Some shareholders do find bottom-line value
in a "marriage of convenience."
With six merger and acquisition (M&A) deals announced between May 1995 and January 1996, and three more so far this year, the long-predicted consolidation of the electric utility industry is taking hold. At least 23 utilities, with business-combination transactions pending, are part of the frenetic domestic M&A activity that has swept the industry. With over 150 major players in the industry, expect swift consolidation, especially on the electric side (em deals of all shapes and sizes, not just the traditional mergers of the past.
The Table below presents key information on selected mergers announced in 1995 and the first seven months of 1996.
The merger participants are generally low-cost providers with similar cost structures (see Graph 1).
s All eight transactions involve at least one combination or gas company.
s Five pair a company with nuclear operations with a nonnuclear company (a significant shift from the past, when the electric industry was basically divided into nuclear and nonnuclear groups).
s All the mergers are structured as stock-based, tax-free transactions, and six expect to be considered as pooling interests. (Stock exchange ratios for three transactions precluded any premium offers at the announcement date; market premiums for the other five averaged 27 percent, with premium offers ranging from 11 to 48 percent.)
s Four of the newly merged companies expect to become PUHCA registered companies. (None are currently registered under PUHCA.)
s Six of the transactions merge an electric company with a
combination or gas company, enabling the combination company to expand its gas services to a new customer base.