In a bid to create one of the largest U.S. utilities companies, Northeast Utilities (NYSE:NU) inked an all-stock deal to merge with rival Nstar (NYSE:NST).
If the deal receives the necessary regulatory and shareholder approvals, the combined company would operate six regulated electric and gas utilities in three states and provide electric and gas energy to over half of the customers in New England.
Under terms of the transaction, Nstar shareholders would receive 1.312 Northeast Utilities common shares, putting a $40.28 price tag on Nstar. Called by the companies a “merger of equals,” the deal doesn’t provide a significant premium on Nstar’s Friday closing price of $39.53
Northeast Utilities expects the transaction to add to its bottom line in its first year. The companies said they anticipate receiving regulatory approval within nine to 12 months.
“The combination of Northeast Utilities and Nstar will create a great New England-based company, assuring the regional benefits of a locally-controlled energy company for years to come,” Northeast Utilities CEO Charles Shivery said in a statement.
Shivery will become the non-executive chairman of the combined company for 18 months, while Thomas May, Nstar’s CEO, will serve as the company’s president, CEO and chairman for 18 months.
The deal calls for Northeast’s dividend to increase to an equivalent of Nstar’s on an “exchange ratio adjusted basis.”
The companies already have a relationship, recently working together to invest $1.1 billion in new transmission lines to Quebec in an effort to provide low-carbon hydro energy.
“This is simply the start. Together, with enhanced financial resources, complementary distribution and transmission assets, reputations for operating excellence and talented employees, we will be able to accomplish great things,” said May.