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Utilities call off $6B merger
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May 16, 1997: 8:12 p.m. ET
Northern States Power, Wisconsin Energy end two-year effort to combine
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NEW YORK (CNNfn) - Two days after federal regulators rejected their merger plans, Wisconsin Energy Co. and Northern States Power Co. late Friday agreed to terminate their two-year-old efforts to form the nation's tenth-largest utility.
The two Midwestern utilities announced on May 1, 1995, their plans to form a new $6-billion company, to be called Primergy Corp. Today, however, officials from both companies expressed exasperation with the process of gaining regulatory approval.
"There is simply no end to this process in sight," said James J. Howard, chairman and chief executive of Minneapolis-based Northern States Power.
"Continuing the Primergy transaction, given the current regulatory climate, is not in the best interests of our stockholders, customers and employees," said Richard A. Abdoo, chairman and chief executive officer of Minneapolis-based Wisconsin Energy Corp.
Howard explained that when the applications were originally filed two years ago, executives had anticipated regulatory approval would take a year-and-a-half at most. But the changes brought about by deregulation have forced regulators to alter their views, increasing scrutiny of mergers transactions, he said.
"Unfortunately, the regulators have chosen [transactions] like this one to resolve many of these issues," Howard said in a statement.
The Federal Energy Regulatory Commission (FERC) Wednesday ruled that the two utilities would have to restructure their merger plans within three months in order to obtain approval. The ruling suggested the companies had to divest some generation capacity to ease concern of market concentration.
Indeed, the companies admitted regulators would have "significantly" reduced the benefits of the transaction. They had hoped to recognize $2 billion in cost reductions.
The companies today said they have agreed to examine several potential collaborative efforts that came up during the merger planning process.
To date, approvals have been granted by the state regulatory commissions in Michigan and North Dakota, but not by the commissions in Minnesota and Wisconsin. Approvals from the Securities & Exchange Commission and U.S. Department of Justice also are pending.
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