New York/Chicago: Canadian power producer Emera Inc agreed to buy Florida generator Teco Energy Inc for $6.5 billion on Friday, marking its biggest acquisition to date and a major shift for the company into US power and gas markets.

Under the terms of the all-cash agreement, Teco investors will receive $27.55 per common share, a 48 per cent premium based on the company’s July 15 closing price, the companies said in a statement. The deal also includes the assumption of about $3.9 billion in debt. US operations would account for about 71 per cent of Emera’s earnings after the acquisition, up from less than half currently, the company said.

A push by electric utilities to consolidate to capture more customers and spread out operating costs has run head-on into resistance from municipalities and state regulators who’ve questioned the benefits of the deals to customers. Exelon Corp., NextEra Energy Inc and other would-be purchasers have been stopped short or slowed in efforts to buy their way to growth.

Where some rival utilities have failed to sway regulators, Emera may succeed because of its track record of hands-off management, said Timothy Winter, an analyst at Gabelli & Co. in Rye, New York. “The Canadians have a history of leaving a utility in place,” he said.

The acquisition will be accretive to earnings in 2017 and help the Halifax, Nova Scotia-based Emera extend its 8 per cent dividend growth target beyond the existing forecast of 2019, the company said. The generator was targeting “a new platform in growth markets” in snatching up Teco’s far-flung assets, according to the statement. Florida is home to six of the 20 fastest-growing US metropolitan areas.

Company Doubling

Prior to Friday’s announced deal, Emera spent about $750 million on acquisitions during the past half decade. “We’re essentially doubling the company,” Chris Huskilson, the company’s chief executive officer, said in a call with investors late Friday.

Emera’s strategy has been to pay a premium for acquisition targets and leave the management teams and corporate headquarters in place, Winter said.

“It is a healthy price,” Winter said in a telephone interview on Friday. Emera and other Canadian utilities that have gone on buying sprees “tend to pay a reasonable price to make shareholders happy.”

Tampa-based Teco, which owns assets as diverse as gas-fired power plants in New Mexico and coal mines in Virginia, effectively put itself up for sale in July when it hired Morgan Stanley to explore options. Nationwide, power suppliers are working on an estimated $50 billion in mergers and acquisitions as the industry faces tepid sales, rising costs and tougher regulations.

Exelon Rejection

Regulators in Washington rejected Exelon’s takeover of Pepco Holdings Inc last month, throwing in doubt a $6.8 billion deal. Betty Ann Kane, chairman of the Public Service Commission of the District of Columbia, said at the time that the deal would turn Pepco into “a second-tier company in a much larger corporation whose primary interest is not in distribution, but in generation.”

In June, Connecticut regulators rejected Iberdrola SA’s $3 billion acquisition of UIL Holdings Corp., saying it wasn’t clear what the structure, operations or management of the new company would be. Last year, UIL’s attempt to expand with the purchase of Philadelphia Gas Works was rebuffed by that city council.

Teco’s Tampa Electric sells power to about 700,000 homes and businesses in Florida and its Peoples Gas utility delivers heating fuel to about 350,000. The company’s New Mexico Gas unit has more than 513,000 customers in that state. Teco has been trying to sell its coal unit since at least last year.

Emera will close the deal with a $6.5 billion bridge loan from JPMorgan Chase & Co. and Bank of Nova Scotia; permanent financing will take the form of equity sales and long-term debt, a company presentation shows.

JPMorgan was Emera’s lead adviser, and Scotiabank provided financial advice. Emera’s legal advisers were Davis Polk & Wardwell LLP and Osler, Hoskin & Harcourt LLP.