Construction of a wind turbine at the Wisconsin Public Service Crane Creek Wind Farm near Riceville, Iowa. (Courtesy of Integrys Energy Group)
Wisconsin Energy Corporation said on Monday that it would buy energy holding company Integrys Energy Group in a $9.1 billion deal, including debt, that is expected to expand the company’s geographic base.
The cash and stock deal calls for the Milwaukee-based Wisconsin Energy to pay 1.128 of its shares and $18.58 in cash for each share of Integrys—a 17.26 percent premium over the target’s closing price on Friday.
The deal is expected to close next summer and requires shareholder approval from both companies, as well as the approval of the Federal Energy Regulatory Commission, Federal Communications Commission and energy regulators in all four states where the merged company—to be known as WEC Energy Group—would operate.
Wisconsin Energy serves 1.1 million electric customers and a similar number of natural gas customers. It provides electricity to a few parts of Wisconsin—including Milwaukee and Appleton—as well as much of Michigan’s Upper Peninsula. Its natural gas coverage includes various portions of Wisconsin.
By purchasing Chicago-based Integrys, Wisconsin Energy would acquire six other natural gas and electric operators, allowing the company to expand its coverage in Wisconsin and Michigan and enter big markets in Illinois and Minnesota such as Chicago and Minneapolis.
Both companies would combine their equity stakes in American Transmission Company, yielding a 60 percent stake in the federally regulated transmission company.
In a joint statement, Wisconsin Energy and Integrys touted the expanded size and complementary geographical distribution as motivators for the deal, noting that it would generate value for the combined company and better enable it to meet the region’s future energy needs. After the acquisition’s completion, the new company will have 4.3 million electric and natural gas customers, making it the eighth-largest natural gas distributor in the nation.
“We believe this combination provides a unique opportunity to create the premier regulated utility system in the Midwest, with superior service and competitive pricing for years to come,” said Wisconsin Energy CEO and chairman Gale Klappa in a statement.
Wisconsin Energy tapped Skadden, Arps, Slate, Meagher & Flom for legal advice, with Chicago-based M&A partner Susan Hassan leading the legal team. Antitrust and competition partner John Lyons, banking partner Seth Jacobson, energy regulatory partner Mike Naeve, executive compensation and benefits partner Joseph Yaffe, environmental and climate change partner Don Frost Jr., intellectual property partner Bruce Goldner, labor and employment partner John Furfaro, real estate partner Nancy Olson and tax partner David Rievman all worked on the case.
A spokeswoman for the firm said that Hassan has handled various deals for Wisconsin Energy, including its $1 billion sale of Point Beach Nuclear Plant to Florida-based FPL Energy, announced in 2006.
For its part, Integrys sought counsel from Cravath, Swaine & Moore and Foley & Lardner. The Cravath team was led by M&A partners Mark Greene and Andrew Thompson and included antitrust partner Christine Varney, executive compensation and benefits partner Eric Hilfers, and tax partner Michael Schler. Associates Matthew Cantor, Andrew Carlon, Margaret D’Amico, Bomi Lee and David Willard were also involved in the deal.
Cravath said it represented the Wisconsin Public Resources Corporation in its $1.6 billion acquisition of People’s Energy Corporation, which led to the formation of Integrys in 2007.
The team from Foley & Lardner included employee benefits and executive compensation senior counsel Joshua Agen and partner Gregg Dooge, energy regulatory partner Bradley Jackson, environmental partner Linda Benfield and M&A partners Benjamin Garmer, Eric Nelson and Russell Ryba.
Baker Botts provided legal counsel to Wisconsin Energy’s financial adviser Barclays, with M&A partner William Lamb and associate Brendan Dignan working on the team. Davis Polk & Wardwell represented Lazard Frères & Co. as financial adviser to Integrys, with a team made up of corporate partner Phillip Mills, associate Michael Patrone and counsel Scott Luftglass.