Juno Beach, Fla. and New Orleans
FPL Group Inc. and Entergy Corp. have agreed to combine in a merger of equals, creating the largest power company in the nation. Based on the closing stock prices of both companies on July 28, the combined company will have a total enterprise value of more than $27 billion ($16.4 billion in equity market capitalization and $10.7 billion in debt and preferred stock).
“The merger combines two strategically aligned, financially healthy companies into an organization that has no equal in the industry,” said J. Wayne Leonard, CEO of Entergy Corp.
Under the terms of the agreement-approved unanimously by the boards of directors of both companies-each holder of FPL Group common stock will receive 1.00 share of the new holding company per share of common stock, and each holder of Entergy common stock will receive 0.585 of a share. FPL and Entergy have authorized share repurchase programs totaling #1 billion to be implemented prior to the close of the merger. The newly combined company expects to pay a dividend that is consistent with FPL Group’s current policy.
The as-yet-unnamed utility will serve more than 6.3 million customers through its affiliates: Florida Power & Light, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans. It will own and operate 38,400 MW of capacity and be the largest operator of gas-fired power plants in the country.
The merger will also bring together more than 10,000 MW of nuclear power, making it the second-largest nuclear generator in the country. Entergy has eight nuclear units–including two in the process of purchase-while FPL Group has four.
“We are creating a company with the scope and scale to prosper in the changing industry marketplace,” said James L. Broadhead, chairman and CEO of FPL Group Inc. “We expect to deliver average annual earnings per share growth of ten percent or more over the next several years fueled by a combination of revenue enhancement opportunities and cost savings.”
“Our strong balance sheet and increased cash flows will enable our new company to more aggressively pursue profitable growth opportunities,” he commented.
Based on the number of common shares currently outstanding, FPL Group shareholders will own 57 percent of the common equity of the company, and Entergy shareholders will own 43 percent.
The merger requires the approval of shareholders of both companies, the Securities and Exchange Commission, the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission and the Federal Communications Commission; the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act; and the completion of regulatory procedures in Arkansas, Florida, Louisiana, Mississippi, Texas and the city of New Orleans. The companies’ objective it to complete the transaction within 15 months.
Later this year, Entergy also expects to close its previously announced agreement with Koch Industries-under which the companies agreed to form Entergy-Koch L.P., expected to rank among the nation’s top energy commodity traders in terms of combined volumes of electricity and natural gas. Entergy-Koch is expected to trade more than 100 million MW per year and to create a significant marketing platform to sell the company’s wholesale generation. It will also procure more than 7 billion cubic feet of gas per day for the combined company. (The venture will also include Koch’s gateway natural pipeline, a 10,000-mile system serving the Gulf South.)
“Through its pending ventures with other industry leaders such as Koch Industries and the Shaw Group, Entergy has taken an innovative approach to add to its capabilities and to expand its growth opportunities,” said Broadhead.
“We would expect these partnerships to provide added benefit to our combined company as we grow our wholesale generation portfolio,” he finished. n