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Deal Addict
Aug 17, 2008
1382 posts
644 upvotes
MrMom wrote:
Nov 10th, 2016 3:00 pm
ZBZ6 may push lower into the 3pm close. Put in a bid @ $22.60 on H

I see my risk as $21.53 from Dec 8/15 low, so just over $1.00

Update: Filled. US cash bond mkt closed tomorrow. That pretty much thins out all global bond mkts, so that may limit the downside due to interest rate risk. ER s/b in line. Just have Trump proclamation/headline risk.
Update (Apr 10 cob): T 10Y yield still low (https://invst.ly/3prgj). Holding H. Looking to break up through 50% Fib @ $24.43, https://invst.ly/3prfk. Of course, Yellen Q&A soon
Deal Addict
Aug 17, 2008
1382 posts
644 upvotes
Double hit potential for HYDONE debt and equity holders. Still long from second offering and $22.60 add on, FWIW

1 - https://invst.ly/48un8

2 - Higher mkt yields and steeper curves are bad for utilities

Cda 10Y https://invst.ly/48uk-
Cda 30Y https://invst.ly/48ul6

3 - H1 may also engage in some M&A activity which would mean more dilution of equity and higher debt.

via the Globe and Mail (June 28/17)

"Why Hydro One is eyeing U.S. takeovers to fuel expansion"

Smart CEOs don't surprise the market with deals. They take the time to sell investors on a growth strategy long before they announce a takeover.

Hydro One Ltd. chief executive officer Mayo Schmidt knows this. He's a veteran deal maker who built a dominant grain-handling business at Viterra Inc. by doing two dozen acquisitions over 12 years, before the company was sold and carved up.

Now Mr. Schmidt is almost two years into running a newly privatized utility that hasn't done a major transaction outside its home territory, Ontario's electricity market. And Hydro One's boss is taking every opportunity to bang the drum on U.S. expansion. There's clearly something in the works.

While we don't know the name of the U.S. utility that Hydro One is targeting – in fact, there's every indication that Mr. Schmidt is still trying to find a dance partner – we do know the game plan, and on Bay Street there is plenty of well-informed speculation on what exactly the Toronto-based company will eventually acquire.

In looking outside Ontario for growth, Hydro One is taking a page from peers such as Enbridge, Fortis and TransCanada; these are three of the six Canadian companies that collectively spent $87-billion on six well-received U.S. utility takeovers over the past 18 months. In large part, these companies looked abroad because they saw limited opportunities to expand in their home markets, and because the American companies were willing sellers.

"With several Canadian utility peers deciding to acquire assets south of the border, we would not be surprised if Hydro One were to make an acquisition in the U.S.," said Laurentian Bank Securities analyst Mona Nazir in a recent report that also said the company could pull the trigger on a deal later this year or in 2018.

The Hydro One executive team – several of whom were recruited from U.S. utilities – were paving the road for a potential deal this week at a JPMorgan conference in New York. Mr. Schmidt told the crowd that Hydro One had a top-grade single-A credit rating and could shoulder more debt than U.S. peers while maintaining this coveted rating, and also use an acquisition to take advantage of the U.S. tax regime.

"There's quite a number of metrics that make it look favourable," Mr. Schmidt said in discussing a potential takeover. He also said Hydro One would be a disciplined buyer and "any opportunity we see at home or beyond our borders needs to be accretive on every measure in the first 12 months of operation," a criteria applied to every one of the 24 takeovers Mr. Schmidt authored while running Viterra.

With an enterprise value of $24-billion, investment bankers who work with Hydro One predict the company will make a $2-billion to $7-billion acquisition as an opening foray into the United States – anything smaller doesn't move the dial financially, anything larger is likely to spook investors.

If Hydro One decides to acquire an electrical transmission or distribution business – the sectors it owns in Ontario – it makes sense to buy a network that's linked to its existing grid, which is directly connected to U.S. networks in New York, Michigan and Minnesota. However, there's a school of thought that says investors would be well-served by seeing the company move into new sectors, where returns remain predictable due to government regulation, but there's additional growth potential.

"We believe Hydro One is closer to making acquisitions outside of Ontario, including the possibility of new business lines," said a recent report from CIBC Capital Markets analysts Robert Catellier and Ian Woodward. "We would view the diversification as beneficial, notwithstanding our view that Ontario is a relatively attractive jurisdiction. Diversification into other utility lines, such as gas distribution, could also be attractive in providing larger growth opportunities while not greatly changing the character of the company's operations."

To date, Mr. Schmidt has telegraphed he's interested in snagging a U.S. utility, but steered clear of referring to specific sectors. When Hydro One executives start talking up the virtues of wires or pipes that run to American homes, we'll know they've zeroed in on a target, and that a deal is imminent.
Deal Addict
User avatar
Mar 16, 2010
2378 posts
992 upvotes
Burlington
Hydro One acquiring Avista @ 22.3% premium over close

Also issuing 1.4B in convertible debentures.

Exciting after market activity lol.
Deal Expert
User avatar
Sep 19, 2004
21628 posts
3806 upvotes
Waterloo
Dpack22 wrote:
Jul 19th, 2017 4:57 pm
Hydro One acquiring Avista @ 22.3% premium over close

Also issuing 1.4B in convertible debentures.

Exciting after market activity lol.
and H will probably tank further, following the trend of recent M&A buyers' fate.... AltaGas, Enbridge, CVE, and more


https://ca.investing.com/news/stock-mar ... lue-499897
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Deal Fanatic
User avatar
Dec 21, 2005
5088 posts
360 upvotes
Markham
Dpack22 wrote:
Jul 19th, 2017 4:57 pm
Hydro One acquiring Avista @ 22.3% premium over close

Also issuing 1.4B in convertible debentures.

Exciting after market activity lol.
Why do they have to make the convertibles so complicated???? $21.40 conversion looks nice...i thought the converts typically have a higher conversion price (unless, this is some funny way for the Province to retain its % ownership???)

http://www.newswire.ca/news-releases/hy ... 66183.html
:idea: :) :lol: :razz: :D
Member
Aug 16, 2015
275 posts
38 upvotes
ARG. I bought some shares last week. **** ****.

How much is it going to drop? So that explains the slow sell off. Some people got tips IMO.
Deal Addict
Mar 27, 2003
1063 posts
193 upvotes
Vancouver
As long as dividends remain strong, I'm a buyer.
Deal Addict
Jun 18, 2008
4635 posts
3266 upvotes
Montreal
I guess Mayo Schmidt needed to justify his outrageous salary. I can't think of an easier way than borrowing $5 billion to do it.
Member
Mar 8, 2004
472 posts
46 upvotes
Doesn't Hydro One have the highest paid executives amongst the group of utilities? They don't strike me as strong operators at all. I'll probably not buy in on any dip that's to come.

Ongoing dividend increases will also be a problem considering the cost of this acquisition.
Deal Addict
User avatar
Aug 28, 2012
1671 posts
714 upvotes
Kanata, ON
Should have sold at $26.xx when we were warned on this thread a while back... I don't trust anything that Wynne has her hands on...
Deal Addict
User avatar
May 25, 2008
1303 posts
480 upvotes
Mississauga
Hydro One has been dead money for me. My worst performer, other than some residual O&G stocks remaining in my portfolio from 2015/16. I'll be looking to sell my position soon....
Sr. Member
Feb 21, 2010
634 posts
139 upvotes
Scarborough
how does this whole convertible debentures work? Is my understanding correct? For every $1000 in debenture, you pay $333 now and $667 when the transaction close, which can be up to a year. Interest rate is 4%, so for 1st year, you may earn up to 12% as they are paying 4% on the entire committed capital of $1000. Now it is a 10 year convertible debenture, so from years 2 thru 10, it will pay you 4% interest. Then after 10 years, debentures are converted to common shares at $21.40. So for every $1000 in debentures, you will get 46.72 shares
Deal Addict
User avatar
Mar 16, 2010
2378 posts
992 upvotes
Burlington
Keep in mind they still have the third tranche of new shares to bring to market so this still has the potential to go lower when that happens.

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