Wisconsin Energy (NYSE:WEC) announced today that it would acquire Integrys Energy Group (UNKNOWN:TEG.DL) for $9.1 billion to join Wisconsin's electricity and natural-gas delivery services into one regulated utility. The price includes $5.8 billion in cash and stock and the assumption of $3.3 billion in debt.
"We believe this combination provides a unique opportunity to create the premier regulated utility system in the Midwest, with superior service and competitive pricing for years to come," said Wisconsin Energy Chairman and CEO Gale Klappa in a press release. "The operational and financial benefits to all of our stakeholders -- from the customers and communities we serve, to the people we employ, to the shareholders who count on us to create value -- are clear, achievable and compelling."
Klappa stated in the press release that "[w]e have been consistent in our commitment to undertake acquisitions or combinations only if we believe they will be accretive to earnings per share in the first calendar year after closing, be largely credit neutral and produce a growth rate at least equal to Wisconsin Energy's stand-alone growth rate. This combination meets or exceeds those criteria on all counts."
The newly combined utility, WEC Energy Group, will boast a $16.8 billion regulatory rate base as of 2015 that includes 4.3 million customers in Wisconsin, Illinois, Michigan, and Minnesota, 71,000 miles of power lines, and over 44,000 miles of natural-gas lines.
"With compatible operational philosophies and Wisconsin Energy's demonstrated commitment to reliability, customer satisfaction, safety and environmental stewardship, Wisconsin Energy is a great partner for Integrys," said Integrys Chairman and CEO Charlie Schrock in today's press release. "Our shareholders will receive an attractive premium for their investment and will also benefit from the opportunity to participate in the upside of the combination, including future value creation and a growing dividend program."
Integrys shareholders will receive total compensation of $71.47 per share -- 74% as stock and 26% in cash. Combined, that's a 22.8% premium to Integrys' average price over the last 30 market days ending June 20, according to the companies. Integrys stockholders will receive 1.128 Wisconsin Energy shares and $18.58 in cash for each share they own.
Barring any regulatory holdups and with the approval of shareholders, the deal should be sealed during summer 2015. Wisconsin Energy Chairman and CEO Gale Klappa will serve in the same posts for the combined company. Integrys Chairman and CEO Charlie Schrock will stay in his current roles until the acquisition is complete. He will retire upon the closing.
-- Material from The Associated Press was used in this report.
Justin Loiseau has no position in any stocks mentioned. The Motley Fool recommends Wisconsin Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.