Constellation Energy (CEG) has entered into a definitive merger agreement to acquire StarTex Power in an all-cash transaction for $142.5 million.
StarTex Power, a Texas-based retail electric provider, serves 170,000 residential and commercial customers across the state. Following the merger, it will remain headquartered in Houston where approximately 150 of its employees reside.
The company with 100.0% ownership of StarTex will gain a foothold in the Texas mass market, which is one of the top ten competitive energy shopping states. The StarTex buy will also help the company to achieve its objective of being the residential sector market leader. Expanding Constellation’s retail presence, the acquisition will add StarTex Power’s residential and commercial customers, which will move the company closer to its goal of 1 million mass market customers by the end of 2011.
Earlier this month, in another deal, Constellation Energy agreed to acquire MXenergy in an all-cash transaction for a total base purchase price of $175.0 million. At closing, the shareholders of MXenergy are expected to receive cash in the range of $3.00–$3.28 per share. Additionally, they are expected to be paid approximately 91 cents per share upon settlement of customary escrow holdbacks that will result in a total potential cash consideration of up to $4.21 per share. However, the final price per share will be subject to a number of factors and the transaction is expected to close in the third quarter of 2011.
Constellation Energy is a diversified energy company with regulated and merchant businesses. The visibility of its underlying earnings strength is enhanced by a geographically-disparate customer base and diversified power generation portfolio, as well as a strong balance sheet and stable regulated earnings. Additionally, the StarTex Power acquisition strengthens its commitment for innovation and enhances choices for customers along with expanding its presence in the lucrative Texan power market.
Apart from serving as an energy provider, Constellation Energy demonstrates its commitment to environmental stewardship and a clean energy future by delivering innovative energy solutions that help customers to control energy use, reduce greenhouse gas emissions and utilize sources of renewable energy.
All these positives, however, are already accounted for in the company’s valuation, leaving little room for upside from the current level. Also, significant Maryland exposure, risks in the merchant power space,and pending regulatory cases continue to restrain valuation in the near term. The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock. The company mainly competes with American Electric Power Co. Inc. (AEP) and Duke Energy Corporation (DUK) in the near term.
AMER ELEC PWR (AEP): Free Stock Analysis Report
CONSTELLATN EGY (CEG): Free Stock Analysis Report
Be the first to comment