$9.1 Billion Energy Merger May Be Just the Start

Energy

Published: June 23, 2014 9:00 am

Last Updated: April 27, 2020 3:06 pm

Wisconsin Energy Corp. (NYSE: WEC) announced Monday morning that it will acquire electricity and natural gas provider Integrys Energy Group Inc. (NYSE: TEG) for $9.1 billion in cash and stock. The combined company will serve some 4.3 million customers in four Midwestern states.

The Dow Jones Utilities average is up more than 17% year-to-date and more than 20% over the past 12 months. That is not quite as good as the S&P 500’s growth over the past year, but it is better than the Dow Jones Industrial Average.

Utility mergers were down in the first quarter of this year, and the total deal value dropped from $10.3 billion to $4.4 billion, compared with the fourth quarter of 2013. Given recent strength in the utilities sector, this announcement may be just the beginning of a new spurt of utility company mergers and acquisitions.

Wisconsin Energy will pay $18.58 in cash and 1.128 shares of Wisconsin Energy stock — valued at $71.47 — for each share of Integrys stock. The acquisition price represents a premium of about 17.3% above Integrys’s Friday closing price of $60.95. The purchase price includes $3.3 billion of assumed Integrys debt.

The combined company will have a market cap of $15 billion, 1.5 million electricity customers and 2.8 million natural gas customers. In terms of market cap, the merged company, which will change its name to WEC Energy Group, will be the seventh largest publicly traded electric and gas utility in the United States. Current Integrys shareholders will own 28% of WEC, and Wisconsin Energy shareholders will own 72%.

Wisconsin Energy will terminate its share repurchase program and maintain the two companies’ dividend policies until the acquisition closes. Integrys currently pays an annual dividend of $2.72 (dividend yield of 4.5%) and Wisconsin Energy pays a dividend of $1.56 (dividend yield of 3.3%). WEC shareholders will receive a dividend increase at the time the deal closes, now expected to be the summer of 2015.

Shares of Integrys traded up 15.4% to $70.35 in Monday’s premarket. The stock’s 52-week range is $52.08 to $63.58.

Shares of Wisconsin Energy were down about 0.6%, at $46.62 in a 52-week range of $39.11 to $49.21.

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