Fortis Inc. has a friendly US$11.3-billion deal to buy USA electric transmission company ITC, which will operate as a stand-alone company within a Canadian group that operates various electric, natural gas and other utilities on both sides of the border. The company plans to invest about $3 billion in new lines and improvements through 2018, a November investor presentation shows.
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ITC will add to Fortis’s USA holdings and make up 39 percent of the regulated earnings of the St. John’s, Newfoundland and Labrador-based company, according to a company presentation.
Fortis said that ITC’s economies of scale and geographical situation positions it to take advantage of the “significant transmission investment opportunity”.
The closing of the deal is expected to occur in late 2016.
The most notable recent deal is Canadian firm Emera’s proposed acquisition of TECO Energy for $10.4 billion. Emera itself has been on a acquisition spree over the last few years, buying up assets in the Caribbean, Canada, and the U.S.
Big deals: In May 2004, Fortis acquired FortisAlberta and FortisBC (Electric) for $1.5 billion.
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.
Fortis Inc. and ITC Holdings Corp.
“The acquisition of ITC – a premier pure-play transmission utility – is a continuation of this growth strategy”.
Fortis intends to retain all of ITC’s employees and maintain the corporate headquarters in Novi, Mich. Fortis will apply to list its common shares on the NYSE.
“They have a lower cost of capital, so coming in Fortis had a bit of an advantage over some of its USA peers”, Andrew Bischof, an analyst at Morningstar Inc.in Chicago, said in a phone interview.
Under the terms of the transaction, ITC shareholders will receive $22.57 in cash and 0.7520 Fortis shares per ITC share.
The boards of both companies have approved the deal, but regulatory and shareholder approvals are still required.
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ITC owns and runs high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma.
