econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 13 July 2016

Post-Brexit Invasion: Foreign Utes Come Shopping

by Richard Stavros

Investing Daily Article of the Week

One of the country's top utility investment bankers predicts increased cross-border merger activity as European and Canadian firms seek safety in the U.S.

Of course, the strengthening dollar could also cause capital to flow in the opposite direction. In the wake of the U.K.'s vote to exit the European Union, there is also speculation that, with the dollar rising against the pound and euro, some U.S. utilities may be looking to acquire foreign utilities on the cheap.

In fact, the strong dollar has already boosted U.S. cross-border merger-and-acquisition activity to its highest level in two decades, according to Bloomberg.

The news service noted:

"With the greenback averaging its strongest level for a year since 2002, American companies have announced almost 3,100 deals in 2015, the fastest clip since at least 1996."

As such, investors should be on the lookout for more M&A that could make for better valuations on greater earnings and growth, dividend strength, and possible eye-popping premiums for core Utility Forecaster holdings.

To be sure, we've already seen the beginning of this trend of foreign acquisitions of U.S. utilities with the purchase of UIL Holdings by Spain-based Iberdrola (OTC: IBDRY) to form Avangrid (NYSE: AGR), and Canadian utility giant Fortis' (TSX: FTS, OTC: FRTSF) bid for ITC Holdings (NYSE: ITC), to name just a couple.

Even so, investors might be forgiven for being skeptical of an investment banker who predicts more mergers, as it's in their interest to do so.

But Jeffrey Holzschuh, chairman of institutional securities at Morgan Stanley, who spoke at the recent Deloitte conference that I attended, has had a formative role in shaping the U.S. utilities sector. Indeed, over the past 20 years, I've seen his name repeatedly associated with some of the biggest deals in the industry.

So when I heard he'd be speaking in D.C., I knew Utility Forecaster had to be there. And he did not disappoint.

Holzschuh explained that many of these international firms are not only looking to diversify their holdings, but in some cases may be looking to domicile in the U.S., which would make it easier to get listed on U.S. exchanges and market their securities to U.S. investors.

Without disclosing which companies or where, he predicted that there will be five or six reasonably big deals in the near future, as well as further spin-offs or carve-outs, where those with higher risk tolerances can invest in specific assets.

The veteran banker also believes that most of the deals announced over the past few months will be completed or approved by regulators, though the proposed acquisition of Hawaiian Electric (NYSE: HE) by NextEra Energy (NYSE: NEE) does look increasingly uncertain given the pushback from regulators.

Holzschuh, who has been a banker for more than 30 years, remembers that he used to follow 275 companies, but given industry consolidation over the decades, that number has fallen to just 55.

This statistic underscores that M&A opportunities are becoming scarcer by the day. Even if the sector hits peak consolidation, the next era of dealmaking could see sprawling utility empires rationalized via spin-offs, IPOs of subsidiaries, or carve-outs.

But for right now, all eyes are on international utilities.

Holzschuh said:

"We are going to continue to see European and Canadian utilities who continue to perceive growth in the U.S. versus Canada and Europe."

That means we could be dealing with more happy dilemmas, where the joy of a takeover at a premium is balanced by the need to find another dependable dividend payer at the right price.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Investing


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Was Marx Right?
Angst in America, Part 5: The Crisis We Can’t Muddle Through
News Blog
Voice Recognition Elevator In Scotland
May 2017 Economic Forecast: Return to Normal Growth
Guanxi: How Business Is Done In China
Measuring Interest Rate Risk In The Very Long Term
2016 Small Business Credit Survey: A Significant Majority Relied On Personal Finances
How Economic Changes Affect Congressional Budget Office's Budget Projections
Three Public Relations Blunders And How Your Company Can Learn From Them
Infographic Of The Day: Cheat Sheet: NAFTA's Mixed Track Record Since 1994
Early Headlines: Trump Blames Dems And Constitution For Chaos, US Child Poverty, Winter Leaves North New England, Labour Gains In Polls, And More
Grading President Trump's First 100 Days: B!
The Most Important Gaming Platforms 2017
Earnings And Economic Reports: Week Starting 01 May 2017
Ancestors Of Flores 'Hobbits' May Have Been Pioneers Of First 'Human' Migration Out Of Africa
Investing Blog
Technical Thoughts: Finding Contrarian Ideas
More People Have Access To Netflix Than A DVR
Opinion Blog
Investors: Super Size Me
How Our Addiction To Safety Could Lead To Another Financial Crisis
Precious Metals Blog
A New Age For Gold
Live Markets
28Apr2017 Market Close: Wall Street Closed Mostly Down On News The U.S. Economy Grew At Its Weakest Pace In Three Years, WTI Crude Settles In The Low 49 Handle
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved