$4.6 Billion AltaGas Deal Has Wall Street Fearing Exelon Repeat

  • WGL shares trading below price offered by Canadian company
  • Consumer advocate to pay ‘particular attention’ to process

Wall Street’s bracing itself for another utility merger fight in Washington.

Since AltaGas Ltd. proposed to buy Washington utility owner WGL Holdings Inc. for $4.6 billion Wednesday, WGL’s stock has been trading well below its offer price. Why? Consider the three attempts it took for Exelon Corp. to win approval from District of Columbia utility regulators to buy power supplier Pepco Holdings for $6.8 billion.

Investors, worried about a repeat, discounted WGL’s stock on Thursday by as much as $7.75 a share below AltaGas’s offer. The gap is a testament to how contentious state reviews of utility mergers have become in recent years as regulators work to negotiate better deals for ratepayers. Last year, Macquarie Group Ltd. had to agree not to raise rates and commit to $136 million in credits before gaining Louisiana’s approval to buy Cleco Corp. for $3.4 billion.

“Utility deals have drawn extensive scrutiny,” Katie Bays, an energy analyst for Height Securities, said by e-mail Thursday. “We expect the deal could face stiff opposition in DC and Maryland.”

District of Columbia’s Office of the People’s Counsel, which advocates for utility customers, wasted no time in saying it would pay “particular attention” to the review of AltaGas’s WGL takeover, citing what it described as “procedural flaws” in the Exelon-Pepco merger process.

The agency said in a statement Thursday that it will “aggressively advocate for the best conditions for District consumers, as we would with any merger.”

For its part, AltaGas said in a statement that it’s confident the deal will be approved “after a thorough analysis by regulators.” The Calgary-based company’s takeover of WGL will expand its reach in the U.S., where it already owns power plants and two gas distributors.

WGL didn’t immediately return a request for comment. 

Second Quarter

The transaction, which needs both federal and state regulatory approvals, is expected to close in the second quarter of 2018, the two companies said in a call with reporters on Wednesday.

The takeover comes as President Donald Trump is looking to renegotiate trade agreements with Canada.

When asked whether Trump could block the deal, AltaGas Services President John O’Brien said during the call on Wednesday, “We are already here as a company. We are here, and we have a large presence in the country. The reason we are excited about this is the growth opportunities that we have in the U.S.”

The Trump administration didn’t return a request for comment.

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