Gillian Tan, Columnist

Fortis Pays the Price for Paying Up

Investors won't accept growth at any price.

February 9, 2016 at 8:17 PM UTC

Gillian Tan is a senior reporter covering finance and alternative asset classes including real estate, infrastructure, private equity, private credit, venture capital and sports business. She previously wrote an opinion column for Bloomberg and was a reporter at the Wall Street Journal. She is a qualified chartered accountant.

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During M&A booms like the one we're in, acquirers become accustomed to seeing their shares rise as investors cheer the pursuit of growth. For Fortis, however, the reception towards its biggest-ever purchase couldn't have been cooler.

After agreeing to buy Midwestern power-transmission company ITC Holdings for $6.9 billion, the Canadian utility sank as much as 12.8 percent and lost more than $1 billion in market value, its biggest single-day decline since the company was formed in 1987. ITC is expected to add 5 percent to Fortis' earnings per share in the first full year following the deal's completion, and that should hearten investors. But as Bloomberg Gadfly's Liam Denning has pointed out, the market doesn't reward growth at any price.