Vectren Gets Investors' Approval for CenterPoint Merger
Vectren Corporation VVC announced that the company’s shareholders conducted a special meeting and voted in favor of its merger with CenterPoint Energy, Inc. CNP. The proposed merger was approved by 61.6% of outstanding shareholders, entitled to cast votes. This in turn, accounts for more than 95% of the shares voted.
The final merger is subject to various conditions including approvals, clearances or orders from various regulators. Though the proposed merger has received an approval from some of the regulatory, the nod from Indiana and Ohio authority over the merger is still pending. Once approved, the company anticipates to close the merger by first-quarter 2019.
With the merger of Vectren and CenterPoint, both companies would be able to avail of the low-risk opportunity in natural gas distribution plus electricity generation & transmission segment. Currently, Vectren has major operations in Ohio and Indiana while CenterPoint serves majorly six territories (Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas). The merger in the offing would enable the combined entity to diversify and increase its revenue components as well as the customer base.
The merger synergies will assist the consolidated company to continue serving its customers more efficiently and this would be possible via greater economies of scale in operation, a strong financial position of the unified company, better access to capital, greater purchasing power and an expanded customer base.
Acquisition & Merger in Utility Space
Utility sector operators don’t shy away from merger and acquisition (M&A) activities to supplement organic growth. In addition to lending their operations a greater scale and scope, such favorable measures lead to cost synergies and better utilization of resources. The larger the size of the company, the more access it gets to capital resources, essential for vital infrastructure upgrades.
We believe that in a mature energy market like the United States, M&As represent a surefire recipe for success to enhance the market share.
Beginning this year, SCANA Corporation SCG entered into a merger agreement with Dominion Energy D. Per the accord, each stockholder of SCANA will likely acquire 0.669 shares of Dominion. Considering Dominion’s assumption of $6.7 billion debt for SCANA, the transaction is projected at roughly worth $14.6 billion.
Over the past six months, shares of Vectren have rallied 18.2%, outperforming its industry’s increase of 10.6%.
Zacks Rank & Key Picks
Vectren currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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