By Cara Lombardo, Maureen Farrell and Dana Cimilluca
NextEra Energy Inc. recently made a takeover approach to Duke
Energy Corp., according to people familiar with the matter, testing
the waters for what would be a $60 billion-plus combination of two
Duke rebuffed the approach but NextEra is still interested in
pursuing a deal, some of the people said. There is no guarantee
NextEra will do so and if it does, that a deal would result.
Should there be one, it would be big. Duke, based in Charlotte,
N.C., has a market value of roughly $61 billion following a 14%
decline in its share price this year, and an acquisition of the
company could be the largest utility deal ever and the biggest
merger so far this year.
Pulling one off won't be easy. First, NextEra would have to
overcome any resistance from Duke and its executives, and hostile
deals in the utility industry are rare. Any agreed deal would have
to pass muster with an array of government officials in a highly
With a market value of about $139 billion after its stock rose
22% so far this year, Juno Beach, Fla.-based NextEra is the largest
public utility company in the U.S.
It owns Florida Power & Light Co., which has more than 5
million customers in Florida and is the biggest rate-regulated
electric utility in the U.S. by retail electricity produced,
according to the company's website. It also owns Gulf Power Co.,
which serves more than 470,000 customers in eight counties in
Utility investors see Florida as a particularly desirable market
given the constant need for air conditioning and growing
NextEra also owns a clean-energy business that, along with
affiliates, is the world's largest generator of renewable wind and
solar energy. It also operates emissions-free electricity from
plants in Florida, New Hampshire, Iowa and Wisconsin.
Duke provides electricity to roughly 7.7 million retail
customers in six states, including the Carolinas, some Midwestern
states and Florida, according to its website, and distributes
natural gas to more than 1.6 million customers in Ohio, Kentucky,
Tennessee and the Carolinas. It has a commercial business with
power-generation assets in North America including a renewables
NextEra has been an active acquirer of smaller assets in recent
years and has also eyed larger deals, benefiting from its bulk and
a stock price that has outperformed those of its peers. It
announced a deal Tuesday to buy an independent transmission company
for $660 million, including debt.
NextEra, run by James Robo, became a renewable energy goliath
using tax subsidies to help finance wind and solar projects around
the country and avoiding debt. It sells the output to utilities,
many of which must procure power from green sources to meet state
mandates. It went from being the 30th largest U.S. power company in
2001 to the largest today. But it has faced challenges in trying to
expand, including regulatory pushback and the phasing out of
certain tax credits. Texas regulators rejected its bid in 2017 to
buy a large transmission company and Hawaii regulators rejected its
bid for the state's largest utility in 2016.
Duke is run by Lynn Good and founded in 1904. It grew through a
series of deals, including a roughly $5 billion deal, excluding
debt, to buy Piedmont Natural Gas Co. that closed in 2016.
Since the coronavirus pandemic kept many people out of offices
and working from home since mid-March, utility companies have been
dealing with a surge in retail energy use -- as big chunks of the
population work from home -- and a decrease in commercial demand.
Duke, for example, said in its second quarter that commercial and
industrial customer electricity volumes fell 13% and 15%,
respectively, though most of its larger business clients have
resumed operations. While retail use typically offers higher profit
margins, it isn't clear how long large portions of the population
will continue its outsize use as workers are expected to gradually
return to their offices.
A handful of other utility companies have recently flirted with
deal making, sometimes at the behest of activist investors. Evergy
Inc., a roughly $11 billion electric utility based in Kansas City,
Mo., was urged by Elliott Management Corp. to consider selling
itself. Evergy undertook a strategic review but didn't ultimately
pursue a sale. Its chief executive officer announced plans to
retire in August.
CenterPoint Energy Inc., where Elliott has also been involved,
in May formed a strategic review committee that plans to make
recommendations to the board by October. The company has said it
will update investors by early next year.
The biggest deal announced so far this year is Nvidia Corp.'s
$40 billion acquisition of SoftBank Group Corp.-owned chip designer
Arm Ltd. Merger and acquisition volumes are down 22% globally and
43% in the U.S. compared with last year, in large part because
executives shifted focus from deal-making to respond to the impact
of the coronavirus pandemic. Recently, however, the M&A market
has begun to show signs of life as companies begin to regain their
footing and look to establish strategic plans for the post-pandemic
Write to Cara Lombardo at email@example.com, Maureen Farrell
at firstname.lastname@example.org and Dana Cimilluca at
(END) Dow Jones Newswires
September 29, 2020 20:50 ET (00:50 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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