Over the past year, Canadian power firms, ranging from power generators to distributors, have been looking at potential takeover targets abroad. So it's no surprise that more deals are getting signed outside our borders. Yet a recent spate of acquisitions proves that the competition for foreign assets is getting more competitive.
The latest example is Gaz Métro LP's combination with Central Vermont Public Service Corp. To secure the deal, Gaz Métro had to outbid Fortis Inc. , a Canadian rival. The offer was originally put forward at the end of June, and on Tuesday CVPS agreed to terminated its agreement with Fortis.
The new deal comes on the heels of Atco Ltd. buying Western Australia Gas Networks for $356-million (Australian), plus $644-million in debt. Capital Power Corp. has also scooped up three New England assets in the past few months and Emera Inc. has been looking at Caribbean power assets as well as investing in companies that own New England based assets.
Nancy Southern, Atco's chief executive officer, admitted that Canada is already bought up, so firms like hers have had to look abroad. "We will to continue to grow [in Canada]" she said, "but we are really saturated, especially in Western Canada."
To secure CVPS, Gaz Métro didn't pay much more than Fortis, offering $35.25 versus $35.10 in an all-cash deal. Because the bid was put forward to CVPS's board a few weeks back, there was speculation that Fortis could come back in with a higher offer, because it barely was outbid. Plus, the takeover was much cheaper alternative for Fortis over having to build a New England plant on its own.
CVPS was also required to negotiate with Fortis for five days prior to terminating the agreement. However, Fortis has decided to fully terminate its agreement, and take a $17.5-million fee instead.
Although Fortis sold $300-million common shares to help fund the purchase of CVPS, investors don't seem to mind that the deal has been killed. The company's stock is basically flat this morning.
As for Gaz Métro, the deal makes a lot of sense. Gaz Metro already owns 100 per cent of Green Mountain Power Corporation, an integrated electric utility in Vermont, so it can merge that with CVPS.
BMO Nesbitt Burns acted as Gaz Métro's financial adviser, while Osler, Hoskin & Harcourt LLP advised on legal issues.