NEW ORLEANS (dpa-AFX) - Entergy Corp. (ETR) and ITC Holdings Corp. (ITC) announced on Monday that the Boards of Directors of both companies have approved a definitive agreement, under which Entergy will divest and then merge its electric transmission business into ITC.
Under the deal terms, Entergy would divest its electric transmission business to a newly-formed entity, Mid South TransCo LLC, and distribute this newly-formed entity to its shareholders in the form of a tax-free spin-off. Transco will then merge with and into a newly-created merger subsidiary of ITC in an all-stock, Reverse Morris Trust transaction.
The deal is expected to complete in 2013 subject to the satisfaction of certain closing conditions, including the necessary approvals.
Entergy expects to receive gross cash proceeds of $1.775 billion from indebtedness that will be incurred in connection with the deal. This indebtedness will be assumed by ITC at the close of the merger.
The merger will result in shareholders of Entergy receiving 50.1 percent of the shares of pro forma ITC in exchange for their shares of Transco, with existing shareholders of ITC owning the remaining 49.9 percent of the combined company.
Prior to the merger, ITC expects to effectuate a $700 million recapitalization, currently anticipated to take the form of a one-time special dividend to its shareholders.
The transaction is expected to be immediately value accretive to ITC shareholders. Rate base for pro forma ITC is projected to be approximately $7.1 billion by year-end 2013.
Joseph Welch, ITC chairman, president and CEO, said, 'By combining these businesses, we will significantly enhance the scale of our operations and financial resources as we continue to invest in electric transmission infrastructure for the benefit of customers, resulting in improved reliability, reduced system congestion and greater access to competitive energy markets.'
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