Wisconsin Energy to acquire Integrys Energy Group for $9.1 billion in cash, stock and assumed debt - creating a leading Midwest electric and gas utility

June 23, 2014

Wisconsin Energy Corp. (NYSE: WEC) and Integrys Energy Group Inc. (NYSE: TEG) announced that they have entered into a definitive agreement under which Wisconsin Energy will acquire Integrys in a transaction valued at $9.1 billion. Upon completion of the transaction, the combined company will be named WEC Energy Group, Inc.

The combination of Wisconsin Energy and Integrys brings together two strong and well-regarded utility operators with complementary geographic footprints to create a larger, more diverse Midwest electric and natural gas delivery company with the operational expertise, scale and financial resources to meet the region's future energy needs.

The combined entity is projected to have a regulated rate base of $16.8 billion in 2015, serve more than 4.3 million total gas and electric customers across Wisconsin, Illinois, Michigan and Minnesota, and operate nearly 71,000 miles of electric distribution lines and more than 44,000 miles of gas transmission and distribution lines. The combination brings together Wisconsin Energy's top-performing electric and gas utility - We Energies - and Integrys' strong electric and gas utilities - Wisconsin Public Service, Peoples Gas, North Shore Gas, Minnesota Energy Resources and Michigan Gas Utilities.

In addition to expanding and diversifying Wisconsin Energy's regulated holdings into other large Midwestern states, the combined company will hold a 60 percent stake in American Transmission Co.

Gale Klappa, chairman and CEO of Wisconsin Energy said, "We believe this combination provides a unique opportunity to create the premier regulated utility system in the Midwest, with superior service and competitive pricing for years to come. The operational and financial benefits to all of our stakeholders - from the customers and communities we serve, to the people we employ, to the shareholders who count on us to create value - are clear, achievable and compelling."

He continued, "We have been consistent in our commitment to undertake acquisitions or combinations only if we believe they will be accretive to earnings per share in the first calendar year after closing, be largely credit neutral and produce a growth rate at least equal to Wisconsin Energy's stand-alone growth rate. This combination meets or exceeds those criteria on all counts."

Charlie Schrock, chairman and CEO of Integrys commented, "Wisconsin Energy is consistently ranked as one of the best companies in the nation for reliability and customer satisfaction. With compatible operational philosophies and Wisconsin Energy's demonstrated commitment to reliability, customer satisfaction, safety and environmental stewardship, Wisconsin Energy is a great partner for Integrys. Our shareholders will receive an attractive premium for their investment and will also benefit from the opportunity to participate in the upside of the combination, including future value creation and a growing dividend program. Wisconsin Energy is committed to the accelerated investment we're making in our territories - investment that will help build on our strong track record of quality. As a larger combined company committed to growth, we believe the combination will also offer more diverse opportunities for employees."

Leadership and headquarters

Upon completion of the transaction, Klappa will become chairman and CEO of the combined company. Schrock will remain in his current roles with Integrys until the closing of the transaction, when he will retire. The other senior leadership roles in the combined company will be filled by current senior officers of Wisconsin Energy.

WEC Energy Group will be headquartered in metropolitan Milwaukee with operating headquarters in Chicago, Green Bay and Milwaukee. The new company will honor all existing labor agreements and maintain historic levels of community involvement and charitable contributions.

Transaction terms and financial profile

Under the terms of the transaction, which has been unanimously approved by the boards of directors of both companies, Integrys shareholders will receive common stock at a fixed exchange ratio of 1.128 Wisconsin Energy shares plus $18.58 in cash per Integrys share.

Total consideration is valued at $71.47 per Integrys share, with a consideration mix of 74 percent stock and 26 percent cash. This represents a 17.3 percent premium to Integrys' closing price on June 20, 2014 and a 22.8 percent premium to the volume-weighted average share price over the past 30 trading days ending June 20, 2014. Upon closing of the transaction, Integrys shareholders will own approximately 28 percent of the combined company.

The proposed dividend policy of the combined company will be designed to initially keep Integrys' shareholders neutral after taking into consideration both the stock and cash they received.

In the period before closing, Wisconsin Energy plans to continue its current dividend policy, which calls for a 7-8 percent annual increase in the dividend. "At closing, we would expect a further dividend increase for the Wisconsin Energy shareholders to reflect the dividend policy of the combined company," Klappa said. "In future years, the projected payout target for the combined company will be 65-70 percent of earnings," he added. The dividend policy of the combined company is expected to be accretive to all shareholders in future years.

Also, Integrys announced that it is in the late stages of a competitive process to divest Integrys Energy Services, its non-regulated marketing subsidiary. In January 2014, it also announced an agreement to sell Upper Peninsula Power Company to Balfour Beatty Infrastructure Partners.

"As part of our ongoing assessment of Integrys' portfolio of businesses, we previously determined it was appropriate to divest Integrys Energy Services' retail electric and natural gas business and began that process earlier this year," said Schrock. "The process is moving forward as we expected and we anticipate completing it soon."

Approvals and timing

The transaction is subject to approvals from the shareholders of both companies, the Federal Energy Regulatory Commission, Federal Communications Commission, Public Service Commission of Wisconsin, Illinois Commerce Commission, Michigan Public Service Commission and the Minnesota Public Utilities Commission. The transaction also is subject to the notification and clearance and reporting requirements under the Hart-Scott-Rodino Act and other customary closing conditions.

The companies anticipate closing in the summer of 2015.


Barclays is serving as the sole financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to Wisconsin Energy. Lazard is acting as sole financial advisor to Integrys, and Cravath, Swaine & Moore LLP and Foley & Lardner LLP are providing legal counsel.

About Wisconsin Energy

Wisconsin Energy (NYSE: WEC), based in Milwaukee, is one of the nation's premier energy companies, serving more than 1.1 million electric customers in Wisconsin and Michigan's Upper Peninsula and 1.1 million natural gas customers in Wisconsin. The company's principal utility is We Energies. The company's other major subsidiary, We Power, designs, builds and owns electric generating plants.

Wisconsin Energy, a component of the S&P 500, has nearly $15 billion of assets, 4,300 employees and approximately 40,000 stockholders of record.

It also has an approximate 26 percent equity ownership interest in American Transmission Co. (a federally regulated electric transmission company).

About Integrys Energy Group

Integrys Energy Group Inc. is a diversified energy holding company with regulated natural gas and electric utility operations (serving customers in Illinois, Michigan, Minnesota and Wisconsin), an approximate 34 percent equity ownership interest in American Transmission Co. (a federally regulated electric transmission company) and non-regulated energy operations. For more information, visit integrysgroup.com.

Click here to read the full press release.

For more information:

Wisconsin Energy Corporation

231 W Michigan St
Milwaukee, Wisconsin
United States, 53201
Tel: 414-221-2345

Colleen F. Henderson, CFA
Tel: 414-221-2592
E-mail: colleen.henderson@wisconsinenergy.com

Rick White, Media Contact
Wisconsin Energy Corporation
Tel: 414-221-4444

Barry McNulty, Media Contact
Wisconsin Energy Corporation
Tel: 414-221-4444

Kathy Hartman
Integrys Media Contact
Tel: 800-977-2250

Steven P. Eschbach, CFA
Integrys Investor Contact
Tel: 312-228-5408

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