Why Dominion Energy Stock Jumped Today
Key Points
NextEra wants to buy Dominion at a substantial premium to its recent trading prices.
The combined entity would be bigger, stronger, and far more profitable.
Shares of Dominion Energy (NYSE: D) climbed on Monday after the electricity provider struck a deal to be acquired by power infrastructure giant NextEra Energy (NYSE: NEE).
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Creating an energy titan
Under the terms of the agreement, Dominion investors would receive 0.8138 shares of NextEra for each share of Dominion they own. That represents a premium of about 23% compared to the stocks' closing prices on Friday. The deal values Dominion at approximately $67 billion.
The two companies would combine to form the largest regulated electric utility in the world with roughly 10 million customers in Florida, Virginia, North Carolina, and South Carolina. The combined enterprise would possess 110 gigawatts (GW) of power generation capacity from a range of energy sources, including natural gas, nuclear, wind, solar, and battery storage.
The acquisition is projected to close in 12 to 18 months, subject to shareholder and regulatory approval.
A stronger and more profitable union
Together, Dominion and NextEra would benefit from scale advantages and cost savings -- at a time when artificial intelligence (AI)-related infrastructure projects are growing larger and more complex.
"Scale matters more than ever -- not for the sake of size, but because scale translates into capital and operating efficiencies," NextEra CEO John Ketchum said. "It enables us to buy, build, finance, and operate more efficiently, which translates into more affordable electricity for our customers in the long run."
The deal, in turn, is expected to add to NextEra's adjusted earnings per share immediately upon closing. Management forecasts annual per-share profit growth of more than 9% through at least 2032.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.