The Successful Investor Hotline – Friday, February 12, 2016

Article Excerpt

FORTIS INC., $36.20, Toronto symbol FTS, has agreed to buy ITC Holdings Corp. (New York symbol ITC), which owns 25,100 kilometres of high-voltage power lines in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. The company is paying $6.9 billion U.S. in cash and shares for ITC. Following the acquisition, ITC shareholders will own 27% of the combined company. Fortis will also list its shares on the New York Stock Exchange; its shares will continue to trade in Toronto. If you include ITC’s $4.4-billion U.S. debt, the total purchase price is $11.3 billion U.S. (or $15.7 billion Canadian). That’s roughly 1.5 times Fortis’s current market cap (the value of all outstanding shares) of $10.3 billion. Fortis will issue $2 billion U.S. in new bonds to help pay for ITC. That will add to the company’s long-term debt, which was $11.3 billion, as of September 30, 2015. Fortis also plans to sell 19.9% of ITC to a private investor. Big acquisitions like this add risk…