By Ted Caddell
Canada’s Algonquin Power & Utilities has agreed to purchase The Empire District Electric Co. for $2.4 billion, including the assumption of Empire’s debt.
The Missouri-based Empire, with 218,000 customers in Missouri, Kansas, Oklahoma and Arkansas, will be folded into Algonquin’s Liberty Utilities unit at the close of the transaction, Algonquin said. Liberty Utilities has about 485,000 customers in Arizona, Arkansas, California, Georgia, Illinois, Iowa, Massachusetts, Missouri, New Hampshire and Texas.
Empire’s headquarters will remain in Joplin after the deal closes, the companies said. Empire shareholders will receive $34 per common share, a 21% premium to Empire’s Feb. 8 closing price. The Ontario-based Algonquin said all of Empire’s 750 employees will be retained, and customer rates are not expected to change.
Algonquin said it doesn’t expect to close the deal until the first quarter of 2017. Approval is needed from various state and federal regulatory agencies, including FERC and the Department of Justice, as well as the Federal Trade Commission. Because Algonquin is a Canadian company, the acquisition will also need the approval of the federal interagency Committee on Foreign Investment.
“The acquisition of Empire represents a continuation of our disciplined growth strategy, which strengthens and diversifies Algonquin’s existing businesses and strategically expands our regulated utility footprint in the Midwest,” said Algonquin CEO Ian Robertson.
It was the second takeover of an American utility company by a Canadian firm in the same week. Earlier, Newfoundland-based Fortis announced it plans to buy ITC Holdings, the largest independent transmission operator in the U.S., for $11.3 billion. (See related story, Fortis to Acquire ITC Holdings for $11.3B.)
U.S. utilities are an attractive target for Canadian companies. They are typically permitted a larger return on equity than Canadian firms. At the same time, analysts say, Canadian companies have access to cheaper financing, making it easier for them to complete transactions and to outbid U.S. competitors for acquisitions.
ITC and Empire aren’t the only companies attracting Canadian interest. Last fall, Nova Scotia-based Emera announced its intention to buy Florida-based TECO Energy for $10.4 billion. TECO owns electric and gas companies in Florida and New Mexico. That deal is expected to close in the middle of this year.