Integrys Energy Group To be acquired by Wisconsin Energy for equivalent of $71.47/shr in all-stock deal valued around $9.1B
Wisconsin Energy Corp. (NYSE: WEC) and Integrys Energy Group Inc. (NYSE: TEG) today announced that they have entered into a definitive agreement under which Wisconsin Energy will acquire Integrys in a transaction valued at $9.1 billion. Upon completion of the transaction, the combined company will be named WEC Energy Group, Inc.
The combination of Wisconsin Energy and Integrys brings together two strong and well-regarded utility operators with complementary geographic footprints to create a larger, more diverse Midwest electric and natural gas delivery company with the operational expertise, scale and financial resources to meet the region's future energy needs.
The combined entity is projected to have a regulated rate base of $16.8 billion in 2015, serve more than 4.3 million total gas and electric customers across Wisconsin, Illinois, Michigan and Minnesota, and operate nearly 71,000 miles of electric distribution lines and more than 44,000 miles of gas transmission and distribution lines. The combination brings together Wisconsin Energy's top-performing electric and gas utility We Energies and Integrys' strong electric and gas utilities Wisconsin Public Service, Peoples Gas, North Shore Gas, Minnesota Energy Resources and Michigan Gas Utilities.
In addition to expanding and diversifying Wisconsin Energy's regulated holdings into other large Midwestern states, the combined company will hold a 60 percent stake in American Transmission Co.
Gale Klappa, chairman and CEO of Wisconsin Energy said, "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. 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."
He continued, "We 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."
Under the terms of the transaction, which has been unanimously approved by the boards of directors of both companies, Integrys shareholders will receive common stock at a fixed exchange ratio of 1.128 Wisconsin Energy shares plus $18.58 in cash per Integrys share.
Total consideration is valued at $71.47 per Integrys share, with a consideration mix of 74 percent stock and 26 percent cash. This represents a 17.3 percent premium to Integrys' closing price on June 20, 2014 and a 22.8 percent premium to the volume-weighted average share price over the past 30 trading days ending June 20, 2014. Upon closing of the transaction, Integrys shareholders will own approximately 28 percent of the combined company.
The proposed dividend policy of the combined company will be designed to initially keep Integrys' shareholders neutral after taking into consideration both the stock and cash they received. In the period before closing, Wisconsin Energy plans to continue its current dividend policy, which calls for a 7-8 percent annual increase in the dividend. "At closing, we would expect a further dividend increase for the Wisconsin Energy shareholders to reflect the dividend policy of the combined company," Klappa said. "In future years, the projected payout target for the combined company will be 65-70 percent of earnings," he added. The dividend policy of the combined company is expected to be accretive to all shareholders in future years. Also, Integrys announced that it is in the late stages of a competitive process to divest Integrys Energy Services, its non-regulated marketing subsidiary. In January 2014, it also announced an agreement to sell Upper Peninsula Power Company to Balfour Beatty Infrastructure Partners.
"As part of our ongoing assessment of Integrys' portfolio of businesses, we previously determined it was appropriate to divest Integrys Energy Services' retail electric and natural gas business and began that process earlier this year," said Schrock. "The process is moving forward as we expected and we anticipate completing it soon." Approvals and timing The transaction is subject to approvals from the shareholders of both companies, the Federal Energy Regulatory Commission, Federal Communications Commission, Public Service Commission of Wisconsin, Illinois Commerce Commission, Michigan Public Service Commission and the Minnesota Public Utilities Commission. The transaction also is subject to the notification and clearance and reporting requirements under the Hart-Scott-Rodino Act and other customary closing conditions