New Century Energies and Northern States Power to merge in $11 billion deal

Weekly Corporate Growth Report, Mar 29, 1999

The Deal: New Century Energies and Northern States

Power Company have agreed to merge in an $11 billion deal that will create an electric and natural gas distribution company stretching from Mexico to Canada. Holders of New Century Energies stock will receive 1.55 shares of the merged company stock for each share held and each share of Northern States Power stock will continue as one share of the combined company. Based on the closing price at the announcement of $38.69 and $27.25, respectively, the stock transaction would have a value of over $11 billion. The merger is expected to be a tax-free, stock-for-stock exchange for shareholders of both companies and to be accounted for as a pooling of interests. Based on 1998 results, the combined company would have revenues of $6.4 billion, earnings of $618.8 million and assets totaling $15.1 billion. New Century shareholders will 54% of the common equity of the combined company and Northern States Power shareholders will own 46%. The merger will help the new entity attain the scale needed to compete in a partially deregulated utility industry. It will also have international operations in the United Kingdom, Central Europe, Australia and South America. The deal will take up to a year and a half to complete and is expected to be accretive in the first full year and thereafter to both sets of shareholders assuming realization of anticipated net cost savings, which the companies put at about $1.1 billion over the first ten years.

Discussion: The merged company will stretch from Mexico to the Canadian border, and will also have a strong global presence. New Century Energies serves 1.5 million electricity customers and more than a million gas customers in Colorado, Texas, New Mexico, Wyoming, Kansas and Oklahoma. Northern States provides electricity to 1.5 million customers and natural gas to over 475,000 customers.