Power company AES Corp. (NYSE: AES) announced an agreement to acquire smaller rival DPL Inc. (NYSE: DPL) for $3.5 billion, or $30 a share, in cash.
The deal is the latest in the wave of consolidation in the power industry, as companies seek to add customers to offset high regulatory barriers and aging power grids.
AES said it is concentrating its growth efforts in a few key markets, including the U.S. utility sector.
The purchase price represents an 8.7 percent premium over DPL’s closing share price of $27.59 on Tuesday.
Including DPL's net debt, the transaction has an enterprise value of $4.7 billion.
The DPL acquisition is expected to be value and earnings accretive and to build on our nearby utility business at Indianapolis Power & Light Company, said Paul Hanrahan, President and Chief Executive Officer of AES.
DPL’s principal subsidiaries include The Dayton Power and Light Co. (DP&L); DPL Energy, LLC (DPLE); and DPL Energy Resources Inc. (DPLER). DPL has around 1,500 employees.
DP&L sells electricity to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio. DPLE engages in the operation of merchant peaking generation facilities; and DPLER is a competitive retail electric supplier in Ohio.
DPL, through its subsidiaries, owns and operates around 3,800 megawatts of generation capacity, of which 2,800 megawatts are low cost coal-fired units and 1,000 megawatts are natural gas and diesel peaking units.
AES has 40,500 megawatts of generating capacity and 11.5 million customers.
The transaction is expected to close in the next six to nine months.
In January, Duke Energy Corp. and Progress Energy Inc. merged in a $13.7 billion, stock-for-stock deal, creating the largest U.S. utility.
Shares of Arlington, Virginia-based AES ended Tuesday's regular trading at $12.47 on the NYSE.