Emera to buy Canadian Utilities in C$14.3 billion all-stock deal
Emera said it will acquire Canadian Utilities in an all-stock deal valued at C$14.3 billion ($10.02 billion). ATCO will spin off into a publicly traded industrial services company called New ATCO.
(The author is a Reuters Breakingviews columnist. ) By Pranav Kiran TORONTO, Oct 6 (Reuters Breakingviews) — Canada’s utilities are bulking up for the AI era. Halifax-headquartered Emera is merging with Alberta’s Canadian Utilities in a $10 billion all-stock deal. Both buyer and seller are betting on two different spending waves.
The power provider gears up for data-center growth up North. The Southern family, which controls the target through conglomerate ATCO, is focused on Ottawa’s defense buildout. Ensuring arctic sovereignty might prove the better end of the deal. Canadian Utilities will become a part of Emera, with the buyer’s shareholders owning 60% of the combined company.
The Southern family's other businesses, which span awkwardly from oilfield trailers to military contract work, will be spun into publicly-traded New ATCO. For Emera, the deal is a way to diversify. Despite being headquartered in Canada, hurricane-prone Florida makes up 73% of the utility’s rate base. After the combination, that number goes down to less than half.
Data-center building for AI has so far been concentrated in the US and China. But massive facilities have become politically unpopular in the US, including in the Sunshine State, where a rash of local governments have passed building moratoriums that have spooked companies. It makes sense to move North, given Alberta’s ambition to spark C$100 billion in data-center investment by 2030. For ATCO, it’s a sensible trade.
The all-stock deal, though it comes with no premium, lets shareholders own a piece of an enlarged entity more capable of the heavy investment required to participate in the data-center gold rush. That holds promise for an uplift in valuation, which has stayed stubbornly flat at a bit over 10 times expected EBITDA over the next 12 months, That's in line with Canadian peers, but trails some companies more exposed to the US AI buildout. Shareholders are also set to see a 20% boost in dividend payouts as part of the combined company. Meanwhile, ATCO's sharpened focus leans in on Ottawa’s defense push.
Prime Minister Mark Carney’s government wants to spend roughly $26 billion to build military airfields and support hubs while boosting Canada's Arctic defenses and reducing its reliance on the United States. Escalating trade tensions with the Trump administration have added urgency to the spending. 5 trillion of spending by 2030, is clearly the larger opportunity, but it comes with many risks. For instance, AI clients could cut back if the promise of self-learning tech disappoints, hurting returns on heavy capital investments.
By contrast, NATO allies including Canada, pressured by Russia’s war in Ukraine, have now committed to investing 5% of GDP in defense. Governments could prove more reliable customers than hyperscalers. Follow Pranav Kiran on Bluesky and X. 02 billion).
819 Emera shares apiece. ATCO, which holds nearly 37% of the outstanding non-voting shares and all outstanding voting shares of Canadian Utilities, will spin off into a publicly traded industrial services company called New ATCO, Emera said. Emera shareholders are expected to own about 60% of the merged entity, which will have an enterprise value of about C$72 billion. Canadian Utilities shareholders will own about 40%, Emera said.
7% to the stock's last closing price on October 5, Lazard and Scotiabank served as financial advisers to Emera, while Gordon Dyal advised ATCO and Canadian Utilities. BMO Capital Markets served as an adviser to a special committee of Canadian Utilities' board, while CIBC World Markets advised ATCO's special committee. com)