Hydro One announces US$5.3B acquisition and completes $1.54B financing

On July 19, 2017, Hydro One Limited (Hydro One) announced that it had entered into an agreement and plan of merger pursuant to which it has agreed to indirectly acquire Avista Corporation (Avista), a pure-play regulated electric and gas utilities holding company, for an aggregate purchase price of approximately US$5.3 billion including the assumption of approximately US$1.9 billion of debt. (Closing is expected to occur in the second half of 2018. The combined company will have over $32.2 billion of assets while transmitting and distributing electricity and gas power safely and reliably to more than two million customers.)

On July 19, 2017, Hydro One subsequently announced that its direct wholly owned subsidiary, 2587264 Ontario Inc., had agreed to sell to a syndicate of underwriters $1.4-billion aggregate principal amount of 4.00-per-cent convertible unsecured subordinated debentures of Hydro One (the Debentures) represented by instalment receipts on a “bought deal” basis.

In connection with the offering, the underwriters were granted an over-allotment option to purchase up to an additional $140 million aggregate principal amount of Debentures represented by instalment receipts at the offering price, within 30 days from the date of the closing of the offering solely to cover over-allotments, if any, and for market stabilization purposes.

The net proceeds of the offering are to be used to finance, directly or indirectly, Hydro One’s acquisition of Avista and other acquisition-related expenses.

The offering — including the exercise in full of the over-allotment option — closed on August 9, 2017.

The syndicate of underwriters was co-led by RBC Dominion Securities Inc., CIBC World Markets Inc. and BMO Nesbitt Burns Inc. and included National Bank Financial Inc., Scotia Capital Inc., TD Securities Inc., Barclays Capital Canada Inc., Credit Suisse Securities (Canada), Inc., Canaccord Genuity Corp., Desjardins Securities Inc., Laurentian Bank Securities Inc., Raymond James Ltd., Industrial Alliance Securities Inc. and Wells Fargo Securities Canada, Ltd.

Hydro One was represented by an internal team led by Jamie Scarlett (Executive Vice President and Chief Legal Officer) and Cassidy McFarlane (Assistant General Counsel) and by Steven Smith, Michael Innes, Rosalind Hunter, James Brown, Jay Greenspoon, Lauren Lefcoe, Blake Binions and Arielle Kaplan (corporate) and Firoz Ahmed, Drew Morier and David Davachi (tax) of Osler, Hoskin & Harcourt LLP.

The underwriters were advised by Brendan Reay, Richard Turner, Joe Zed, Ted Gotlieb, Christopher Yeretsian, Taylor Dickinson and Lauren Leahy (securities), and Chris Van Loan, Kathleen Penny and Ian Caines (tax) of Blake, Cassels & Graydon LLP.