Wisconsin Energy Corp.’s proposed acquisition of Integrys Energy Group Inc. for $9.1 billion in cash and stock is drawing mixed reviews on Wall Street.
The Milwaukee-based parent company of We Energies plans to rename the merged firm WEC Energy Group Inc.
There have been 12 electric-utility merger announcements in the U.S. and Canada this year, compared with three at this point in 2013, according to FactSet.
Wells Fargo upgraded its rating of Wisconsin Energy’s stock (trading with the ticker symbol of WEC) from “market perform” to “outperform” and raised its price target to $50-$51 from $49-$50. A Wells Fargo analyst praised the strategic synergies and the geographic fit of the two companies.
Similarly, ISI Group upgraded Wisconsin Energy from “cautious” to “neutral.”
However, CRT Capital cut its price target of Wisconsin Energy’s stock to $44 from $48, citing subsequent increased regulatory risks.
Moody’s Investors Service changed its rating outlook for Wisconsin Energy’s stock to “negative” from “stable.”
Moody’s stated, “The change in WEC’s rating outlook to negative from stable considers that should the transaction close WEC’s credit profile will deteriorate as it acquires a company with a weaker credit profile in a leveraged transaction. The negative outlook reflects the increase in WEC’s holding company debt compared to the consolidated indebtedness which will hover around 20 percent for a sustained period of time. It further considers the introduction of integration risk given WEC’s limited acquisition experience and lack of track record in operating under the Illinois regulatory environment. WEC’s negative outlook considers the expected deterioration in WEC’s consolidated key credit metrics.”
The deal has already been unanimously approved by the boards of directors of both companies. The transaction is anticipated to close in the summer of 2015.
