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Duke rebuffed the approach but NextEra is still interested in pursuing a deal, people familiar with the matter said

NextEra Energy Inc. NEE -0.36% recently made a takeover approach to Duke Energy Corp., according to people familiar with the matter, testing the waters for what would be a $60 billion-plus combination of two Southern utilities.

Duke rebuffed the approach but NextEra is still interested in pursuing a deal, some of the people said. There is no guarantee NextEra will do so and if it does, that a deal would result.

Should there be one, it would be big. Duke, based in Charlotte, N.C., has a market value of roughly $61 billion following a 14% decline in its share price this year, and an acquisition of the company could be the largest utility deal ever and the biggest merger so far this year.

Pulling one off won’t be easy. First, NextEra would have to overcome any resistance from Duke and its executives, and hostile deals in the utility industry are rare. Any agreed deal would have to pass muster with an array of government officials in a highly regulated industry.

With a market value of about $139 billion after its stock rose 22% so far this year, Juno Beach, Fla.-based NextEra is the largest public utility company in the U.S.

It owns Florida Power & Light Co., which has more than 5 million customers in Florida and is the biggest rate-regulated electric utility in the U.S. by retail electricity produced, according to the company’s website. It also owns Gulf Power Co., which serves more than 470,000 customers in eight counties in northwest Florida.

Utility investors see Florida as a particularly desirable market given the constant need for air conditioning and growing population.

NextEra also owns a clean-energy business that, along with affiliates, is the world’s largest generator of renewable wind and solar energy. It also operates emissions-free electricity from plants in Florida, New Hampshire, Iowa and Wisconsin.

Duke provides electricity to roughly 7.7 million retail customers in six states, including the Carolinas, some Midwestern states and Florida, according to its website, and distributes natural gas to more than 1.6 million customers in Ohio, Kentucky, Tennessee and the Carolinas. It has a commercial business with power-generation assets in North America including a renewables portfolio.

NextEra has been an active acquirer of smaller assets in recent years and has also eyed larger deals, benefiting from its bulk and a stock price that has outperformed those of its peers. It announced a deal Tuesday to buy an independent transmission company for $660 million, including debt.

NextEra, run by James Robo, became a renewable energy goliath using tax subsidies to help finance wind and solar projects around the country and avoiding debt. It sells the output to utilities, many of which must procure power from green sources to meet state mandates. It went from being the 30th largest U.S. power company in 2001 to the largest today. But it has faced challenges in trying to expand, including regulatory pushback and the phasing out of certain tax credits. Texas regulators rejected its bid in 2017 to buy a large transmission company and Hawaii regulators rejected its bid for the state’s largest utility in 2016.

Duke is run by Lynn Good and founded in 1904. It grew through a series of deals, including a roughly $5 billion deal, excluding debt, to buy Piedmont Natural Gas Co. that closed in 2016.

Since the coronavirus pandemic kept many people out of offices and working from home since mid-March, utility companies have been dealing with a surge in retail energy use—as big chunks of the population work from home—and a decrease in commercial demand. Duke, for example, said in its second quarter that commercial and industrial customer electricity volumes fell 13% and 15%, respectively, though most of its larger business clients have resumed operations. While retail use typically offers higher profit margins, it isn’t clear how long large portions of the population will continue its outsize use as workers are expected to gradually return to their offices.

A handful of other utility companies have recently flirted with deal making, sometimes at the behest of activist investors. Evergy Inc., a roughly $11 billion electric utility based in Kansas City, Mo., was urged by Elliott Management Corp. to consider selling itself. Evergy undertook a strategic review but didn’t ultimately pursue a sale. Its chief executive officer announced plans to retire in August.

CenterPoint Energy Inc., where Elliott has also been involved, in May formed a strategic review committee that plans to make recommendations to the board by October. The company has said it will update investors by early next year.

The biggest deal announced so far this year is Nvidia Corp.’s $40 billion acquisition of SoftBank Group Corp. -owned chip designer Arm Ltd. Merger and acquisition volumes are down 22% globally and 43% in the U.S. compared with last year, in large part because executives shifted focus from deal-making to respond to the impact of the coronavirus pandemic. Recently, however, the M&A market has begun to show signs of life as companies begin to regain their footing and look to establish strategic plans for the post-pandemic era.

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Treasury Secretary Steven Mnuchin urges Congress to approve more aid for airline workers

The U.S. Treasury said it has closed loans to seven passenger airlines and joined with the industry to call on Congress to extend more aid to prevent massive job cuts later this week.

Airlines continue to grapple with a sharp drop-off in travel because of the coronavirus pandemic and accompanying restrictions. The loans were one of two major sources of aid to airlines under the Cares Act passed in March. Airlines also received $25 billion to continue paying workers through the summer.

Airlines have said they’ll furlough more than 30,000 workers Thursday when the job protections that accompany that aid expire, with American Airlines Group Inc. and United Airlines Holdings Inc. accounting for the bulk of the cuts.

The Treasury said Tuesday it closed loans to American Airlines, United Airlines, Alaska Airlines, Frontier Airlines, JetBlue Airways Corp. JBLU -4.44% , Hawaiian Airlines HA -3.89% and SkyWest Airlines. The announcement comes days after American said it had secured a $5.5 billion loan facility that could be increased to $7.5 billion, the most the Treasury will allow any one airline to borrow. The Treasury didn’t say how much other airlines agreed to borrow.

These airlines will be able to receive more money than they originally anticipated after others, including Delta Air Lines Inc. and Southwest Airlines Co. , decided to forgo their share.

Airlines and unions are in the final hours of a major lobbying push to secure another six months’ worth of funds to avert the furloughs.

Treasury Secretary Steven Mnuchin said in a statement Tuesday: “We call on Congress to extend the Payroll Support Program so we can continue to support aviation industry workers as our economy reopens and we continue on the path to recovery.”

Democrats in the U.S. House of Representatives this week included more than $25 billion for airlines in their latest aid proposal, which could come up for a vote in the House as soon as Wednesday. Lawmakers and industry officials have grown more pessimistic about the prospects of a broader agreement before Oct. 1, but House Speaker Nancy Pelosi (D., Calif.) told reporters after a meeting with Mr. Mnuchin Tuesday that she was hopeful they could reach a deal this week.

Dealmaking rebound drives busiest summer for M&A on record

Thirty-six deals worth $5bn-plus unveiled in quarter as bankers race to make up for slowdown from pandemic

A resurgence in mergers and acquisitions activity led to the busiest summer for blockbuster deals in three decades, as executives reshaped companies to cope with the fallout from the pandemic and private equity groups pounced on targets. 

The combined value of $5bn-plus deals worldwide soared to $456bn in the three months to September, figures from Refinitiv show. That makes it the busiest third quarter on record, as bankers raced to make up for a dearth of activity at the height of the coronavirus crisis. 

“The pace of the rebound in August and September somewhat surprised us,” said Dirk Albersmeier, global co-head of M&A at JPMorgan. “It’s been an amazing third quarter in terms of the rebound.”

Thirty-six deals worth $5bn or more were announced in the third quarter, the highest since records began 30 years ago, figures from Refinitiv show. The most prolific month for global dealmaking was September, when levels exceeded the same month a year earlier by 73 per cent, to reach $391bn. 

“The M&A market was largely dormant almost all of the second quarter so there was a backlog when things reopened,” said Eric Schiele, a partner at the law firm Kirkland & Ellis. “I don’t think there is so much a new driver of a boom as much as the M&A market took a quarter off.”

“For high-quality companies . . . there’s an inordinate amount of interest,” added Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup. Meanwhile, companies hit hard by the pandemic are using deals to become “bigger, stronger, more diversified and better insulated”, she added.

The busiest summer on record for blockbuster deals helped drive an investment banking fee bonanza. In the third quarter, Wall Street banks booked a record $28bn in investment banking fees, bringing their year to date total to $89bn.

Boosted by a wave of stock market listings, corporate demand for financing during the crisis, and a boom in special-purpose acquisition companies, so far in 2020 the top five Wall Street lenders have each increased the investment banking fees they have booked by more than a fifth year on year.

“If you would’ve told me in mid-March that the business could perform this well during a pandemic, I would have never expected it,” said Gregg Lemkau, co-head of investment banking at Goldman Sachs. The sudden boom in Spacs has been a “positive upside surprise for Wall Street”, he added.

“The second quarter was the capital markets quarter and the third quarter has been the quarter for M&A,” said Patrick Ramsey, head of global M&A at Bank of America.

However, the resurgent dealmaking in the third quarter was not enough to compensate for low levels of activity in the first half of the year. In the nine months to September, activity fell to $2.2tn, its lowest year-to-date level since 2013, as companies focused on keeping their operations running rather than looking to strike deals.

Technology deals had their best quarter in terms of value since records began three decades ago with $226bn worth of deals struck in the three months through September.

“Multinationals have figured out that, through the Covid crisis, there’s no time to wait when it comes to technology [and] now is the time to step up and transform your business,” said JPMorgan’s Mr Albersmeier.

Meanwhile, there were tie-ups in the pharmaceutical industry in the third quarter as major players sought to push further into treatments for rare conditions. Johnson & Johnson signed a $6.5bn all-cash deal for Momenta Pharmaceuticals and Sanofi agreed to buy Principia Biopharma for $3.4bn. 

US dealmaking led the rebound, with M&A totalling $415bn in the third quarter, more than three times the volume in the second quarter of the year. “It was really the Americas that saw both the steepest decline in the second quarter and the sharpest recovery,” said BoA’s Mr Ramsey.

Cross-border dealmaking took a hit, however, as trade tensions ratcheted up and the pandemic brought out nationalist economic sentiment, and left dealmakers largely unable to travel. 

Such deals fell to their lowest level in seven years despite a handful of large agreements, such as the Speedway deal and Adevinta’s $9.2bn purchase of eBay’s classifieds business, being pulled off. 

Mr Schiele, who is based in the US, said restrictions around travel because of coronavirus have made it more difficult for cross-border deals to come together. “You can’t get on a plane and go anywhere, you can’t go meet a management team in Europe.”

Private equity groups, many of which had raised record-sized funds before the crisis, accounted for 15 per cent of all M&A activity in the first nine months of the year, the highest proportion since the boom in leveraged buyouts in the run-up to the financial crisis in 2007.

Among the most acquisitive private equity groups in the past three months were KKR and EQT. The largest deals included Blackstone acquiring a majority stake in Ancestry.com from US private group Silver Lake in a $4.7bn deal, and Clayton, Dubilier & Rice agreeing to pay $4.7bn for software group Epicor.

The industry struck more than 5,500 deals in the first nine months of the year, the most since records began in 1980, though its deals were worth 6 per cent less than last year, suggesting the groups have spent much of 2020 focusing on smaller deals and add-on acquisitions for portfolio companies even as large corporates have struck megadeals of $5bn and above.

“There’s a buy-and-build element and there’s also an element of people doing more growth equity deals, particularly in the tech space but also more broadly,” said Victoria Sigeti, a partner at law firm Freshfields. “People have wanted to carry that on through the pandemic as large deals have become more challenging.”