BREAKFAST WITH THE FOOL
Monday, August 23, 1999
"Whenever you see a successful business, someone once made a courageous decision."
-- Peter Drucker
Carolina Power Surges Into Florida
Brian Graney (TMF Panic)
Extending its business reach further along the Southeastern U.S. coast, Raleigh, North Carolina-based electricity generator Carolina Power & Light (NYSE: CPL) agreed to acquire Florida Power Co. owner Florida Progress Corp. (NYSE: FPC) of St. Petersburg, Florida for $8 billion in cash, stock, and assumed debt this morning. The purchase price works out to $54 per share for Florida Progress -- a 21% premium to its closing price of $44 5/8 per share on Friday.
The combined company will be the ninth-largest electric generating company in the U.S., with a generating capacity of more than 18,500 megawatts. Its service area will include 2.7 million customers in Eastern North Carolina, Northeastern South Carolina, and the growing Central and Gulf Coast regions of Florida, where Florida Power estimates that customer growth is running at a 2% annual rate, or twice the national average. The firm's bigger footprint in the Southeast will improve Carolina Power's cash flow generating ability and also its bargaining position with fuel suppliers, which account for roughly 70% of the total cost of electricity generation. Annual cost savings from synergies are pegged at $100 million.
The company will be structured along the general lines that many analysts have come to expect the bulked-up regional generating companies will look like in the future -- heavy on debt and cash flow with a smaller emphasis on equity and earnings. With Florida Progress' $2.7 billion debt load in the mix, the combined company's estimated $17 billion in enterprise value will be split between $8 billion in equity and $9.1 billion in debt and preferred stock. Carolina Power expects the deal to add to its earnings in the first full year. Thereafter, annual EPS growth is forecasted in the 7% to 8% range. That may not be exactly eye-popping compared to some of today's high-growth companies, but it's probably pushing the earnings growth limit in the electricity generating business.
News to Go
Larry Ellison, the CEO of database software developer Oracle Corp. (Nasdaq: ORCL), told Bloomberg News over the weekend that the company's outlook for its first quarter earnings "looks good." Ellison also predicted that the company will see a 10 point improvement in margins by the end of the year thanks to employee attrition.
Internet financial services company Equitex Inc. (Nasdaq: EQTX) posted a pro forma Q2 loss of $0.10 per share, which was not quite as bad as last year's loss of $0.25 per share. The company also said that it has closed its acquisition of First Bankers Mortgage Services Corp., the largest residential mortgage lender in South Florida.
Diversified manufacturer Textron Inc. (NYSE: TXT), which makes everything from golf carts and auto parts to Cessna airplanes and Bell helicopters, agreed to acquire telescopic material handlers maker OmniQuip International (Nasdaq: OMQP) for $477 million in cash and assumed debt, or $21 per share. The purchase price represents a 60% premium to OmniQuip's closing price of $13 1/8 per share on Friday.
Media giant Walt Disney's (NYSE: DIS) Buena Vista Internet Group has agreed to acquire a 60% interest in soccer website soccernet.com from Britain's Daily Mail and General Trust for undisclosed terms. Disney intends to use the website as the cornerstone for the international expansion of its ESPN.com website.
The latest Daily Trouble is Bankrate.com parent Intelligent Life Corp... When Greenspan talks, who knows what he's saying? Louis Corrigan looks at the Fed's interpreters... Read this week's StockTalk interview with the CFO of free fax-to-e-mail services company eFax.com.
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