Canada's Fortis bulks up regulated power business with ITC buy
(Reuters) - Canadian utility Fortis Inc (FTS.TO: Quote) said it would buy U.S. power transmission company ITC Holdings Corp ITC.N for $6.9 billion – its biggest deal ever – to boost its exposure to regulated power markets, which have stable power prices.
Falling electricity demand due to increased energy efficiency has spurred a spate of mergers in the United States, with utilities looking to cut their exposure to volatile power prices in unregulated markets.
ITC shareholders will get $45 per share – $22.57 in cash and 0.7520 Fortis shares for each share they hold – a 14 percent premium to the stock's closing price on Monday.
ITC's transmission lines, which carry electricity from power plants to cities, are regulated by the Federal Energy Regulatory Commission (FERC). These lines tend to be more profitable for utilities than state-regulated distribution lines within cities.
The company, which said in November that it was exploring strategic options, owns and operates 15,600 miles (25,000 km) of transmission lines and facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma.
Fortis, whose regulated utilities serve more than three million customers in Canada, the United States and the Caribbean, said ITC is expected to account for almost 40 percent of its consolidated regulated operating earnings for the year ended Sept. 30.
Fortis said that including ITC's debt of about $4.4 billion, the deal was worth $11.3 billion, or $44.90 per ITC share, based on the Canadian dollar-U.S. dollar exchange rate and Fortis's closing price on Monday.
ITC will become a subsidiary of Fortis and its shareholders will own about 27 percent of the combined company.
The deal, expected to close in late 2016, requires approval from FERC, the U.S. Committee on Foreign Investment and the U.S. Federal Trade Commission. Continued...