Emera, ATCO and Canadian Utilities Set to Create $72B Canadian Energy Powerhouse
Emera, ATCO and Canadian Utilities have announced a definitive agreement to combine Emera and Canadian Utilities in a merger of equals, creating a major Canadian utility and energy infrastructure company positioned to support growing energy demand across North America.
The combined company, which will operate under the Emera name, is expected to have a pro forma enterprise value of approximately $72 billion, a rate base of roughly $45 billion and approximately six million customers across Canada, the United States and international markets. The transaction is designed to strengthen the company’s financial position, expand its capabilities and increase its ability to invest in large-scale energy infrastructure.
The proposed combination comes as demand for electricity and resilient infrastructure accelerates across North America. Growing electrification, industrial development, data-intensive customers, transmission requirements and energy infrastructure projects are expected to require significant capital investment. The larger company will have greater capacity to pursue these opportunities, including electric and natural gas transmission, electrification projects, export infrastructure and major energy developments.
Canadian Headquarters and Global Operations
The new Emera will maintain its public company headquarters in Halifax, Nova Scotia. Canadian Utilities’ corporate and operational headquarters will continue in Calgary and Edmonton, while the company will maintain a strong presence in key markets, including Perth, Australia. Emera’s U.S. operations will remain headquartered in Tampa, Florida.
The companies said customers should continue to receive safe and reliable service throughout the transaction process. Until the transaction closes, Emera, ATCO and Canadian Utilities will continue operating independently, with their existing focus on customers, employees, safety, reliability and operational performance.
The combined organization is also expected to support continued infrastructure investment, employment, economic development and community partnerships across its operating regions.
ATCO to Become a Focused Industrial Services Company
As part of the transaction, ATCO will separate its industrial services businesses into a new publicly traded company called New ATCO. The new company will focus on housing, defence and investments, including ports and retail energy.
The restructuring is intended to give ATCO’s businesses a more focused growth strategy while allowing the combined Emera and Canadian Utilities organization to concentrate on regulated utilities and energy infrastructure.
ATCO shareholders will receive shares in both the combined Emera company and New ATCO. The new structure is designed to give shareholders exposure to two businesses with different growth strategies and investment priorities.
Transaction Terms
Under the arrangement agreement, Emera will acquire all outstanding shares of Canadian Utilities and ATCO, while ATCO’s industrial services businesses will be separated into New ATCO.
Canadian Utilities Class A shareholders, excluding ATCO, will receive 0.755 Emera common shares for each Canadian Utilities Class A share. Canadian Utilities Class B shareholders, excluding ATCO, will receive 0.819 Emera common shares for each Class B share.
ATCO Class I and Class II shareholders will receive 0.865 Emera common shares for each corresponding ATCO share. In addition, ATCO shareholders will receive one New ATCO Class I or Class II share for each ATCO share held.
The transaction values Canadian Utilities at approximately $14.3 billion and is structured as an all-share transaction. Existing shareholders will therefore retain participation in the future performance of the combined organization.
Following completion, existing Emera shareholders are expected to collectively own approximately 60% of the combined company, while former ATCO and Canadian Utilities shareholders are expected to collectively own approximately 40%.
Stronger Position in High-Growth Markets
The combination will bring together Emera’s significant operations in Florida with Canadian Utilities’ substantial presence in Alberta. Approximately 70% of Emera’s earnings currently come from operations in Florida, while roughly 80% of Canadian Utilities’ earnings come from Alberta.
Together, approximately 95% of the combined company’s earnings are expected to come from regulated utilities. About 80% of earnings are expected to be generated in Florida and Alberta, which the companies identify as two of North America’s high-growth jurisdictions.
The companies expect the combination to create a more diversified utility platform with stronger financial resources and greater capacity to execute large infrastructure projects.
The combined company is expected to have approximately 12 regulated utilities and serve about six million customers. Its planned capital investment program is expected to total approximately $32 billion through 2030, supporting anticipated average annual rate base growth of approximately 7% to 8%.
Leadership and Governance
Scott Balfour, President and Chief Executive Officer of Emera, will lead the combined company following closing.
Key members of Canadian Utilities’ leadership team are expected to join the Emera executive team. Bob Myles will serve as Chief Executive Officer of Canadian Utilities, while Becky Penrice will become Executive Vice President, Corporate Transformation and Integration.
The combined company will have a 13-member Board of Directors, with six directors nominated by Canadian Utilities and seven nominated by Emera. Nancy Southern will serve as Co-Chair alongside current Emera Board Chair Karen Sheriff.
Leadership of the operating businesses is expected to remain unchanged, supporting continuity for customers, employees and other stakeholders.
Balfour said the merger would provide the scale, financial capacity and expertise needed to invest in energy systems that customers will depend on for decades. He also highlighted increasing demand resulting from electrification and major infrastructure development.
Karen Sheriff described the transaction as an opportunity to build on the strengths of two established companies while increasing their capacity to invest and grow.
Nancy Southern said the agreement represents a new chapter for ATCO and is intended to unlock the growth potential of its housing, defence and industrial services businesses.
Canadian Utilities CEO Bob Myles said combining the two organizations would bring together complementary capabilities and greater financial capacity to support future energy infrastructure requirements.
New ATCO’s Growth Strategy
New ATCO will be headquartered in Calgary and continue operating internationally. Nancy Southern will serve as Chair and Chief Executive Officer, while Katie Patrick will serve as Chief Financial & Investment Officer.
The company will focus on housing, defence and investments, including ports and retail energy. Its standalone structure is intended to provide dedicated leadership and capital allocation while enabling the company to pursue organic and acquisition-led growth.
New ATCO will retain a dual-class share structure, including voting and non-voting shares with equivalent economic entitlements. Voting shares will be distributed to ATCO’s sole voting shareholder, Sentgraf, while non-voting shares will be distributed proportionally to existing ATCO non-voting shareholders.
Expected Benefits for Shareholders and Infrastructure Investment
The companies expect the transaction to be accretive to adjusted earnings per share during the first full year following closing. Emera also expects to maintain its current investment-grade credit ratings and stable outlooks.
The larger balance sheet is expected to enhance the company’s ability to invest in safe, reliable and resilient infrastructure while maintaining local operating capabilities.
For shareholders, the transaction creates exposure to two distinct companies: the combined Emera and Canadian Utilities utility platform and New ATCO’s industrial services businesses.
Independent Review and Approvals
The transaction followed a comprehensive review process involving independent directors and special committees at ATCO and Canadian Utilities. Separate special committees were established to evaluate the transaction, negotiate its terms and assess its potential benefits and risks.
Multiple financial institutions provided fairness opinions to the boards and special committees. Gordon Dyal & Co. and CIBC World Markets provided opinions related to ATCO, while BMO Capital Markets advised the Canadian Utilities Special Committee. Lazard and Scotiabank provided fairness opinions to Emera.
Following recommendations from their respective special committees, the boards of ATCO and Canadian Utilities unanimously approved the transaction, with interested directors abstaining, and agreed to recommend that shareholders vote in favor.
Emera’s Board also unanimously determined that the transaction is in the company’s best interests and resolved to recommend shareholder approval.
If completed, the merger would represent a major transformation of Canada’s utility and energy infrastructure landscape, creating a larger platform with substantial regulated operations, significant capital investment capacity and exposure to growing energy markets in both Canada and the United States.
Source Link: https://www.businesswire.com/
