Bloomberg News

Duke Pushes Back Progress Takeover to March, Citing Ruling

December 16, 2011

Dec. 15 (Bloomberg) -- Duke Energy Corp. delayed the expected closing of its $16.2 billion takeover of Progress Energy Inc. to March after U.S. regulators rejected its plan to ease competition concerns.

The companies remain committed to the transaction and will submit revised terms promptly, Charlotte, North Carolina-based Duke said in a statement today. The transaction would create the largest U.S. utility owner.

The Federal Energy Regulatory Commission yesterday declared Duke’s proposal to sell some power in North Carolina and South Carolina at 10 percent above cost to preclude its ability to run up prices insufficient. Duke had planned to close the transaction by Jan. 1.

“The time line is shot,” Philip Adams, a Chicago-based analyst for Gimme Credit LLC, said earlier today in an interview. “The deal is in regulatory trouble.” Adams rates the debt of both companies at “underperform” and doesn’t own their stock nor bonds.

Market confidence that the deal would close as expected waned today. Progress shares fell 1.3 percent to close at $53.75, dropping $1.22 below the value of Duke’s all-stock offer. The arbitrage spread on the deal widened by $1.18 from 4 cents yesterday. Duke shares rose less than 1 percent to close at $21.04 in New York, their highest close since May 15, 2002.

Duke must notify North Carolina and South Carolina regulators of any planned federal regulatory filings under an agreement that cleared the way for its $5.7 billion takeover of Cinergy Corp. in 2006. Those notices will be given, it said.

The federal commission wants Duke, Raleigh, North Carolina- based Progress and other utility owners in the U.S. Southeast to sell their power plants and allow interstate oversight of competitive wholesale power markets by regional transmission organizations, Adams said. Southeastern regulators want to keep utilities integrated with state-regulated power rates based cost, he said.

--Editors: Jasmina Kelemen, Charles Siler

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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