Dominion Energy ( D ) will buy Scana ( SCG ) for $7.9 billion in a stock-for-stock deal, scooping up a utility battered by a failed nuclear project that's drawn scrutiny from federal and state regulators.
The transaction is valued at about $14.6 billion including the assumption of debt, according to a statement Wednesday. Scana shareholders will receive 0.669 share of Dominion for each share of Scana, equal to about 55.35 a share as of Tuesday's close. The acquisition is expected to close in 2018 pending regulatory and shareholder approval, according to the statement.
Scana made an attractive target as the company's market value plummeted after the utility halted a controversial nuclear expansion in late July. Federal and state investigators are probing the project, which triggered a review of the law that allows utilities to charge customers for unfinished or abandoned power plant projects.
"Dominion acquiring Scana makes a lot of sense," Shahriar Pourreza, a New York-based analyst for Guggenheim Securities, said by phone Wednesday. Dominion is building a major natural gas pipeline, the Atlantic Coast line, to the South Carolina border, and state officials want it extended, he said. The line could serve Scana customers.
Scana shares were trading 22% higher at 47.39 before the opening bell on the stock market today . They had dropped 47% over the past year. Dominion traded down 4.7% to 76.50 a share.
The deal is the latest in a string of massive utility mergers: The industry saw a combined $68.2 billion of acquisitions in 2017, the most in a decade, according to data compiled by Bloomberg. Stagnant electricity prices and tight profit margins have stoked the buying spree.
The acquisition would include a more than $1.7 billion write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, allowing the elimination of all related customer costs over 20 years.
Last year's biggest utility deal was the Sempra Energy ( SRE ) acquisition of Oncor Electric Delivery Co., the largest transmission-line operator in Texas, for $18.8 billion. Sempra outbid Warren Buffett's Berkshire Hathaway (BRKB), which had offered $18.2 billion. In October, Dynegy ( DYN ) and Vistra Energy ( VIST ), both in Texas, agreed to merge in a transaction valued at $10.5 billion.
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