Duke Energy announced this morning that it will buy Progress Energy in a all-stock deal worth about $26 billion, creating the largest electric utility in the nation with 7.1 million customers.
The expanded company will keep Duke's name and corporate identity. It will remain headquartered in Charlotte, boosting that city's profile as the state's business and finance capital, but "maintain substantial operations in Raleigh," the companies said.
The deal will result in Raleigh losing a Fortune 500 corporate headquarters when Progress ceases to exist as an independent company after 102 years of continuous operation. The union is expected to bring job cuts as the companies look to save money by consolidating operations, but could result in lower rates for customers.
But there will be challenges. The companies expect to close the deal by the end of the year, but will need to get various state and federal regulatory approvals. They'll also need to win over investors, who will want evidence that the combination will result in stronger financial results.
Progress CEO Bill Johnson will become CEO of the combined company, while Duke CEO Jim Rogers will serve as chairman. Johnson, who turned 57 yesterday, joined Progress as a lawyer in the early 1990s and became CEO in in 2007 after the unexpected death of then-CEO Bob McGehee.
"This combination of two outstanding companies is a natural fit," Johnson said in a prepared statement.
As chairman, Rogers, 63, will advise Johnson on strategic matters, play an active role in government relations and serve as the company's lead spokesperson on energy policy. By joining forces, Duke and Progress expect to have more financial muscle as they build new nuclear power plants and adapt more green energy initiatives.
"This transaction is unprecedented in size and scale," Rogers said on a conference call with Wall Street analysts this morning. "Our combined strength exceeds the strength we have as separate companies."
Under the terms of the deal, Progress shareholders will receive 2.6125 shares of Duke in exchange for each share of Progress common stock. Based on Duke's closing share price on Friday, Progress shareholders would receive a value of $46.48 per share, or $13.7 billion. Duke also will assume $11.4 billion of Progress debt.
Progress shares closed Friday at $44.72, after rising on reports of a pending deal late last week.
This morning, Progress shares fell 70 cents to $44.02. Duke shares fell 28 cents to $17.51.
Rogers and Johnson held a conference call at 10 a.m. Listen to a webcast here.
Read today's N&O's report on the deal here.