Hydro One of Canada to acquire Avista in $5B deal
- Hydro One of Canada and Avista of Spokane, Wash., have agreed to merge in a $5.3 billion deal.
- In the all-cash deal, Avista shareholders would receive $53 per common share, a 24% premium to Avista’s July 18 closing price. Hydro One shares fell on the announcement, as some analysts said the Canadian utility overpaid for the acquisition.
- Hydro One said the transaction would add to its earnings per share in the mid-single digits in the first full year of operation. The transaction is expected to close in the second half of 2018.
Avista is one of the smallest investor owned utilities in the U.S., with 379,000 electric customers and 342,000 gas customers in eastern Washington, northern Idaho and part of southern and eastern Oregon.
Hydro One is Ontario's largest electricity transmission and distribution provider with more than 1.3 million customers.
Hydro One was once owned by the province of Ontario until it was spun off as a publicly traded company in 2015. The Ontario government is still the company’s largest minority shareholder, with 49% stake.
The Hydro One purchase gives Avista a toehold in the U.S. market, but the purchase has proved controversial back home. The leader of the Progressive Conservative party, the right-of-center opposition party in the provincial parliament, criticized Hydro One for using ratepayer money "to buy up foreign companies."
“Just last month Hydro One was asking for a rate increase by $141," PC leader Patrick Brown told the Toronto Star. "You’ve got hard-working Ontario families paying higher hydro bills while Hydro One now has nearly $7 billion [in Canadian dollars] to throw at foreign companies. Tell me how that works?"
Despite the critique, Hydro One executives said the merger would create "clear benefits" for customers, and signaled that they could use the Avista acquisition to push further into the U.S. market.
“We think there are opportunities under [Scott Morris’s] leadership to grow in other areas of the U.S.,” Mayo Schmidt, president and CEO of Hydro One said in a telephone press conference. Morris is the CEO of Avista.
Avista's management team will remain in place after the acquisition closes, and Avista will also have its own board of directors with Morris serving as the chairman.
Hydro One plans to finance the transaction through a combination of medium and long-term borrowings amounting to about $2.7 billion and $1.1 billion of contingent convertible debentures.
- The Spokesman-Review Avista selling to Canadian firm Hydro One for $5.3 billion
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