Power-Line Operator ITC Starts Review That May Lead to Sale

Updated on
  • Study is part of effort to maximize value to shareholders: ITC
  • National Grid, Iberdrola may consider bidding: people familiar

ITC Holdings Corp. said Monday it is engaged in a strategic review that may lead to a sale of the power-line company as it works to “maximize value for shareholders.”

The company’s board of directors hasn’t decided to enter into a transaction, Novi, Michigan-based ITC said in a statement late Monday. There are no guarantees that the study will result in a deal, ITC said.

ITC’s review comes as power companies across the U.S., grappling with slackening electricity demand and rising capital costs, are seeking deals in other areas that promise better growth. Shares of the power-line builder and operator surged as much as 13 percent, the most in a decade, after Bloomberg News reported that it was considering a sale.

“This seems to be an environment where utilities are trading at pretty high valuations and where there is a lot of interest in potential acquisitions, with buyouts happening at pretty high premiums," Paul Patterson, a New York-based analyst for Glenrock Associates LLC, said by phone. “It wouldn’t surprise me if ITC is not alone in reviewing its options strategically in such an environment.”

ITC shares rose 2.6 percent to $37.84 at the close in New York, lifting its market value to about $5.8 billion. Shares closed up 9.3 percent on Monday at $36.88.

“Launching a sale process now would make sense,” Citigroup analyst Praful Mehta said in a research note Monday. ITC may fetch as much as $45 a share, reflecting a premium of as great as 37 percent over the 50-day average stock price, according to the note.

Potential Bidders

Utilities including the U.K.’s National Grid Plc and Spain’s Iberdrola SA may consider bidding for ITC, people familiar with the situation said. The deliberations are at an early stage and may not lead to a sale, they said, asking not to be identified because the process is private.

“Our Board of Directors is focused on creating value for our shareholders and so we are conducting a review of strategic alternatives to ensure that we are doing that,” ITC Chief Executive Officer Joseph L. Welch said in the company’s statement.

Almost 30 utility deals have been announced this year in the U.S. and Canada, with a total value of about $44 billion, data compiled by Bloomberg show. They include Southern Co.’s acquisition of natural gas distributor AGL Resources Inc. for a 36 percent premium and Duke Energy Corp.’s pending purchase of Piedmont Natural Gas Co. for a 46 percent premium.