personal Finance
Savvy Strategies
Your tax questions
Your Taxes
Business Digest
Tristate Business Summary
What's the Buzz?