Wisconsin Energy (WEC +1.9%) regains some of yesterday's 3.5% loss following its acquisition of Integrys (TEG +1.5%) for $71.47/share, which represents a 17.3% premium to Friday's closing price.
Wells Fargo upgrades WEC to Outperform and raises its target price for shares to $50-$51 from $49-$50, believing the deal makes strategic sense given synergies associated with geographic fit and potential opportunities via an increased ownership in Wisconsin transmission grid owner ATC; however, CRT Capital cuts its WEC target price to $44 from $48, citing subsequent increased regulatory risk and potential year-long overhang (Briefing.com).
Utilities that meet takeover criteria outlined by Warren Buffett this weekend for another “major” acquisition after paying more than $5B last year for electricity provider NV Energy include Wisconsin Energy (WEC +1.8%) and Alliant Energy (LNT +1.1%), Bloomberg speculates.
WEC and LNT operate in states with favorable regulatory environments, and LNT is expanding into renewable energy, which Buffett has signaled could be a focus for large investments, according to Morningstar; pipeline MLPs such as Plains All American (PAA) and MarkWest Energy (MWE) also could appeal to Buffett, a Baird analyst says.
Berkshire Hathaway (BRK.A, BRK.B) “is likely looking at a lot of small, regulated utilities that have a lot of growth on the table where his low cost of capital is an incredible advantage,” Morningstar's Mark Barnett says.
Small and mid-cap regulated utilities with high dividend yields are trading slightly lower as investors rotate positions on rising treasury yields: CNL -1.7%, EE -2.1%, GXP -1.7%, PNW -2.4%, POR -2.5%, SCG -1.9%, NVE -2.8%, WEC -2.5%, WR -2.6%, AWK -1.7%.
Alliant Energy's (LNT +1.4%) recent moves to revise provisions for executive pay and employee retirement plans in case of a takeover sparks speculation that the operator of power plants in Wisconsin and Iowa could sell itself to Berkshire Hathaway (BRK.A) or Wisconsin Energy (WEC).