Tags: Entergy | Merge | ITC

Part of Entergy to Merge With ITC in $1.78 Billion Deal

Monday, 05 Dec 2011 10:35 AM

Entergy Corp will spin off and merge its electricity transmission business with ITC Holdings Corp in a $1.78 billion deal designed to allow Entergy to focus on its power-generation and utility operations.

The news lifted shares of ITC more than 7 percent to $79.12 in early trading; Entergy shares rose 3.6 percent to $72.17.

The deal is Entergy's second bid in recent years to restructure its business, following a failed effort to spin off some of its nuclear power plants into a stand-alone company.

"We're in a business that we shouldn't be in," Entergy Chief Executive Officer Wayne Leonard told Reuters, referring to the transmission business.

Entergy operates power utilities in Louisiana, Mississippi, Arkansas and Texas, as well as a "merchant" power plant business that sells electricity into the wholesale market.

Its transmission business will need investments of some $2 billion over the next four or five years, a drain on Entergy's finances as the company seeks to bolster its generation operations.

For ITC, the nation's largest independent electricity transmission company, the deal will double its size and add Entergy's operations in Louisiana, Texas, Mississippi and Arkansas to its current base that runs from Michigan and Minnesota south to Illinois, Iowa, Missouri and Kansas.

"It's a business that is best suited in the hands of someone who is does only this," Leonard said.

Entergy is currently seeking to integrate its transmission operations into the Midwest Independent System Operator, the regional transmission network that ITC's operations are in.

Under the terms of the deal, expected to close in 2013, Entergy will divest its transmission business to a newly formed company, Mid South TransCo LLC, and distribute it to its shareholders in the form of a tax-free spin-off.

TransCo will then merge with and into a newly created unit of ITC in an all-stock, Reverse Morris Trust transaction. Entergy shareholders will get a 50.1 percent stake in ITC in exchange for their shares in TransCo.

Under the deal, Entergy will issue nearly $1.78 billion in new debt, which will be assumed by ITC.

Prior to the merger, ITC plans to undertake a $700 million recapitalization, currently expected to be in the form of a one-time special dividend.

J.P. Morgan and Barclays Capital served as financial advisers to ITC. Goldman Sachs served as Entergy's financial adviser.

© 2017 Thomson/Reuters. All rights reserved.

 
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Entergy Corp will spin off and merge its electricity transmission business with ITC Holdings Corp in a $1.78 billion deal designed to allow Entergy to focus on its power-generation and utility operations. The news lifted shares of ITC more than 7 percent to $79.12 in early...
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Monday, 05 Dec 2011 10:35 AM
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