Understanding Emera’s $10 Billion Acquisition of TECO Energy
HALIFAX–Halifax-based Emera announced on Friday night that it will acquire TECO Energy in a transaction valued at US$10.4 billion. When the deal closes, TECO Energy will become a wholly owned subsidiary of Emera, which will then have about US$20 billion in assets and more than 2.4 million electric and gas customers. That will make Emera one of the 20 largest North American regulated utilities.
“Our patient approach and disciplined investment criteria have resulted in a pure-play regulated utility transaction that we expect to be significantly accretive for Emera’s shareholders, and one that advances our strategic objectives,” said Chris Huskilson, President and CEO of Emera Inc. “We have found our ideal match in TECO Energy.”
Here’s what you need to know about the deal.
How big will Emera become with this deal?
Pretty big. When deal closes, expected by mid-2016, Emera’s total assets will double to US$20 billion, with 56 percent of those assets in Florida, 23 percent in Canada, 10 percent in New England, 6 percent in New Mexico and 5 percent in the Caribbean.
Without TECO, Emera had already built an impressive business with $10 billion in assets and 2014 revenues of $2.97 billion. Emera owns Nova Scotia Power, which has 500,000 customers, and Emera Maine, formed by the integration of Bangor Hydro and Maine Public Service. It has 156,000 residential, commercial and industrial customers. Emera Caribbean is the parent company of Barbados Light & Power and has equity stakes in Dominica Electricity Services and St. Lucia Electricty Services and Grand Bahama Power company. These utilities represent about 245,000 customers.
Emera New Brunswick transmits natural gas through the Brunswick Pipeline, connecting the Canaport LNG terminal in Saint John to the Maritimes & Northeast Pipeline near St. Stephen. Emera also has operations in Newfoundland and Labrador and investments in Maritimes & Northeast Pipeline, Algonquin Power & Utilities Corp, Atlantic Hydrogen and OpenHydro.
Who is TECO Energy?
TECO Energy, Inc. (NYSE: TE) is a holding company that owns Tampa Electric, which has 700,000 customers in West Central Florida; Peoples Gas System, with 350,000 customers across Florida; and New Mexico Gas Co. with 510,000 customers across New Mexico. Other TECO Energy subsidiaries include TECO Coal, which owns and operates coal-production facilities in Kentucky, Tennessee and Virginia.
What are the financial details?
It’s an all-cash deal. TECO Energy shareholders will receive US$27.55 per common share, a 48 percent premium based on TECO Energy’s unaffected closing stock price on July 15, 2015 (the last trading day prior to news reports regarding TECO Energy’s strategic review) and 25 percent above TECO Energy’s unaffected 52-week high. The total purchase price of US$10.4 billion also includes Emera assuming US$3.9 billion of TECO debt.
What is the regulatory process to finalize the deal?
It’s complex. The deal is subject to TECO Energy common shareholder approval and regulatory and government approvals, including approval by the New Mexico Public Regulation Commission, the Federal Energy Regulatory Commission and compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
What about TECO Coal?
TECO Coal is expected to be sold prior to the deal’s closing.
How is the deal being financed?
Emera has US$6.5 billion in bridge financing in place with JP Morgan Chase and Scotiabank. Permanent financing of the transaction is expected from one or more placements of common equity, preferred equity and long-term debt.
Who were the advisors?
J.P. Morgan acted as lead financial advisor and Scotiabank acted as financial advisor to Emera. Legal advisors to Emera were Davis Polk & Wardwell LLP and Osler, Hoskin & Harcourt LLP. Morgan Stanley acted as the lead strategic and financial advisor and Moelis & Company acted as financial advisor to TECO Energy. Skadden Arps, Slate, Meagher & Flom LLP and Holland & Knight LLP acted as legal counsel.