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Fortis to acquire UNS Energy for US$4.3B, including US$1.8B in debt

ST. JOHN'S, N.L. - Fortis Inc. (TSX:FTS) has signed a deal to acquire Arizona-based UNS Energy Corp. for US$4.3 billion, including the assumption of about US$1.8 billion of debt.

The Canadian utility company said Wednesday that it has agreed to pay US$60.25 per share in cash for the UNS Energy, which serves about 654,000 electricity and gas customers.

UNS Energy shares closed down 46 cents at US$45.84 on the New York Stock Exchange on Wednesday.

"These are significant regulated utility assets located in the U.S. southwest, a region experiencing above-average economic growth," Fortis president and chief executive Stan Marshall said.

"The acquisition further mitigates business risk for Fortis by enhancing the geographic diversification of our businesses, resulting in no more than one-third of total assets being located in any one regulatory jurisdiction."

Fortis said the deal is expected to add to earnings per share in the first full year after closing, excluding one-time acquisition-related costs. It is expected to close by the end of 2014, subject to shareholder, regulatory and government approvals.

Fortis said once the deal is complete it plans to inject US$200 million into UNS Energy to help fund improvements that will reduce its reliance on coal-fired power.

UNS Energy is expected to remain a stand-alone utility with its headquarters and management team in Tucson, Ariz.

"Fortis has built a successful track record of investing in fundamentally strong utilities that remain deeply engaged with the communities they serve," UNS Energy president David Hutchens said.

"They proposed this partnership because they like the way we do business, not because they're looking to change it."

To help pay for the deal, Fortis says it will raise $1.8 billion through the sale of convertible unsecured subordinated debentures.

The company said it has agreed to sell $1.594 billion in debentures on a bought deal basis to the public and $206 million more in a private placement to institutional investors. The debentures will mature on Jan. 9, 2024, and pay interest at an annual rate of four per cent.

Fortis operates utilities serving more than 2.4 million customers in Canada and in New York State and the Caribbean.

Shares in the company closed down 14 cents at C$31.19 on the Toronto Stock Exchange on Wednesday.

The Canadian Press


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