SEC Filings

Emera To Absorb Canadian Utilities And ATCO In $14.3 Billion All-Share Deal, With New ATCO Spun Out

Emera holders would own about 60% of the combined utility, which the companies put at $72 billion in enterprise value, if approvals arrive.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

— 3 min read
Share
Emera To Absorb Canadian Utilities And ATCO In $14.3 Billion All-Share Deal, With New ATCO Spun Out

Emera, ATCO and Canadian Utilities agreed to a definitive deal under which Emera would buy all shares of both companies in an all-share arrangement that values Canadian Utilities' outstanding shares at about $14.3 billion. The companies announced it Tuesday in a release furnished to the SEC on Form 6-K, and ATCO's industrial services arm would be spun out as a separate listed company, New ATCO.

The exchange ratios

Canadian Utilities Class A holders, other than ATCO, would get 0.755x of an Emera common share per share held. Class B holders, other than ATCO, would get 0.819x.

ATCO Class I and Class II holders would get 0.865x of an Emera share per share. The release says that ratio reflects the Class A and Class B ratios on the Canadian Utilities shares ATCO owns, adjusted for certain liabilities Emera assumes and for the value of certain Emera shares issued to New ATCO in the spinoff.

ATCO holders would also get one New ATCO share for each ATCO share of the same class. All New ATCO voting shares would go to Sentgraf Enterprises Ltd., ATCO's sole Class II voting shareholder, which has signed a voting support agreement backing the deal. Non-voting shares would go pro rata to existing Class I holders.

Canadian Utilities preferred shares stay outstanding, and no fractional Emera shares will be issued.

What the combined company would look like

Existing Emera shareholders would own about 60% of the combined company, and former ATCO and Canadian Utilities holders about 40%. The release puts combined enterprise value at about $72 billion, rate base at about $45 billion and customers at about six million.

The company expects the deal to add to adjusted earnings per share in the first full year after closing. It also expects roughly a 20% rise in dividend income for Canadian Utilities Class A holders, though the release says Emera's board will decide the amount and timing of any dividends.

Emera gets about 70% of its earnings from operations in Florida, and Canadian Utilities about 80% from Alberta. Combined, about 95% of earnings would come from regulated utilities and about 80% from Florida and Alberta. The plan is a $32 billion capital plan through 2030, with expected average annual rate base growth of 7% to 8%.

The company would keep the Emera name and its Halifax headquarters. Emera CEO Scott Balfour would lead it. ATCO Chair and CEO Nancy Southern would be Co-Chair alongside current Chair Karen Sheriff, and would also chair and run New ATCO. The board would have 13 members: seven put forward by Emera and six by Canadian Utilities.

Balfour said the merger creates a "Canadian utility and energy infrastructure powerhouse" with the scale to invest in the systems customers will rely on.

Approvals, timing and the stock

Closing needs shareholder, court and regulatory approvals, including from the Alberta Utilities Commission and the U.S. Federal Energy Regulatory Commission. The companies expect it to close in the third or fourth quarter of 2027. The release calls it the largest merger between two Canadian companies, based on Canadian Utilities' implied enterprise value of $28 billion.

Emera's U.S.-listed shares closed at $46.64 on Tuesday, down from $47.88 the session before. The 6-K was filed at 4:06 p.m. ET, after the regular session ended.

Until closing, the three companies will operate independently.

The companies plan to circulate a joint management information circular ahead of special securityholder meetings expected in early 2027.

Sources

Read more