Emera and Canadian Utilities agree to merge in all-share deal, forming a C$72 billion utility

Emera, the Halifax utility that earns most of its profit in Florida, agreed on Tuesday to combine with Alberta's Canadian Utilities in an all-share merger. The companies say the combined business would have an enterprise value of about C$72 billion and serve about six million customers, making it one of the 20 largest utilities in North America.

The deal is a signed agreement, not a completed one. It needs votes from shareholders of all three companies involved, approval from an Alberta court and clearance from regulators in Canada, the United States, Mexico and Australia. The companies expect it to close in the third or fourth quarter of 2027.

Measured by Canadian Utilities' implied enterprise value of about C$28 billion, the companies say it would be the largest merger ever between two Canadian companies. The combined business would keep the Emera name and its head office in Halifax.

What shareholders get

Emera is paying entirely in its own stock. Canadian Utilities Class A shareholders other than its parent, ATCO, would receive 0.755 of an Emera share for each share, and Class B holders would receive 0.819. The companies value the purchase of Canadian Utilities' shares at about C$14.3 billion.

There is almost no premium. Emera closed Monday at C$68.30 in Toronto, which makes 0.755 of a share worth about C$51.57, roughly 0.7% above Canadian Utilities' Class A close of C$51.20, by TickerGrove's calculation. That fits the "merger of equals" label the companies are using.

The selling point for Canadian Utilities investors is income. The companies say Class A holders can expect about 20% more dividend income. At Emera's current annual dividend of about C$2.93 a share, 0.755 of a share would pay about C$2.21 a year, compared with about C$1.85 on a Canadian Utilities Class A share. Emera's board will decide future dividends after the deal closes.

ATCO shareholders would get 0.865 of an Emera share for each share they hold, plus one share of a new company that will hold ATCO's non-utility businesses. At Monday's prices the Emera stock alone is worth about C$59.08 per ATCO share, about C$15.10 below ATCO's Class I close of C$74.18, so the rest of the value for ATCO holders rests on the new company, by TickerGrove's calculation.

When the deal is done, current Emera shareholders would own about 60% of the combined company and former ATCO and Canadian Utilities shareholders about 40%. Emera's own market value is about C$21 billion.

Why Florida and Alberta

Emera gets about 70% of its earnings from Florida, where its U.S. business is based, and Canadian Utilities gets about 80% of its earnings from Alberta. Together, about 95% of earnings would come from regulated utilities, where returns are set by regulators, and about 80% from those two markets, which the companies describe as two of the highest-growth jurisdictions in North America.

The pitch is size. The combined company would own 12 regulated utilities with about C$45 billion of rate base, the asset value on which regulators let utilities earn a return. It plans to spend C$32 billion through 2030, which it says would support rate base growth of 7% to 8% a year. Emera expects the deal to add to adjusted earnings per share in the first full year after closing and expects to keep its investment-grade credit ratings.

Scott Balfour, Emera's chief executive, said the merger gives the company "the scale, financial capacity and expertise to invest in the systems our customers will rely on for decades."

"Our goal is to create a Canadian champion," Balfour told The Globe and Mail, adding that the company needs that scale to build networks for projects such as data centres, new natural gas pipelines and integrated provincial grids. The newspaper reported that the companies had been in talks for 15 months and that Balfour cited Prime Minister Mark Carney's push to attract up to C$1 trillion of infrastructure investment as an encouragement to do a domestic deal.

Who would run it

Balfour would be chief executive of the combined company. Bob Myles, Canadian Utilities' chief executive, would join Emera's executive team and keep running Canadian Utilities, whose headquarters stay in Calgary and Edmonton. Emera's U.S. business stays in Tampa.

The board would have 13 members, seven put forward by Emera and six by Canadian Utilities. Nancy Southern, ATCO's chair and chief executive, would become co-chair alongside Emera's current chair, Karen Sheriff.

What happens to ATCO

ATCO is controlled by the Southern family through Sentgraf Enterprises, and it in turn controls Canadian Utilities. As part of the deal, ATCO's housing, defence and investment businesses, including ports and retail energy, will be spun out as a separate listed company called New ATCO, led by Southern as chair and chief executive with Katie Patrick as chief financial and investment officer. Sentgraf would receive all of New ATCO's voting shares, keeping the family in control.

"This transaction represents a defining next chapter for ATCO," Southern said in the release. She told the newspaper that the value of those businesses is not reflected in ATCO's share price. Sentgraf would own about 7% of Emera after the deal, the newspaper reported.

Votes and regulators

The family has already committed its votes. Sentgraf, which holds all of ATCO's voting shares and about 27% of its non-voting shares, signed an agreement to vote for the deal. ATCO, which holds all of Canadian Utilities' voting shares and about 37% of its non-voting shares, did the same.

That does not settle it. Canadian Utilities Class A holders other than ATCO and its related parties must approve the deal separately by a simple majority under Canada's minority-protection rules, and Emera shareholders must approve issuing the new shares. The meetings are expected in early 2027.

The regulatory list is long. It includes the Alberta Utilities Commission, the U.S. Federal Energy Regulatory Commission, the Federal Communications Commission, the Committee on Foreign Investment in the United States, U.S. and Canadian competition reviews, Australia's foreign investment review and Mexico's antitrust authority.