NEW YORK (TheStreet) --Shares of Hawaiian Electric Industries (HE) are climbing higher by 16.32% to $32.79 mid-morning trading on Thursday, after the company announced on Wednesday that it will merge with NextEra Energy (NEE) in a transaction valued at approximately $4.3 billion.
The deal brings together two "industry leaders" in clean and renewable energy, Hawaiian Electric said in a statement.
As part of the agreement Hawaiian Electric shareholders will receive 0.2413 NextEra Energy shares per Hawaiian Electric share, and a one-time special cash dividend payment of 50 cents per share, the company said.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
The transaction is expected to be completed within approximately 12 months, and as part of the deal Hawaiian Electric will spinoff ASB Hawaii, which is the parent company of American Savings Bank, to shareholders establishing an independent publicly traded company.
NextEra is taking over the biggest electric company in Hawaii in order to provide ground for its push into green energy, Bloomberg reports.
'It makes a lot of sense for NextEra with all the renewables that Hawaiian Electric was going to do. NextEra is the premier renewable energy builder and developer and really good at transmission," an analyst at Gabelli & Co. told Bloomberg.
Separately, TheStreet Ratings team rates HAWAIIAN ELECTRIC INDS as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate HAWAIIAN ELECTRIC INDS (HE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, notable return on equity, good cash flow from operations and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 4.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- HAWAIIAN ELECTRIC INDS' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HAWAIIAN ELECTRIC INDS increased its bottom line by earning $1.62 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.62).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, HAWAIIAN ELECTRIC INDS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Net operating cash flow has slightly increased to $127.22 million or 9.73% when compared to the same quarter last year. Despite an increase in cash flow, HAWAIIAN ELECTRIC INDS's average is still marginally south of the industry average growth rate of 13.11%.
- You can view the full analysis from the report here: HE Ratings Report