CenterPoint Energy, Inc. (CNP - Free Report) and Vectren Corp. (VVC - Free Report) received approval for their merger agreement from The Federal Energy Regulatory Commission (FERC). The approval came after a month, when Vectren’s shareholders conducted a special meeting and voted in favor of its merger with CenterPoint Energy.
Pending Regulatory Approvals
Though the definitive merger agreement between both the companies already received approval from shareholders and the FERC, it is yet to receive mandatory regulatory approval from Federal Communications Commission.
In addition to this, the company also needs to fulfill certain regulatory filings in Indiana and Ohio, where informational proceedings with regulators in both states have already been initiated. Subject to these conditions, the merger is expected to close by first-quarter 2019.
Benefits Expected from the CenterPoint-Vectren Merger
The acquisition of Vectren, a deal roughly worth $6 billion, will help in creating a new company that would eventually serve more than 7 million customers across nearly 40 states in the United States. With the combination of experienced professionals and associated businesses, CenterPoint Energy and Vectren may go on to create a robust, diversified company with compelling advantages.
The combined company is expected to have electric and natural gas delivery operations in eight states with assets totaling $29 billion and an enterprise value of $27 billion. It is also expected to acquire new opportunities to leverage and expand competitive energy-related services across a larger U.S. footprint and create long-term efficiencies in the delivery of services to customers. This, in turn, will help the company increase its revenue components and expand customer base.
Mergers & Acquisitions in Utility Space
Utility operators don’t shy away from merger and acquisition (M&A) activities to supplement organic growth. In addition to lending their operations a greater scale and scope, such favorable measures lead to cost synergies and better utilization of resources. The larger the size of the company, the more access it gets to capital resources, which is essential for vital infrastructure upgrades.
Beginning this year, SCANA Corp. (SCG - Free Report) entered into a merger agreement with Dominion Energy (D - Free Report) . Considering Dominion’s assumption of $6.7 billion debt for SCANA, the transaction is projected to be valued at roughly $14.6 billion. Notably, we believe that in an established energy market like the United States, mergers and acquisitions will be pivotal for expansion and enhancing market share.
CenterPoint Energy stock has rallied nearly 5.7% over the past six months, outperforming the industry’s growth of 4.4%. The outperformance must have been led by significant customer growth and investments to upgrade infrastructure.
CenterPoint Energy currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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