Black Hills Corp. (NYSE: BKH) and Northwestern Energy, Inc. d/b/a Northwestern Energy (NASDAQ: NWE) have announced a definitive agreement to combine in an all-stock, tax-free merger. The merger is expected to create a premier regional regulated electric and natural gas utility company with a pro forma market capitalization of approximately $7.8 billion and a combined enterprise value of $15.4 billion. The transaction is expected to close in 12 to 15 months, subject to customary closing conditions and regulatory approvals.
Under the terms of the agreement, Northwestern shareholders will receive a fixed exchange ratio of 0.98 shares of Black Hills for each share of Northwestern they own at the close of the transaction. Black Hills shareholders will continue to hold the same number of shares of the combined company that they hold of Black Hills immediately prior to the closing of the transaction. Upon completion of the merger, Black Hills shareholders will own approximately 56% and Northwestern shareholders will own approximately 44% of the combined company on a fully diluted basis.
The combined company, serving approximately 2.1 million customers across eight contiguous states, is expected to result in a stronger, more resilient platform to meet customers' rising energy needs. This increased scale is expected to drive operating and cost efficiencies across the combined enterprise.
The merger is anticipated to double the size of each company's rate base to a total of approximately $11.4 billion, with approximately $7.0 billion and $4.4 billion for electric and natural gas, respectively. The combined companies' current investment plans from 2025 to 2029 exceed $7 billion and will be focused on building new electric and natural gas critical infrastructure to meet rising energy demand and advancing energy resilience in the regions where the combined company operates.
The combined company supports a long-term target EPS growth rate of 5% to 7%, greater than both Black Hills and Northwestern on a standalone basis. Additionally, the combination is expected to be accretive to each company's EPS in the first year following the close of the transaction.
The combined company is expected to have substantial cash flows to support a customer-focused capital investment program and an ongoing strong investment-grade credit quality. Both companies expect to maintain their existing dividend policies until the merger transaction is completed.
Upon closing of the transaction, Mr. Bird will serve as chief executive officer of the combined company, with Marne Jones as chief operating officer, Crystal Lail as chief financial officer, and Kimberly Nooney as chief integration officer. The combined company will be headquartered in Rapid City, South Dakota.
The transaction is being advised by Goldman Sachs & Co. LLC as exclusive financial advisor to Black Hills and Faegre Drinker Biddle & Reath LLP as legal advisor. Greenhill, a Mizuho affiliate, is serving as exclusive financial advisor to Northwestern, and Morgan, Lewis & Bockius LLP is serving as legal advisor.
The companies will hold a joint investor conference call and webcast to discuss the transaction. The market has reacted to these announcements by moving the company's shares 0.86% to a price of $60.87. For the full picture, make sure to review BLACK HILLS CORP /SD/'s 8-K report.
