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Kansas Regulator Clears Fortis' USD 11.3bn Acquisition of US Utility Operator ITC.

M2 EQUITYBITES-October 13, 2016-Kansas Regulator Clears Fortis' USD 11.3bn Acquisition of US Utility Operator ITC

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13 October 2016 - The Kansas Corp. Commission has voted to approve their application authorising Canadian utility operator Fortis Inc. (TSX: FTS) to acquire US-based electrical transmission company ITC Holdings Corp. (NYSE: ITC) subject to conditions consistent with those proposed in the application, to be confirmed in an official Commission Order to follow, the company said.

This approval completes all required regulatory authorizations for the acquisition.

Fortis and ITC shareholders approved the acquisition at shareholder meetings held on 5 May and 22 June 2016, respectively.

Approval required from the Committee on Foreign Investment in the United States was received on July 8, 2016, and the post-filing waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired 10 August 2016.

Also, approvals from the Oklahoma Corp. Commission, the Illinois Commerce Commission and the Missouri Public Service Commission were received on 16 August 2016, 24 August 2016 and 14 September 2016, respectively.

All applicable consents related to the transfer of control of licenses were received from the FCC as of 21 September 2016.

The closing of the transaction remains subject to receipt of regulatory authorizations from FERC and the state of Kansas.

In February, the companies entered into an agreement and plan of merger pursuant to which Fortis will acquire ITC in a transaction valued at approximately USD 11.3bn.

Under the terms of the acquisition, which has been approved by the boards of directors of both companies, ITC shareholders will receive approximately USD 6.9bn in Fortis common shares and cash at closing and Fortis will assume approximately USD 4.4bn of consolidated ITC indebtedness.

ITC shareholders will receive USD 22.57 in cash and 0.7520 Fortis shares per ITC share.

Following the acquisition, Fortis will be one of the top 15 North American public utilities ranked by enterprise value, with an estimated enterprise value of CDN 42bn (USD 30bn).

On a pro forma basis, the consolidated mid year 2016 rate base of Fortis would increase by approximately CDN 8bn (USD 6bn) to approximately CDN 26bn (USD 18bn), as a result of the acquisition.

Upon completion of the acquisition, ITC will become a subsidiary of Fortis and approximately 27% of the common shares of Fortis will be held by ITC shareholders.

Fortis will apply to list its common shares on the New York Stock Exchange in connection with the acquisition and will continue to have its shares listed on the Toronto Stock Exchange.

By acquiring ITC, Fortis is acquiring the largest independent pure-play electric transmission company in the United States.

ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000mw along approximately 15,600 miles of transmission line.

In addition, ITC is a public utility and independent transmission owner in Wisconsin. ITC has grown its average rate base at a compounded average annual rate of approximately 16% over the last three years and, as of September 30, 2015, ITC had assets of USD 7.4bn.

The acquisition will increase the regional economic diversity of Fortis from its current operations in five Canadian provinces, the US states of New York and Arizona, and three Caribbean countries, to include a presence in eight additional US states.

Fortis is in the North American electric and gas utility business, with total assets of approximately CDN 28.6bn as at September 30, 2015 and revenue totalling approximately CDN 6.7bn for the twelve month period ended September 30, 2015.

Its regulated utilities serve more than three m customers across Canada and in the United States and the Caribbean. Fortis also owns long-term contracted hydroelectric generation assets in British Columbia and Belize.

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Date:Oct 13, 2016
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