Sempra Energy Trading acquires Enron Metals

Sempra Energy Trading, the Connecticut-based gas, power and petroleum dealer, is to acquire Enron Metals in a $145 million cash deal.

The acquisition is expected to gain approval on February 4, following a final audit, and London-based Enron Metals will be renamed Sempra Metals, said Sempra. The new firm will maintain its position as a London Metals Exchange (LME) market maker. Enron Metals was established in July 2000, when Enron bought broker and market-maker Metallgesellschaft. Enron went bankrupt in December, but Enron Metals continued to trade. Sempra said Enron Metals net trading revenues are running at an annual rate in excess of $50 million.

Donald Felsinger, group president of Sempra Energy Global Enterprises, the umbrella for the group’s growth businesses, said the acquisition expands Sempra’s trading and risk management capabilities globally. “Since its [Enron Metals] inception, this has been a profitable company and we expect this track record to continue, adding new value for our shareholders.”

PricewaterhouseCoopers (PwC), one of the joint administrators of Enron Metals, said it received strong interest from 20 parties. “The offer from Sempra was the best,” said Dipankar Ghosh, partner at PwC.

The LME welcomed the acquisition. “Markets thrive on liquidity, and the more participants there are providing that liquidity the better,” said Simon Heale, chief executive of the LME. Dealers and mining firms are known to be concerned about falling liquidity in metals markets. Scotia Mocatta, part of the Bank of Nova Scotia, pulled out of floor trading on the LME in October last year. Also in October, NM Rothschild pulled out of the base metals business and Credit Suisse First Boston closed its entire - and substantial - metals trading business.

Sempra said Enron Metals' chief executive Michael Hutchinson will be retained in that position, as will Tim Jones, managing director of the business. Thomas McKeever, former chairman of Metallgesellschaft, and David Tregar, former chief financial officer, are set to return to the firm. Both left Enron in July 2001. They will report to David Messer, president of Sempra Energy Trading.

Messer said there are natural synergies in the deal because some of the largest energy users are metals producers. “We see tremendous opportunity to expand risk management services for our current customer base, as well as attracting new customers with our ability to structure cross-commodity deals,” he said.