NEW YORK—FirstEnergy Corp. on Thursday said it will buy rival Allegheny Energy in an all-stock deal valued around $8.5 billion, creating a power giant with customers spanning from the Midwest to the Mid-Atlantic states.
Akron, Ohio-based FirstEnergy will pay Allegheny shareholders 0.667 shares of FirstEnergy for each Allegheny share—a 32 percent premium over Allegheny’s closing share price on Wednesday evening. The companies expect the deal to complete within 12-14 months.
The combined company will keep the FirstEnergy brand name and will have around 6 million customers and more than $16 billion in annual revenues from Ohio, Pennsylvania, New York, New Jersey, and Maryland.
“This transaction will provide outstanding value to both companies’ shareholders—offering enhanced earnings growth potential and a more competitive cost structure,” Anthony Alexander, CEO of FirstEnergy, said in a statement.
“Among other benefits, it would increase generation resources by 70 percent, more than double the amount of supercritical coal capacity, improve the overall environmental performance of the generation fleet, and increase our customer base by 35 percent. We also expect to create significant efficiencies and economies of scale as we share best practices across the new organization,” he said.
The Greesnburg, Pa.-based Allegheny operates power plants, distribution and transmission operations, and other energy services. It currently serves 1.6 million customers in the Mid-Atlantic region.
According to a joint statement from the companies, the merger will improve the power generation mix at the combined company, especially as environmental regulations are expected to get tougher.
FirstEnergy’s Alexander will remain CEO of the new company, a statement said.
Mergers and acquisitions in the power sector have been few and far in between in recent months. The U.S. economic recession has crippled power demand over the last few years as factories closed their doors and plants lessened their capacities, responding to weaker demand for goods.
Edf, the French energy giant, recently acquired the nuclear power subsidiary of Constellation Energy.
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