Black Hills Corp., which provides electricity and natural gas in Colorado and seven other states, is merging with Montana-based NorthWestern Energy Group to create a utility with an enterprise value of $15.4 billion and to meet the growing demand for service across their territories.
The companies announced the all-stock, tax-free transaction Tuesday, saying that board members of each unanimously approved the agreement. The utility will have a market capitalization of approximately $7.8 billion, based on each company’s closing stock price as of Monday.
“The combined company will have greater scale and financial strength to consistently deliver for customers across our service territories and invest at the pace and scale that today’s energy transformation demands,” Black Hills Corp. President and CEO Linn Evans said in a statement.
Black Hills, based in Rapid City, S.D., has 215,000 natural gas customers throughout Colorado and a total of 108,000 electricity customers in the Pueblo area, Rocky Ford and La Junta. The utility serves a total of 1.35 million customers across its territory, which includes Arkansas, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming.
NorthWestern Energy has 800,000 customers in Montana, South Dakota, Nebraska and Yellowstone National Park.
During a call Tuesday with reporters, Evans and NorthWestern Energy President and CEO Brian Bird said combining the two companies should help lower costs through economies of scale and create long-term benefits for customers.
Black Hills Corp. raised electricity rates in Colorado earlier this year. The company scaled back the boost in revenue it was seeking after objections from customers and public hearings in Pueblo and other communities.
The Colorado Public Utilities Commission approved the rate increases in March. Black Hills said the approval would enable it to invest about $370 million in its system.
Evans said the companies believe with the merger, customers could see lower or fewer rate increases over the long term.
Under the agreement, NorthWestern shareholders will receive a fixed exchange ratio of 0.98 shares of Black Hills for each NorthWestern share they own at the close of the transaction. Black Hills shareholders will own approximately 56% and NorthWestern shareholders will own approximately 44% of the combined company.
The transaction is expected to close in 12 to 15 months. On closing, Bird will take over as CEO of the combined company. Evans plans to retire as Black Hills CEO when the merger is complete. The company ‘s headquarters will be in Rapid City.
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