Dive Brief:
- TECO Energy confirmed last week that it is considering the sale of the company, sending stocks back to their highest values in the last year, around $22/share.
- While the company said it does not usually respond to market rumors, it took the unusual step of confirming it had retained Morgan Stanley & Co. LLC to help it examine “strategic alternatives.”
- While the brief statement gives no indication of the reason behind a potential sale, Bloomberg reports impending carbon mandates are forcing consolidation in the industry and could be a factor here.
Dive Insight:
TECO broke with its “long-standing policy” last week to neither confirm nor deny market rumors, and the news that it is considering a sale sent stocks surging. Shares went from about $18.75/share to almost $22/share following the announcement – a level not seen since January.
Shares closed Friday at $21.28/share after pulling back slightly.
“Given the preliminary nature of this exploration, neither the company nor any of its representatives will be providing any additional comments at this time,” the company said in its statement. “No assurance can be given that the company will determine to pursue a potential sale or enter into any definitive sale agreement.”
While TECO makes no note of why the sale is being considered, over at Bloomberg the speculation is that environmental rules may be behind the move. Final Clean Power Plan regulations are expected from the Obama administration in August, and the federal government is targeting a 30% reduction in greenhouse gas by 2030.
“Consolidation has been a fairly steady trend in the sector,” Morningstar analyst Mark Barnett told Bloomberg. “There is a feeling in the industry, from both the regulated side and the company side, that bigger is better.”
TECO was valued around $4.4 billion before the announcement, the third-largest utility in Florida. According to Bloomberg, potential suitors include: Duke Energy, Florida Power & Light, Dominion Resources, Southern Co. and CenterPoint Energy.
