This is a partial transcript from "Your World with Neil Cavuto," May 9, 2005, that was edited for clarity.
TERRY KEENAN, GUEST HOST: Two energy players are hooking up: Duke Energy agreeing to buy Cinergy (CIN) in a $9 billion deal. The new company will supply power to nearly four million homes in the U.S. and Canada. It will also have combined revenues of $27 billion and more than $70 billion in assets. Shares of Cinergy climbing 5 percent, while Duke, the acquirer, losing a bit of ground, as if often the case.
Well, joining me now is Jim Rogers, the chairman, president, and CEO of Cinergy, who also will be CEO of the new company.
And welcome. Nice to have you with us.
JAMES ROGERS, CHAIRMAN, PRESIDENT & CEO, CINERGY: Thank you. I'm delighted to be here.
KEENAN: Well, you just told me that you were a newspaper reporter in another — in another job. If you were going to write the headline on this deal, what would you say?
ROGERS: The headline would be, two companies have joined together to position themselves to create significant value for their shareholders in the future.
KEENAN: Your company is called Cinergy right now, so what's the synergy between these two companies?
ROGERS: Well, there are a number of synergies.
When you put these two companies together, we will generate roughly $400 million of savings each year. As you combine these two platforms, the diversity of fuel and geography will create a lot of value.
KEENAN: Cost savings often come with mergers. They also are accompanied by layoffs, in many cases. How many layoffs do you think will result from this deal?
ROGERS: When we combine these two companies, we'll have over 29,000 people. We expect there will be roughly a reduction in the work force of 5 percent, or 1,500 people.
KEENAN: And most of that, you think you can do through attrition?
ROGERS: I think much of it will come through attrition, as we look forward.
KEENAN: You also have millions of customers, four or five million when this deal is complete. How are they going to see a difference?
ROGERS: I think the advantage to these companies over time — I mean to our customers — is going to be lower prices, because, as we combine these companies, we're going reduce our costs, and we'll be better able to provide a reliable service in the future.
KEENAN: You know, it's interesting. The utility stocks have been runaway winners this year. And your deal kind of just, you know, sort of cements that trend right now. Yet, that's not supposed to be happening when the Federal Reserve is on a big interest-rate-raising campaign. Why do you think the utilities have been so appealing as investments?
ROGERS: In my judgment, the primary reason is about yield. If you look at the demographics of this country, what you basically see is baby boomers start — the early baby boomers are moving toward retirement. The desire for yield is great. And utilities deliver yield to the investor.
KEENAN: So, do you think perhaps that maybe interest rates are not going to go up too much and that the yield that your stock and others offer is, therefore, more attractive?
ROGERS: I think the yield that we offer is more attractive. And I don't think there will be the same correlation between long-term interest rates and utility equities as there's been in the past. And this is due to the desire for yield by investors.
KEENAN: So, that's changed?
ROGERS: I think that the correlation will change. It will always have some relationship, of course. But it will be less in future periods than historically.
KEENAN: All right. Well, thanks for your insights. We appreciate it.
ROGERS: Thank you.
KEENAN: Good to have you with us, James Rogers.
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