The transaction, which is being done in cash, stock and assumed debt, is valued at $71.41 per Integrys share; the company's shares closed at $60.95 Friday. This represents a 17.3% premium to Integrys' closing price on June 20 and a 22.8% premium to the volume-weighted average share price over the past 30 days.
Should the deal go forward, it would create a combined utility that the companies project will have a regulated rate base of $16.8 billion in 2015, serve more than 4.3 million total gas and electric customers across Wisconsin, Illinois, Michigan and Minnesota, and operate nearly 71,000 miles of electric distribution lines and more than 44,000 miles of gas transmission and distribution lines, according to the statement.
Along with the merger announcement Integrys, of Chicago, said that, as part of an ongoing portfolio review it was in the late stage of a competitive process to sell its non-regulated marketing subsidiary Integrys Energy Services.
The tie-up comes amid a boom of M&A activity in the power and utilities sector, as electric utilities look to tip their portfolios more heavily toward the regulated arena. Utilities are moving in this direction, as forward power prices remain weak due to the low price of natural gas and excess power supply.
Similar deals in the sector are Exelon (EXC) acquiring fully regulated Pepco Holdings (POM) in a $6.8 billion deal. At $27.25 per share, the deal was a 20% premium to the closing price the day before the deal was announced.
Last week, The Deal reported that Louisiana power company Cleco (CNL) had hired Goldman Sachs & Co. to advise it on a potential sale after Canadian infrastructure group Borealis Infrastructure made an unsolicited bid for the company.
On Monday, Cleco confirmed that it had hired the bank to assist it after third parties were in touch regarding a potential strategic transaction.
The Wisconsin-Integrys transaction is subject to approvals from the shareholders of both companies, the Federal Energy Regulatory Commission, Federal Communications Commission, as well as the applicable state regulatory bodies. The transaction is also subject to Hart-Scott-Rodino Act and other customary closing conditions.
The companies anticipate closing in the summer of 2015.
Gale Klappa, chairman and CEO of Wisconsin Energy, will become chairman and CEO of the combined entity, with Charlie Schrock, chairman and CEO of Integrys, retiring upon the closing of the transaction.
Milwaukee-based Wisconsin Energy turned to Barclays for financial advice, with John Lange and Jim Penrose heading up the team, sources said. Skadden, Arps, Slate, Meagher & Flom LLP's Susan Hassan, Clifford "Mike" Naeve, David Rievman, Joseph Yaffe, Don Frost Jr., Nancy Olson, Bruce Goldner, Seth Jacobson, John Lyons and John Furfaro as legal counsel.
Lazard's George Bilicic and Jonathan Mir are leading Integrys' financial advisory team, and Cravath, Swaine & Moore LLP's Mark I. Greene, Andrew R. Thompson, Michael L. Schler, Eric W. Hilfers and Christine A. Varney, as well as Foley & Lardner LLP are providing legal counsel.