Carolina Power & Light Co. said today that it will acquire Florida Progress Corp. for $5.3 billion, creating the nation's ninth-largest electric utility.
"This gives us the size and the scope we need to be successful in the future," said William Cavanaugh, CP&L's chairman, president and chief executive.
CP&L would create a holding company to operate the utilities, Carolina Power and Florida Power, as subsidiaries. Florida Power Corp. is the electric subsidiary of Florida Progress.
The merged company would have a generating capacity of 18,500 megawatts, revenue of $6.7 billion and 2.5 million customers. The merger is expected to translate into savings of more than $100 million a year.
CP&L would be buying Florida Progress at a premium, paying shareholders $54 for each share of common stock--21 percent above Florida Progress's Friday closing price. The deal, which was approved over the weekend by the boards of both companies, includes the assumption of $2.7 billion in debt by CP&L. It must be approved by state and federal regulators.
About 1,250 positions, or 7 percent of the total work force, would be cut as a result of the merger, with the cuts coming largely through attrition, the companies said.
Analysts said the combination looked like a good match between two regional utilities that have complementary residential and industrial customer bases and whose peak generating periods don't overlap. CP&L has more business and industrial customers, and Florida Progress has more residential customers. Both operate in high-growth states.
"What the public will get are financially stronger utilities and utilities that will be able to keep the prices frozen for a long period because of the strength they get from the merger," said Barry Abramson, a utility-stock analyst with PaineWebber in New York.
The utilities "also see that deregulation is coming eventually, and they know that size and scope are going to be very important," Abramson said. "It's better to prepare yourself early for something that is going to happen. . . . The southeastern states are way behind the other states in implementing utility deregulation. Regulators don't feel a pressing need because they already have low rates."
Cavanaugh, 60, would be chairman, president and chief executive of the new company. Richard Korpan, the head of Florida Progress, would retire as that company ceased to exist. He would serve on the board of the new holding company.
Florida Power would continue to be based in St. Petersburg. The license of its nuclear plant, Crystal River, would be transferred to CP&L pending approval by the Nuclear Regulatory Commission.
Thomas Hamlin, an analyst with First Union Capital Markets, said Florida Power would benefit from CP&L's expertise in operating nuclear power plants. "As competition comes, customers will always be better served by having more efficient power suppliers," he added.
Investors pushed Florida Progress's stock up 5 percent, or $2.18 3/4, to $46.81 1/4, in trading on the New York Stock Exchange. CP&L's shares sagged 6 percent, falling $2.31 1/4, to $36.68 3/4.