updated 5/9/2005 8:41:16 AM ET 2005-05-09T12:41:16

Duke Energy Corp. said Monday it has agreed to acquire Cinergy Corp. for stock valued at about $9 billion in a deal that will create an energy company with about 5.4 million retail customers and more than $70 billion in assets.

The deal was unanimously approved by both companies' boards.

The combined company will have about $27 billion in annual revenue and $1.9 billion in annual net income. It will own or operate about 54,000 megawatts of electric generation domestically and internationally.

Duke Energy, based in Charlotte, N.C., is a diversified energy company with natural gas and electric businesses as well as a real estate portfolio. Cinergy, based in Cincinnati, operates Cincinnati Gas & Electric Co., Union Light, Heat & Power and PSI Energy.

The two companies currently employ about 29,350 and expect a reduction of about 1,500, primarily through attrition, early retirements and other severance programs.

Under the agreement, each common share of Cinergy will be converted into 1.56 shares of Duke Energy. At Friday's closing prices, that would represent a 13.4 percent premium over Cinergy's closing price of $40.38.

Following the merger, Cinergy shareholders will own about 24 percent, or 310 million shares, of the combined company, and Duke Energy shareholders will own about 76 percent of the total 1.3 billion shares.

The company said Duke Energy Chairman and CEO Paul M. Anderson will become chairman of the combined company, and Cinergy Chairman, President and CEO James E. Rogers will become president and chief executive officer.

The new board will be comprised initially of 10 members named by Duke Energy and five members named by Cinergy.

Duke expects the deal to add to earnings in the first full year of operation.

In conjunction with the deal announcement, Duke Energy's board said it intends to increase Duke Energy's dividend by 12.7 percent, or 14 cents a year, for an annual dividend of $1.24. The dividend increase, which will be voted on during the board's June meeting, would be effective with the September 2005 disbursement.

Following the completion of the deal, the company will be based in Charlotte, N.C. Local headquarters of the operating utilities will remain unchanged by the merger.

Cinergy posted 2004 net income of $400.9 million on sales of $4.69 billion. Duke Energy reported earnings of $1.49 billion on revenue of $22.50 billion in 2004.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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