FirstEnergy Buys Allegheny Energy

FirstEnergy, the country’s fifth-largest publicly held power company, is buying East Coast power company Allegheny Energy for $4.7 billion. The result will be one of the biggest utilities companies in the country. Reuters reports:

The combined company would have a generation capacity of 24,000 megawatts and serve more than 6.1 million customers, the companies said on Thursday.

Shares of Allegheny’s shares rose 12 percent, far short of the premium of 32 percent that FirstEnergy offered, indicating investor skepticism over a deal that faces regulatory hurdles both at the federal level and from state regulators. The merged company would operate in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, New York and Virginia.

Regulators have held up utility deals in recent recent years on fears power prices for their residents will increase and quality of service will decline. FirstEnergy expects the deal to close in 12 to 14 months, although that may be an optimistic goal, one analyst said.

Some might think that the last thing FirstEnergy needs is to get bigger (thanks to past problems). But I’ve never met a utility company that doesn’t like scale.