FirstEnergy plans to merge with Allegheny in £3bn deal

City A.M. Reporter
OHIO-BASED power company FirstEnergy plans to buy Pennsylvania’s Allegheny Energy in an all share deal worth $4.7bn (£3.01bn) that would create one of the largest utility groups in the US.

The combined business would have a generation capacity of 24,000 megawatts and serve more than 6.1m customers, the companies said yesterday.

Shares in Allegheny rose just 12 per cent yesterday, far short of the premium of 32 per cent that FirstEnergy offered, indicating investor scepticism over a deal that faces regulatory hurdles both at the federal level and from state regulators.

The merged company would operate in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, New York and Virginia.

Regulators have held up utility deals in recent years on fears power prices for their residents will increase and quality of service will decline. FirstEnergy expects the deal to close in 12 to 14 months, although that may be an optimistic goal, one analyst said.

“I think it takes longer to get the approvals,” said Michael Worms, analyst with BMO Capital Markets.