Enron Ascending

Chapter 2HNG/InterNorth

Omaha-based InterNorth was eager to merge in the spring of 1985. Sam Segnar, the company’s 57-year-old chairman, saw consolidation and streamlining as the future. His company was looking for new gas markets with higher growth rates than those in the Midwest. He and a group of his top executives were edging toward retirement. But most of all, InterNorth was in play on someone else’s terms.

Irwin “Irv The Liquidator” Jacobs was accumulating InterNorth stock with the intent to gain control. In all likelihood, Jacobs would sell the company in five parts: natural gas transmission, natural gas distribution, exploration and production, gas liquids, and petrochemicals. A merger, though, might make InterNorth too big to swallow, and already mergers were hot among the 20 or so major interstate gas pipelines, the most recent being Coastal Corporation’s $2.5 billion takeover of American Natural Resources Company (ANR). “In natural gas,” a Business Week headline announced, “it’s buy or be bought,” and Segnar’s company was a good candidate.

InterNorth’s 1984 annual report had been titled A Banner Year. A record $297 million was earned on $7.5 billion in revenue. All divisions were profitable, thanks in part to a prior housecleaning that resulted in the sale of underperforming assets, discontinued operations, and write-offs.¹ Cash flow in 1984 of $652 million left the company’s debt-to-capital ratio at a healthy 38 percent, even after making the largest acquisition ...