In the latest round of energy company
combinations, Energy East Corp. has agreed to acquire RGS Energy
Group Inc. for $1.4 billion.
The deal, unveiled Tuesday and approved by both companies'
boards over the long holiday weekend, would create an energy
provider serving nearly 3 million customers in upstate New York,
Connecticut, Maine, Vermont and Massachusetts. The combined company
will have annual revenues of about $5 billion and have nearly $10
billion in assets.
The merger may face intense scrutiny from regulators, who are
concerned about the impact on customers already smarting from
energy price increases.
Energy East and RGS, the parent company of Rochester Gas &
Electric, said they expect to receive approval from New York
state's Public Service Commission and to complete the deal within a
year.
Officials from both companies believe resistance from regulators
is unlikely because of predicted consumer benefits, said Wes von
Schack, Energy East's president and chief executive officer.
"Between the two of us, we're in a position to supply a
reliable amount of energy at stable prices," von Schack said in an
interview.
Mike Worms, an analyst with Gerard Klauer Mattison & Co. in New
York, predicted Energy East would overcome any regulatory
roadblocks. He called the deal "pretty straightforward" and in
line with Energy East's recent acquisitions of CTG Resources,
Central Maine Power and Southern Connecticut Gas Co. Other
susidiaries of Energy East include Berkshire Gas Co. in
Massachussets and Connecticut Natural Gas.
Energy East and RGS have about 8,000 employees, and about 5,000
of them work in upstate New York.
Some jobs will be cut through attrition, but no layoffs are
anticipated, von Schack said. He said he did not know how many
employees Energy East would have after the deal is completed.
"We don't really have a number for that," von Schack said.
"We're not fixed on a particular number of employees."
Utilities started merging in the 1990s, after a federal
deregulation law was passed that allowed non-utilities to generate
and market electricity, essentially breaking the legal monopoly
that public utilities had long enjoyed.
The biggest one yet is a pending marriage between Entergy Corp.
and Florida Power & Light that would create the nation's largest
utility, with more than 6 million customers.
Energy East plans to give RGS shareholders the equivalent of
$39.50 for each share of stock they own, payable in cash or in
Energy East common stock. Energy East will also assume about $1
billion in debt.
Shares of RGS were trading Tuesday afternoon at $36.28, up
$3.18, or 9 percent, on the New York Stock Exchange. Shares of
Energy East fell $1.64, or 9 percent, to $17.50, also on the NYSE.
