The combined company, to be named WEC Energy Group, will serve more than 4.3 million gas and electricity customers in Wisconsin, Illinois, Michigan and Minnesota. The deal, which will help Wisconsin Energy sell more power at stable rates set by regulators, is the latest in a series of utility transactions aimed at minimizing exposure to the volatile open market for electric power.
Power prices on both the open and regulated markets have fallen, due to an abundance of cheap shale gas, increased energy efficiency and tepid economic growth.
Integrys also said on Monday that it was in the late stages of a competitive process to divest its non-regulated marketing unit, Integrys Energy Services.
Integrys shareholders will get 1.128 Wisconsin Energy shares and $18.58 in cash per share, which works out to $71.47 per share based on Wisconsin Energy's Friday close—a premium of 17.3 percent. Integrys shares were trading at $67.41 before the bell. Wisconsin Energy's shares were down 2.5 percent at $45.70.
Including debt, the deal is valued at $9.1 billion. Integrys had total debt of $3.38 billion as of March 31, according to Thomson Reuters data.
Wisconsin Energy Chief Executive Gale Klappa will lead the combined company after its expected close in the summer of 2015. Integrys CEO Charlie Schrock will remain in his current role until then, the companies said. Wisconsin Energy said the deal would add to its earnings per share in the first full calendar year after closing.
The combined company will operate nearly 71,000 miles of electric distribution lines and more than 44,000 miles of gas transmission and distribution lines, making it the eighth largest natural gas distribution company in the United States. It will also hold a 60 percent stake in American Transmission Co, a transmission-only utility.
The transaction is subject to approvals from the Federal Energy Regulatory Commission, the Federal Communications Commission and some state commissions.
Barclays is Wisconsin Energy's financial adviser, while Lazard is advising Integrys.Skadden, Arps, Slate, Meagher & Flom LLP is Wisconsin Energy's legal counsel. Cravath, Swaine & Moore LLP and Foley & Lardner LLP are advising Integrys.