Will There Be A Merger In The Utility Industry?

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According to Reuters, Duke Energy (DUK) is closing in on a deal to buy utility holding company Progress Energy Inc. (PGN) for more than $13 billion dollars. The deal would increase Dukeâ€™s size by 36% and increase the pricing power of the combined utility companies

Duke would be able to expand its operations in North and South Carolina and gain a foothold into the Florida utilities market. Duke would gain access to22,000 megawatts of power. This looks like a good move for Duke as revenue growth is tepid and the company is looking to increase its revenue.

The deal isnâ€™t really accretive to shareholders since Progress Energy is already valued at $13 billion dollars. The new company would have a market cap of $36 billion dollars and an enterprise value of $64 billion dollars.

Dividend investors may also find the new company quite attractive as Progress and Duke were both known for their generous dividend yields. Dividend investors love the utilities industry because the can make money off of the stable earnings and large free cash flows. These stocks have maintained their dividends even during the economic swoon of the past few years.

Duke Energy is currently yielding 5.5% and Progress Energy has a yield of 5.7%.