Fortis Inc on Tuesday agreed to buy ITC Holdings Corp for US$6.9 billion in cash and stock, in what will be the largest Canadian takeover of a US utility.
Fortis, Canada’s largest utility owner, will pay the equivalent of US$44.90 for each ITC share, according to a statement. That is a 14 percent premium to Monday’s close. The offer, which totals US$11.3 billion including assumed debt, will comprise US$22.57 in cash and 0.752 Fortis shares apiece.
In an uncommon step, Fortis said it intends to finance the cash portion of the deal by marketing as much as a 19.9 percent stake in ITC to another investor.
“Fortis shareholders are concerned about equity potentially being diluted by the deal,” Stacy Nemeroff, an analyst at Bloomberg Intelligence, said by telephone on Tuesday. “If they can’t find a buyer they might have to issue more equity.”
Fortis shares fell 10 percent, the biggest one-day decline on record, to close at C$37.14 in Toronto. ITC shares fell 1.9 percent to US$38.65.
Fortis, based in St John’s, Newfoundland, and Labrador, bought Arizona utility owner UNS Energy Corp for US$2.5 billion in cash in 2014 and New York utility owner CH Energy Group Inc for about US$968.5 million in 2013. With ITC, Fortis expects to capitalize on construction of new high-voltage lines as the administration of President Barack Obama encourages development of wind farms and other sources of renewable energy.
“Transmission earnings are not dependent on usage, so there’s no risk from declining electricity consumption,” Nemeroff said. “They’re in the Midwest, where there will be a lot more wind-generation built so there will be increasing demand for new transmission.”
“Fortis has grown its business through strategic acquisitions,” chief executive officer Barry Perry said in the statement. “The acquisition of ITC — a premier pure-play transmission utility — is a continuation of this growth strategy.”
ITC earned an adjusted return on equity of more than 17 percent in 2014, above the 11 percent average of its peers including Consolidated Edison Inc and Sempra Energy, data compiled by Bloomberg show. It’s the only publicly traded US company that owns only transmission lines. Fortis anticipates a return on equity higher than 11 percent at ITC’s business, Perry said on a call with analysts.
Fortis intends to seek listing of its common stock on the New York Stock Exchange in connection with the acquisition. ITC will continue as a stand-alone transmission company and its shareholders will own about 27 percent of Fortis, according to the statement. Fortis plans to retain all of ITC’s employees and maintain corporate headquarters in Novi.
The deal is expected to close in late this year subject to shareholder and regulatory approvals.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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