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DPL Shareholders Cheer AES Merger

AES

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DPL Inc. announced that its shareholders have voted in favor of the proposal to adopt the agreement and plan of merger with The AES Corporation (AES - Analyst Report). Earlier, in April 2011, the companies announced that AES will acquire DPL in a transaction valued at $4.7 billion.

AES will acquire all of the outstanding shares of DPL for approximately $3.5 billion in cash, or $30 per share, representing an 8.7% premium over DPL’s closing share price on April 19, 2011. AES will also assume DPL's net debt of $1.2 billion.

Upon closure of the transaction, DPL will become a wholly-owned subsidiary of AES. The parties expect to complete the merger in the fourth quarter of 2011 or first quarter of 2012. Completion of the merger transaction is however dependant upon pending regulatory approvals from the Federal Energy Regulatory Commission and the Public Utilities Commission of Ohio.

Upon completion of the transaction, DPL’s common stock will cease to trade publicly, and each outstanding share of DPL’s common stock will be converted into a right to receive a cash amount of $30 per share, without interest. AES estimates post-acquisition its adjusted earnings per share for fiscal year 2011 to be in the range of $0.97–$1.03.

Arlington, Virginia-based AES Corporation is a global power company and is involved in the generation, distribution, transmission and selling of electricity to end-customers in the residential, commercial, industrial and governmental sectors. AES Corporation’s businesses encompass 28 countries across 5 continents representing a highly-diversified earnings base.

Geographic diversity has resulted in a portfolio that is well-positioned for capitalizing on regional differences in power prices and weather-driven demand and also insulates the company from specific risks in any single region or country.

Dayton, Ohio-based DPL Inc. is a regional energy company. DPL, through its subsidiaries, owns and operates approximately 3,800 megawatts of generation capacity, of which 2,800 megawatts are low cost coal-fired units and 1,000 megawatts are natural gas and diesel peaking units.

DPL has performed consistently across its solid base of stable utility operations. We also like its strong balance sheet, higher rates, and regulatory approval for recovery of fuel cost.

However, the near-term upside is constrained by regulatory risks, tepid growth in the economy, the high unemployment level in Ohio and lofty purchase power costs. Thus, in the absence of any positive near-term triggers, DPL presently retains a short-term Zacks #4 Rank (Sell). Over the longer run we maintain our long-term Neutral recommendation on the stock.

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