29 June 2011

Fortis, Gaz Metro in war for Vermont utility

Newfoundland and Labrador-based Fortis (CA: FTS)  isn’t alone in its bid to buy Central Vermont Public Service.

The CVPS board announced on June 27 that the company has authorized talks with Gaz Metro on Gaz Metro’s unsolicited acquisition offer.  Gaz Metro is offering $35.25 per share.  That’s slightly better than Fortis offer of $35.10 per share, which the CVPS board accepted in late May.

CVPS is the largest electrical utility in Vermont.

Vermont Governor Pete Shumlin thinks the Gaz Metro offer is better for the state given that Gaz Metro already owns an electric utility and a natural gas utility in the state.

Fortis isn’t happy with the unsolicited offer from a rival. The company wouldn’t comment on the story earlier in June with Canadian media but  Vermont Public Radio quotes Fortis chief financial officer Barry Perry as saying: 

"It is a hostile bid. In the utility sector, hostile bids are not normal.  They're rare, in fact.  So, usually you end up negotiating a transaction, the board selects a party and that's the end of it.    The party is then required to get it approved by the regulator and the shareholders of the company. In this case GMP did decide to go hostile. It is a little unusual."

Under the agreement with Fortis, CVPS could wind up paying Fortis US$19 million if the deal with the company falls through.

If it is successful, Gaz Metro would create a new utility that includes a share of the state’s transmission assets.  VPR reported that as part of the merger, Gaz Metro would create a public trust comprising 30% of the shares in the state transmission utility. The trust would reportedly generate $1.0 million a year in income.


- srbp -