Duke bids $13.7 billion for Progress

Duke Energy-Progress Energy merger forms the largest U.S. regulated utility via an all-stock deal, boosting scale across NC, SC, FL, IN, KY and OH, targeting grid modernization, cleaner energy, cost synergies, and shareholder value.

Duke Energy agreed to pay $47.48 a share for Progress Energy, in a deal valued at $13.7 billion.

The deal would create the country’s largest utility, with $22.7 billion in revenue and more than 7 million customers in North Carolina, South Carolina, through the Duke's Carolinas utility operations across the region, Florida, Indiana, Kentucky and Ohio.

The boards of both companies unanimously approved the all-stock deal, which is expected to increase profit in the first year, even as the Progress CEO warns of higher costs in the years ahead.

“Our industry is entering a building phase where we must invest in an array of new technologies to reduce our environmental footprints and become more efficient,” James E. Rogers, the chairman, president and chief executive of Duke Energy, said in a statement. “By merging our companies, we can do that more economically for our customers, improve shareholder value and continue to grow.”

It is the latest in a wave of utility deals, as companies seek to cut costs and combat falling prices by increasing their customer bases. Energy and power deals made up the biggest share of merger activity in 2010, accounting for 20 percent of announced takeovers, based on Thomson Reuters data.

Duke bought Cinergy of Ohio in 2005 in a $9 billion all-stock deal.

Shares in Progress have risen more than 3 percent since DealReporter first reported on potential deal talks on January 6. The company’s stock closed at $44.72 on January 7 The $47.48 a share bid is 6.4 percent above the average closing share price of Progress Energy in the 20 days through January 7.

The companies hope to complete the merger by the end of 2011. Several regulators will have to sign off, including the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and two state authorities.

If the deal is cleared, Mr. Rogers is expected to become executive chairman, a role in which he would advise the chief executive on strategy and be the company’s main voice on energy policy.

William D. Johnson, the chairman, president and chief executive officer of Progress Energy and part of earlier utility leadership announcements in the Duke-Cinergy era would become president and chief executive of the newly formed company, to be called Duke Energy.

“This combination of two outstanding companies is a natural fit,” Mr. Johnson said in a statement. “It makes clear strategic sense and creates exceptional value for our shareholders.”

Duke was advised by JPMorgan Chase, Bank of America Merrill Lynch and the law firm Wachtell, Lipton, Rosen & Katz. Progress was advised by Lazard, Barclays Capital and the law firm Hunton & Williams.

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