REUTERS: Dominion Energy Inc said on Wednesday it would buy Scana Corp in an all-stock deal worth about US$7.9 billion, offering the utility a way out of dealing with unhappy customers and federal investigations following a failed nuclear project.
Dominion will pay Scana's customers US$1.3 billion, averaging about US$1,000 for each customer, and has promised to cut bills by 5 percent to appease users who have been overcharged for years as Scana funded the nuclear project.
Shares of Dominion, which will also assume Scana's debt of US$6.7 billion, were down 3 percent.
Dominion's US$55.35 per share offer represents a premium of 42.4 percent to Scana's last closing price of US$38.87. Scana's shares were trading well below the offer price at US$47.79, suggesting some investors were skeptical of the deal.
Scana, which owns the South Carolina Electric & Gas Co (SCE&G), has been under pressure ever since it scrapped the V.C. Summer nuclear project in July after spending about US$9 billion on it with Santee Cooper.
Scana was funding some of the project's costs from SCE&G, a move that angered customers and led to the utility rolling back electricity rates for residential users.
The nuclear project became a lightning rod for criticism, with local politicians arguing over who should pay for the aborted project.
South Carolina Governor Henry McMaster said while the deal is a step in the right direction, it will not resolve all problems for customers.
"The only way to resolve this travesty is to sell Santee Cooper," McMaster said, noting that the state-owned utility had racked up debt of US$4 billion as it partnered Scana on the project.
As part of the deal, Dominion will also write off more than US$1.7 billion in connection with the abandoned nuclear plant.
Guggenheim Securities analyst Shahriar Pourreza said he expects regulators to approve the deal.
"Scana does not have any other option and regulators will be aware of that, so the deal is likely to go through but it will be noisy," Pourreza said.
Virginia-based Dominion is offering 0.6690 of its shares for each Scana share, or about US$55.35, based on Dominion's average stock price of the last 30 trading days ended Jan. 2.
The deal is expected to immediately add to earnings after its closure in the third quarter, Dominion said.
Credit Suisse was the financial adviser for Dominion. Morgan Stanley and RBC Capital Markets advised Scana.
(Reporting by Yashaswini Swamynathan in Bengaluru; Writing by Nivedita Bhattacharjee; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty)