(Reuters) - U.S. power company NextEra Energy Inc (NEE.N) said it would buy Hawaiian Electric Industries Inc (HE.N), Hawaii’s largest power supplier, for about $2.63 billion in cash and stock to expand its regulated holdings.
As part of the deal, Hawaiian Electric will spin off its subsidiary ASB Hawaii Inc, the parent company for American Savings Bank, into a publicly traded company.
Hawaiian Electric shares were up 17.4 percent in extended trading at $33.10, slightly shy of the deal value of $33.50 per share, which includes the $8 per share estimated value of ASB Hawaii.
NextEra, which owns Florida Power & Light Co, is one of the largest rate-regulated electric utilities in the United States.
U.S. power producers have recently benefited from higher prices set by regulators, and prefer the controlled market to the volatile wholesale power market.
NextEra will give 0.2413 of its shares for each Hawaiian Electric share, which equates to about $25.19 per share, based on the stock’s Wednesday close. The company will also pay a one-time cash dividend of 50 cents per share.
NextEra will assume $1.7 billion of Hawaiian Electric’s debt, the companies said, valuing the deal at about $4.3 billion.
The companies added there would be no “involuntary reductions” to Hawaiian Electric’s workforce for at least two years after the deal closes.
American Savings Bank is one of Hawaii’s largest full-service financial institutions with over $5 billion in assets.
The deal is expected to be neutral to NextEra’s profit in the first year after closing, which is expected in 12 months.
NextEra Energy were unchanged in extended trading from their closing of $104.39 on Wednesday.
J.P. Morgan Securities LLC advised Hawaiian Electric and Skadden, Arps, Slate, Meagher & Flom LLP was legal counsel. Citigroup Global Markets Inc advised NextEra and Wachtell, Lipton, Rosen & Katz was legal counsel.
Reporting by Shubhankar Chakravorty in Bengaluru; Editing by Simon Jennings and Savio D'Souza