Shares of Dynegy Inc. rallied 3.7% in premarket trade Monday, after the energy company said it agreed to merger with fellow power generation company Vista Energy Corp. /zigman2/quotes/202168943/composite VST +1.27% in a deal that values Dynegy at over $1.7 billion. Under terms of the deal, Dynegy shareholders will receive 0.652 shares of Vista for each Dynegy shares they own. Based on Friday's closing prices, the deal values Dynegy shares at $13.24 each, an 18% premium. With 131.2 million shares outstanding, that would put Dynegy's market capitalization at about $1.74 billion. Vista's market cap through Friday was $8.68 billion. The companies said the merger would make over $5 billion in excess capital available for capital allocation. The companies expect $500 million to $600 million in net present value benefit from tax synergies. The Wall Street Journal had reported last Thursday that the companies were in merger talks. Dynegy's stock had run up 33% year to date through Friday, while Vista's stock had rallied 31%, the SPDR Energy Select Sector ETF /zigman2/quotes/206420077/composite XLE -0.53% had shed 11% and the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.94% had climbed 15%.