FirstEnergy in Talks to Buy GPU

["Sandy Perle" <sandyfl@earthlink.net>]

FirstEnergy in Talks to Buy GPU
  
Akron, Ohio, Aug. 7 (Bloomberg) -- FirstEnergy Corp., an Ohio utility 
owner, is in talks to buy GPU Inc. of New Jersey for more than $10 
billion in stock and assumed debt, people familiar with the talks 
said. 

The companies might reach an agreement this week, though final terms 
haven't been reached and the talks could collapse, the people said. 

A premium of 20 percent to 30 percent is being discussed, the people 
said, valuing the stock portion of the transaction at $4.1 billion to 
$4.4 billion. GPU has about $5.9 billion in debt. Both companies 
declined to comment. 

GPU was one of the first U.S. utilities to sell its power plants, 
including the working nuclear reactor at Three Mile Island, to 
concentrate on delivering electricity. That forced GPU to buy power 
for its 2.2 million customers at fluctuating prices, making the 
company vulnerable to takeover. 

``It was a strategy that backfired,'' said Michael Worms, an analyst 
with Gerard Klauer Mattison & Co. who has ``neutral'' ratings on GPU 
and FirstEnergy. 

FirstEnergy shares fell 2 3/8, or 8.8 percent, to 24 9/16 in early 
trading. GPU rose 2 7/16, or 8.7 percent, to 30 1/2. FirstEnergy had 
climbed 19 percent this year, while GPU was down 5.7 percent. 

Pennsylvania Power 

GPU's position has been weakened by disappointing results from 
overseas investments, Worms said. The company in June agreed to sell 
its Australian electric-transmission unit, GPU PowerNet, to Singapore 
Power Ltd. for $1.27 billion, about $530 million less than GPU paid 
in 1997. 

GPU, based in Morristown, New Jersey, also has investments in the 
U.K. and Argentina. It sells electricity in New Jersey and 
Pennsylvania through utilities Jersey Central Power & Light, 
Metropolitan Edison and Pennsylvania Edison. The company had sales of 
$4.76 billion last year. 

Acquiring GPU would allow Akron, Ohio-based FirstEnergy to expand 
into central Pennsylvania and New Jersey. FirstEnergy owns 
Pennsylvania Power, a utility based in New Castle, near the Ohio 
border, with about 145,000 customers. The company also has stakes in 
power plants in western Pennsylvania. 

FirstEnergy had 1999 revenue of $6.32 billion. Besides Penn Power, 
the company owns Ohio Edison, Toledo Edison Co. and the Illuminating 
Co. The four utilities supply 2.2 million customers in Ohio and 
Pennsylvania. 

FirstEnergy was formed in November 1997, when Ohio Edison Co. bought 
Centerior Energy Corp. for $1.6 billion. Last year, FirstEnergy 
bought an additional 20 percent stake in a Warren County, 
Pennsylvania, hydroelectric plant from GPU for $43 million. 

In December, GPU sold the sole working reactor at Three Mile Island, 
near Harrisburg, Pennsylvania, to AmerGen Energy Co., a joint venture 
of Philadelphia-based Peco Energy Co. and the U.K.'s British Energy 
Plc. 

Three Mile Island's other reactor has been idle since 1979, when it 
nearly melted down in the U.S.'s worst nuclear accident. 

------------------------------------------------------------------------
Sandy Perle					Tel:(714) 545-0100 / (800) 548-5100   				    	
Director, Technical				Extension 2306 				     	
ICN Worldwide Dosimetry Division		Fax:(714) 668-3149 	                   		    
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