Duke Energy Reported to Buy Progress Energy

Econintersect:  Numerous sources are reporting that a deal for Duke Energy to buy rival Progress Energy may be announced on Monday.  If completed, the merger would produce the largest electric utility in the southern United States.

The total cost to Duke would be in the vicinity of $24-25 billion, with an-all stock transaction worth a rumored $13.1 billion and the assumption by Duke of more than $11 billion in Progress Energy debt.  The merged utility would serve more than 7 million customers in North and South Carolina, Florida, Kentucky, Ohio and Indiana.

Duke Energy is headquartered in Charlotte, NC and Progress Energy in Raleigh.  Duke serves approximately 4 million customers and Progress Energy about 3.1 million.Trading in both stocks reflected rumors starting with Duke on Wednesday and for both companies on Thursday.  Duke (DUK) opened the week at $17.81 and traded as high as $18 on Tuesday.  Wednesday saw a gap down open to $17.80 and, after trading as low as $17.63, closed Friday back up to $17.79, down only $0.02 for the week.

Progress Energy (PGN) opened at $43.55 Monday, traded very flat until Thursday, when it gapped down at the open and hit a low of $42.57 during the day.  PGN closed up strongly on Friday at $44.72.  It was up 2.7% for the week and more than 5% from Thursday’s low.

It was reported by the Charlotte Observer that DealReporter, a merger and aquisition information service, said that Progress Energy was not interested in a deal unless it received at least $47 a share.  The  Wall Street Journal reported that  Duke is paying a “low premium” to Progress’ shares.  Available information does not indicate the deal is quite worked out yet.

The last big merger for Duke came in 2005 when it acquire Cinergy of Ohio for $9 billion in another all stock deal.  Since then Duke has lost out in other acquisition bids, most recently a 2010 bid for the U.S. assets of German utility E.ON (EONGn.DE).

There are no comments from the participants.

From WRAL TV in Raleigh: “We don’t comment on any of that stuff if it’s speculation,” said Mike Hughes, a spokesman for Progress Energy.

For Duke:  “There’s been speculation off and on over the years,” said Duke spokesman Tom Williams. “We never comment on merger speculation either way.”  (Charlotte Observer)