Northeast Utilities Buying NSTAR in No-Premium Deal

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Northeast Utilities (NU) is buying NSTAR (NST) for about $4 billion in a no-premium deal. The companies agreed to a stock-for-stock merger of equals with a total enterprise value of $17.5 billion to create a company with nearly 3.5 million electric and gas customers -- over half of the customers in New England.

The merger will create one of the nation's largest utilities, the companies said, operating under the Northeast Utilities name. Under the terms of the agreement, NSTAR shareholders will receive 1.312 Northeast Utilities common shares for each NSTAR share, which is $40.28. The transaction has a total equity value of $9.5 billion and an enterprise value of $17.5 billion.

The ratio reflects a no-premium merger based on the average closing share price for the last 20 trading days, the companies said, but it's a slight premium to NST's Friday close of $39.53.

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Following completion of the merger, Northeast Utilities will own approximately 56% and NSTAR approximately 44% of the combined company. The transaction is expected to add to Northeast Utilities' earnings in the first year following close.

"NSTAR's strong cash flows are very complementary to Northeast Utilities' attractive regulated investment opportunities, mitigating the need for future equity issuances, which is a significant benefit for our shareholders," said Chairman, President and CEO of Northeast Utilities Charles Shivery, who will become the non-executive chairman of the new company for one and half years.

"This merger, upon completion, will provide a significant increase in the dividend for Northeast Utilities shareholders and will enable long-term dividend growth opportunities that are so important to all of our investors."

Chairman, President and CEO of NSTAR Thomas May, who will serve as president and CEO of Northeast Utilities and assume the additional role of chairman after 18 months, said, "NSTAR's very strong balance sheet coupled with Northeast Utilities' impressive array of transmission investment opportunities and diversified suite of distribution businesses translates into a compelling growth story." The two companies have plans to invest $9 billion in New England's energy infrastructure over the next five years.

The combined company, which will have over 9,000 employees in Massachusetts, New Hampshire and Connecticut, will operate six regulated electric and gas utilities in three states. Northeast Utilities will have nearly 4,500 miles of electric transmission lines, 72,000 miles of electric distribution lines and 6,000 miles of gas distribution lines.

While the boards have already approved the deal, shareholder approval will be sought in early 2011.
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