Infrastructure

Utility Mergers Continue (NU, NST)

More mergers in utility-land.  Northeast Utilities (NYSE: NU) and NSTAR (NYSE: NST) have announced a $17.5 billion definitive merger in a move to create one of the largest utilities in the U.S with six regulated electric and gas utilities that will have nearly 3.5 million electric and gas customers.

Terms of the agreement call for NSTAR shareholders to receive 1.312 common shares of Northeast Utilities per NSTAR share that they own.  The equity value of the merger comes to roughly $9.5 billion.  If you tack on the debt assumptions in the deal then the enterprise value of the combined deal is roughly $17.5 billion.

Before the effects of the merger, Northeast Utilities had a market cap of about $5.4 billion and NSTAR had a market cap of roughly $4.1 billion.

NSTAR closed at $39.53 on Friday and the 52-week range is $30.76 to $40.23; Northeast Utilities closed at $30.70 and the 52-week range is $22.20 to $30.73.  Unfortunately this is virtually a no-premium deal as NSTAR shares are valued at $40.21 based upon Friday’s close and before any share price adjustments based upon this merger.

JON C. OGG