Wisconsin Energy to issue $1.5 billion of debt to fund Integrys deal

By Lisa Kerner

Charlotte, N.C., June 23 – Wisconsin Energy Corp. will fund 74% its proposed $9.1 billion acquisition of Integrys Energy Group Inc. through a stock exchange.

“The remaining 26% will be funded with cash we will raise by issuing $1.5 billion of acquisition debt,” said chief financial officer J. Patrick Keyes during a conference call on Monday to discuss the deal.

Keyes said Wisconsin expects to fund the cash portion in the capital markets prior to closing, which is expected next summer.

No further financing for the transaction is required, and following transaction approval, Wisconsin still expects to be cash flow positive on an annual basis. The transaction is expected to be “roughly credit neutral,” according to Keyes.

“Given our credit ratings and the size of the financing, we didn’t think it was necessary to obtain a bridge loan facility, so we’ll issue debt at the holding company prior to closing,” said Keyes.

Eventually, Wisconsin will leverage commercial paper and then spread the holding company debt across multiple tranches, which will be determined, according to the CFO.

Chairman and chief executive officer Gale Klappa estimated the average interest rate of the acquisition debt to be “south of 4%.”

Wisconsin Energy elected to terminate its 2014 to 2017 share repurchase program in light of the proposed transaction.

“Investing our free cash flow to help fund the Integrys capital spending plan does provide a better shareholder return than a share buyback for us right now,” said Klappa.

Transaction details

Both companies’ boards of directors have approved the transaction. Integrys shareholders will receive common stock at a fixed exchange ratio of 1.128 Wisconsin Energy shares plus $18.58 in cash per Integrys share.

Total consideration is valued at $71.47 per Integrys share.

The total purchase price includes $5.8 billion for Integrys equity and $3.3 billion of assumed Integrys debt.

The combined company will be named WEC Energy Group, Inc. and will be led by Klappa. It will be based in Milwaukee.

Wisconsin Energy is a gas and electric company based in Milwaukee. Integrys is a Chicago-based diversified energy holding company.

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