ShareThisDuke Energy and Progress Energy today announced a merger that would make the combined North Carolina companies into the biggest utility in the nation, with 71 million customers.
Charlotte-based Duke agreed to pay $47.48 a share for Raleigh-based Progress today in a deal valued at $13.7 billion, according to the Dealbook website. The headquarters would be in Charlotte.
Duke's all-stock purchase of the smaller Raleigh utility would offer a "modest premium" to Progress' share price, which closed Friday at $44.72.
The result would be the loss of a Fortune 500 corporate headquarters for Raleigh and the potential loss of hundreds of employees locally, with a corresponding boost in prestige for Charlotte as the state's business capital.
The deal would leave Progress with a significant presence in Raleigh and accelerate Charlotte's efforts to build an energy hub in the region. The companies think they will gain state and federal regulators' approval by the end of the year and that the deal will result in "huge benefits for customers in terms of savings," one of the sources told The Charlotte Observer.
The combined company would be called Duke Energy, though it was not clear who would lead it. Duke CEO Jim Rogers and Progress CEO William Johnson started talking about a strategic combination in July, the source said.
Neither Progress nor Duke officials would comment Sunday.
The deal would further expand Duke's transcontinental business footprint, which already extends from Argentina to New England. The combined power company would sell electricity in Florida, Indiana, Kentucky, North Carolina, Ohio and South Carolina. Wind energy farms, solar farms, hydroelectric projects and other energy interests give Duke a presence throughout the Western Hemisphere.
"It's a huge deal," said C. Dukes Scott, executive director of the S.C. Office of Regulatory staff, a state consumer advocate who said he didn't know about the negotiations. "The size -- it'll be a huge company."
The combined company would have a market value of $36 billion, about the size of Exxon Mobil and three times as big as Cisco Systems.
The deal would require approval from shareholders and regulatory agencies, including the utility commissions in North Carolina and South Carolina.
Federal and state regulators would seek assurances that Duke's growing market dominance did not result in anti-competitive practices that drive up power costs for Duke's wholesale customers, especially neighboring power companies and municipal governments.
The companies were expected to provide details today on how Progress would be incorporated into Duke's global empire, and which executives would run the company. The respective ages of the two current chief executives suggest that Duke CEO Rogers, 63, would be the presumptive head of the organization. Some analysts suggested that Progress CEO Johnson, 56, could be groomed to take over upon Rogers' retirement, but others expect top Progress executives to leave.
Wall Street analysts said the merger of the two companies makes sense, because either operating alone would have difficulty financing the construction of a nuclear reactor that's expected to cost at least $10 billion. The two North Carolina companies have applied for federal licenses to build a total of six reactors.
The industry is in the midst of a wave of consolidations, with eight mergers and acquisitions announced or completed last year.
Progress has been the subject of takeover speculation for years. It has more than $11 billion in debt, which Duke would assume.
Meanwhile, Duke is fighting a potential rate cut in Ohio resulting from falling energy prices. A rate cut in that state would significantly impair the company's earnings. In Indiana, Duke has experienced more than $500 million in cost overruns on a power plant using coal gasification technology.
(Contact John Murawski at john.murawski(at)newsobserver.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
Must credit The News and Observer of Raleigh, N.C.
