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.
Assistant Business Editor Alan M. Wolf joined the N&O in 1999 covering the business of health care. He became an editor in 2001, and helps oversee the paper's daily business coverage and Sunday Work&Money section. He lives in Clayton with his wife and two children. Reach him at 919-829-4572 or
Comments
Is Cap 'n Trade looming behind this merger?
Mon, 01/10/2011 - 18:45 — MakkieThis merger brings to mind the phrase stated by President Obama
"With cap and trade electricity prices will necessarily skyrocket". (Not verbatim - I'll leave that to anyone else whom may want the quote to be precise).
Does this merger help BO in his quest for cap and trade? Will jobs be lost? Will costs go up?
One Day the people will wise
Mon, 01/10/2011 - 17:29 — dlnorrisOne Day the people will wise up to the system and stop the process that has been going on for 30 or more years of companies (wall street) printing money -stock-. This is the root of all of the great problems with investment banking and the merger/buyout mentality of the past 30 years. That being said, Progress-Energy is a great service/distribution company (one of the best); their operations/generation was at the other end of the spectrum. Duke has been a fair service/distribution company and one of best for operations/generation. This should prove an interesting marriage. Progress has spent 20+ years fending off acquistions, it appears they are finally succumbing. My money says this is a run to save Sr. Managers jobs as larger comapanies with less concern for the Carolina good-ole-boy network, that is so much Progress Energy, also have them in sights for a takeover. For Duke, gaining 5 operating nukes, with life extentions in place and 4 new COL applications going forward, may be a great windfall; worth the 12B debt they are assuming (the stock trade is irrelevent, since the only cost there is printing/mailing the paper and paying the investment bank commision). And undoubtedly Raleigh Looses it's largest (only?) Fortune 500 company.... and some jobs also; except that Duke can afford to build the new units at Harris (6000 short term, 1200 perm. jobs); progress would have a hard time getting it done.
DUKE POWER/PROGRESS POWER
Mon, 01/10/2011 - 16:57 — wbrad8248For some true progress this new company should buy TVA and run it like a business with a purpose of electrical generation.
DUKE POWER/PROGRESS POWER
Mon, 01/10/2011 - 16:56 — wbrad8248For some true progress this new company should buy TVA and run it like a business with a purpose of electrical generation.
Sounds good to me
Mon, 01/10/2011 - 15:44 — newenglandThey should allow the merger while passing a law that government employees involved in regulating utilities be banned from working, contracting, or subcontracting for the utilities for 5 years.
Free enterprise
Mon, 01/10/2011 - 12:36 — mcarolHow can this be allowed in an economy that is based on competition? The larger the companies get, the more they hire expensive lobbyists and ex-utility commission staff, and they roll right over us with increase after increase, giving them obscene profits like the gasoline and natural gas industries are doing now--The "regulation" of utilities is a joke on those too ignorant to see the stream of ex-utility commission folks going over to the utility companies for their reward job after sticking it to the rest of us.
No Loss of Competition
Mon, 01/10/2011 - 12:05 — whquaintThis does not have the same implications as a merger in industries such as banking, airline, or telecommunication. Duke and Progress are regulated utilities whose primary revenue comes from regulated electricity sales in designated territories. Since there is no competitive market, there cannot be a reduction in competition due to the merger. I do feel for the people who will lose their jobs, especially in the current job market. However, that's the price of efficiency. We wouldn't ban robots in factories in order to have more human jobs. Job reductions means lower costs for the company which means, in a regulated utility, lower electricity prices to the consumer. Progress Energy customers currently pay more per kWh than Duke Energy customers, so there should eventually be more benefit to Progress customers. The regulators have to stay on their toes, of course, to protect the consumers' interest, and I'm sure they will do just that.
No competition
Mon, 01/10/2011 - 12:27 — henryeWe opted for free global trade to get the best prices for the consumer. the thing that was overlooked was our citizens are without jobs and can not afford to buy much.. the consumer excuse was just that.... and now the real truth has emerged. so in short it was a rip off of the consumer.... and very beneficial to big business..
Duke energy to buy progress
Mon, 01/10/2011 - 10:32 — henryeWe have learned how to use electricty with chips to do a lot of things. But beyond that about the only other personal asset mentally is how to make money.We need more real Brains in our thinking as we have over three hundred million souls and more coming in all the time.that have to be clothed and fed. We need people with Brains to do that Job and that search should be ongoing.your future depends on it..
Merger
Mon, 01/10/2011 - 10:16 — bagjunahI'll be the first to admit that though I can understand the ramifications of the effects of consolidation on the financial bottom-line, I can never get my mind around why the regulators that control such things allow these types of mergers, i.e., airlines, banks, insurance companies, etc., to go forward at the expense of peoples jobs, and livelihoods, I mean we currently have two solid companies that employ thousands of people, and at the end of this merger, 100's maybe 1000's will lose their jobs placing even more pressure on our current economic crisis.
Regulators should refuse
Mon, 01/10/2011 - 09:33 — mjrothRegulators should refuse this deal. It creates a monopoly, adds to unemployment during a depression, and does not benefit the energy consumer in any way. This is all about wall street types making more money without actually producing something of tangible benefit to citizens.
Sad to see such a big
Mon, 01/10/2011 - 08:38 — hdog007Sad to see such a big company who's invested quite a bit in downtown, now moving away.